UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM20-F
_________________________________
FORM 20-F
_________________________________
(Mark One)
☐REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20162021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
OR
☐SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report ______________
For the transition period from to
Commission file number 001-33811
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Navios Maritime Partners L.P.
(Exact name of Registrant as specified in its charter)
_________________________________
Not Applicable
(Translation of Registrant’sRegistrant's Name into English)
Republic of Marshall Islands
(Jurisdiction of incorporation or organization)
7 Avenue de Grande Bretagne, Office 11B2
Monte Carlo, MC 98000 Monaco
(Address of Principal Executive Offices)
Todd E. Mason
Thompson Hine LLP
335 Madison Ave.
New York, NY10017
todd.mason@thompsonhine.com
(212)908-3946
(Name, Telephone,E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Units | NMM | New York Stock Exchange LLC |
Securities registered or to be registered pursuant to Section 12(g) of the Act. None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None
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Indicate the number of outstanding shares of each of the issuer’sissuer's classes of capital or common stock as of the close of the period covered by the annual report:
83,323,911 Common Units
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or (15)(d)15(d) of the Securities Exchange Act of 1934. Yes ☐No☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periodsperiod that the registrant was required to file such reports), and (2) has been subject to such reporting requirements for the past 90 days. Yes☒No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or anon-accelerated filer.an emerging growth company. See definitionthe definitions of “accelerated"large accelerated filer," "accelerated filer," and large accelerated filer”"emerging growth company" inRule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer ☐ | Accelerated Filer☒ | Non-Accelerated Filer ☐ | Emerging Growth Company ☐ |
Large Accelerated Filer If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐ Accelerated Filer
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15
U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Non-Accelerated Filer ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP☒ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
If “Other”"Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes ☐No☒
--12-31
FORWARD-LOOKING STATEMENTS | 1 | |||||
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Item 1. | 4 | |||||
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Item 11. | 141 | |||||
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Material Modifications to the Rights of Unitholders and Use of Proceeds | 142 | |||||
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Item 16F. Change in Registrant's Certifying Accountant | 143 | |||||
Item 16G. Corporate Governance | ||||||
Item 16H. Mine Safety Disclosures | 144 | |||||
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 144 | |||||
PART III | 144 | |||||
Item 17. Financial Statements | 144 | |||||
Item 18. Financial Statements | 144 | |||||
Item 19. Exhibits | 144 | |||||
INDEX | F-1 | |||||
SIGNATURES | 209 |
Table of Contents | 1 | |||||
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This Annual Report should be read in conjunction with the consolidated financial statements and accompanying notes included in this report.
Statements included in this annual report which are not historical facts (including our statements concerning plans and objectives of management for future operations or economic performance, or assumptions related thereto) are forward-looking statements. In addition, we and our representatives may from time to time make other oral or written statements which are also forward-looking statements. Such statements include, in particular, statements about our plans, strategies, business prospects, changes and trends in our business, and the markets in which we operate as described in this annual report. In some cases, you can identify the forward-looking statements by the use of words such as “may,” “could,” “should,” “would,” “expect,” “plan,” “anticipate,” “intend,” “forecast,” “believe,” “estimate,” “predict,” “propose,” “potential,” “continue” or the negative of these terms or other comparable terminology.
Forward-looking statements appear in a number of places and include statements with respect to, among other things:
These and other forward-looking statements are made based upon management’smanagement's current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties, including those set forth below, as well as those risks discussed in “Item 3. Key Information”.
The risks uncertainties and assumptions involve known and unknown risks and are inherently subject to significant uncertainties and contingencies, many of which are beyond our control.control and many of which have been and many further be, exacerbated by the COVID-19 pandemic, the Ukrainian/Russian conflict and the impact they have had on the global economy. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements.
We undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, we cannot assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.
Item 1. Identity of Directors, Senior Management and Advisers
Not Applicable.
Item 2. Offer Statistics and Expected Timetable
Not Applicable.
A. Selected Financial Data[Reserved]
The selected consolidated historical financial information as of December 31, 2016 and 2015 and operating results for the years ended December 31, 2016, 2015, and 2014, were derived from our audited consolidated financial statements of Navios Maritime Partners L.P. (sometimes referred to as “Navios Partners”, the “Partnership”, “we” or “us”) which are included elsewhere in this report. The selected consolidated historical financial information as of December 31, 2014, 2013 and 2012 and for the years ended December 31, 2013 and December 31, 2012 have been derived from our audited financial statements not included in this report. This information is qualified by reference to, and should be read in conjunction with, “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements and notes thereto included elsewhere in this report.
Year ended December 31, | ||||||||||||||||||||
2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||
(Expressed in thousands of U.S. dollars-except unit and per unit data) | ||||||||||||||||||||
Statement of Income Data | ||||||||||||||||||||
Time charter and voyage revenues | $ | 190,524 | $ | 223,676 | $ | 227,356 | $ | 198,159 | $ | 205,435 | ||||||||||
Time charter and voyage expenses | (5,673 | ) | (7,199 | ) | (15,390 | ) | (14,943 | ) | (12,937 | ) | ||||||||||
Direct vessel expenses | (6,381 | ) | (4,043 | ) | (761 | ) | — | (25 | ) | |||||||||||
Management fees | (59,209 | ) | (56,504 | ) | (50,359 | ) | (36,173 | ) | (31,689 | ) | ||||||||||
General and administrative expenses | (12,351 | ) | (7,931 | ) | (7,839 | ) | (6,305 | ) | (5,555 | ) | ||||||||||
Depreciation and amortization | (92,370 | ) | (75,933 | ) | (95,822 | ) | (77,505 | ) | (71,622 | ) | ||||||||||
Vessel impairment losses | (27,201 | ) | — | — | — | — | ||||||||||||||
Loss on sale of securities | (19,435 | ) | — | — | — | — | ||||||||||||||
Interest expense and finance cost, net | (31,247 | ) | (31,720 | ) | (28,761 | ) | (16,910 | ) | (10,127 | ) | ||||||||||
Interest income | 541 | 222 | 243 | 50 | 229 | |||||||||||||||
Other income | 14,523 | 5,232 | 47,935 | 13,730 | 22,598 | |||||||||||||||
Other expense | (4,270 | ) | (3,995 | ) | (1,749 | ) | (1,097 | ) | (409 | ) | ||||||||||
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Net (loss)/ income | $ | (52,549 | ) | $ | 41,805 | $ | 74,853 | $ | 59,006 | $ | 95,898 | |||||||||
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Balance Sheet Data (at period end) Current assets, including cash Vessels, net Total assets Total long-term debt, including current portion net of discount Total partners’ capital Units issued and outstanding Common unit holders Weighted average units outstanding (basic and diluted) Common unit holders Earnings per unit (basic and diluted) Common unit Dividends declared per unit Dividend per common unit Dividend per general partner unit Cash Flow Data Net cash provided by operating activities Net cash provided by/ (used in) investing activities Net cash (used in)/provided by financing activities Fleet Data: Vessels at end of period(1) Year ended December 31, 2016 2015 2014 2013 2012 (Expressed in thousands of U.S. dollars-except unit and per unit data) $ 56,349 $ 39,835 $ 115,197 $ 54,484 $ 70,033 1,037,206 1,230,049 1,139,426 1,026,153 721,391 1,268,580 1,350,291 1,338,709 (2) 1,241,616 (2) 952,185 (2) 523,776 598,078 575,974 (2) 524,861 (2) 296,942 (2) 680,209 732,215 749,098 706,507 618,694 83,323,911 83,079,710 77,359,163 71,034,163 60,109,163 83,107,066 82,437,128 76,587,656 66,317,588 58,008,617 $ (0.62 ) $ 0.48 $ 0.93 $ 0.84 $ 1.61 $ — $ 1.54 $ 1.73 $ 1.66 $ 1.72 $ — $ 2.57 $ 3.08 $ 2.96 $ 3.01 $ 56,527 $ 123,276 $ 171,661 $ 104,842 $ 179,081 5,051 (149,301 ) (123,272 ) (382,673 ) (109,698 ) (70,968 ) (46,720 ) 15,760 281,045 (85,329 ) 32 31 32 28 21
B. Capitalization and indebtedness.
Not applicable.
C. Reasons for the offer and use of proceeds.
Not applicable.
D. Risk factors
Risks InherentRelating to Our Business and our Industry
· | Our growth depends on continued growth in demand for drybulk commodities, liquid cargo, finished or semi-finished goods, and the shipping of drybulk cargoes, containers, as well as crude oil, petroleum products and other liquid cargoes. |
· | The cyclical nature of the international shipping industry may lead to decreases in charter rates and lower vessel values. Charter hire rates have significantly declined from historically high levels recently, are volatile and may remain depressed or reach low levels or decrease in the future, which may adversely affect our earnings, revenue and our profitability. |
· | A decrease in the level of China's imports of raw materials, exports of goods, or a decrease in trade globally could have a material adverse impact on our charterers' business and, in turn, could cause a material adverse impact on our results of operations, financial condition and cash flows. |
· | Any decrease in shipments of crude oil from the Arabian Gulf or the Atlantic basin may adversely affect our financial performance. |
· | Increasing energy self-sufficiency in the United States could lead to a decrease in imports of oil to that country, which to date has been one of the largest importers of oil worldwide. |
· | An increase in trade protectionism and the unraveling of multilateral trade agreements could have a material adverse impact on our charterers' business and, in turn, could cause a material adverse impact on our results of operations, financial condition and cash flows. |
· | We are focused on employing vessels on long-term charters and we may have difficulties in doing so if a more active short-term or spot market develops. |
· | While we favor longer term charters for all the tanker, dry bulk and container vessels we own or control, we may from time to time have to rely on chartering our vessels in the spot market either because our charter ended during a period of weak demand or we need to reposition a vessel out of a geographically or seasonally disadvantaged position. Additionally some of the longer term charters we have are indexed to spot rates. Spot market rates for tanker, dry bulk and container vessels are highly volatile and may decrease in the future, which may materially adversely affect our earnings in the event that our vessels are chartered in the spot market. |
· | Our growth depends on our ability to expand relationships with existing customers and obtain new customers, for which we will face substantial competition from new entrants and established companies with significant resources. | |
· | As we expand our business, we may have difficulty managing our growth, which could increase expenses. |
· | We may be unable to make or realize expected benefits from acquisitions, and implementing our growth strategy through acquisitions may harm our business, financial condition and operating results. |
· | Delays in deliveries of secondhand vessels, our decision to cancel an order for purchase of a vessel or our inability to otherwise complete the acquisitions of additional vessels for our fleet, could harm our business, financial condition and results of operations. |
· | If we purchase any newbuilding vessels, delays, cancellations or non-completion of deliveries of newbuilding vessels could harm our operating results. |
· | The loss of a customer, charter or vessel could result in a loss of revenues and cash flow in the event we are unable to replace such customer, charter or vessel. |
· | The aging of our vessels may result in increased operating costs in the future, which could adversely affect our earnings. |
· | A number of third party owners have ordered so-called “eco-type” vessel designs or have retrofitted scrubbers to remove sulphur from exhaust gases, which may offer substantial bunker savings as compared to older designs or vessels without exhaust gas scrubbers. Increased demand for and supply of “eco-type” or scrubber retrofitted vessels could reduce demand for our vessels that are not classified as such and expose us to lower vessel utilization and/or decreased charter rates. |
· | Our vessels may be subject to unbudgeted periods of off-hire, which could materially adversely affect our business, financial condition and results of operations. |
· | Vessels may suffer damage and we may face unexpected drydocking costs, which could affect our cash flow and financial condition. |
· | The market value of our vessels may fluctuate significantly. If vessel values are low at a time when we are attempting to dispose of a vessel, we could incur a loss. |
· | We must make substantial capital expenditures to maintain the operating capacity of our fleet, which will reduce our cash available for distribution. In addition, each quarter our board of directors is required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less or no cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted. |
· | We may be subject to litigation that, if not resolved in our favor or not sufficiently insured against, could have a material adverse effect on us. |
· | Because we generate all of our revenues in U.S. dollars but incur a portion of our expenses in other currencies, exchange rate fluctuations could cause us to suffer exchange rate losses thereby increasing expenses and reducing income. |
· | Security breaches and disruptions to our information technology infrastructure could interfere with our operations and expose us to liability which could have a material adverse effect on our business, financial condition, cash flows and results of operations. |
· | We may not have adequate insurance to compensate us if we lose our vessels or to compensate third parties. |
· | Our growth depends on continued growth in demand for crude oil, refined petroleum products (clean and dirty) and bulk liquid chemicals and the continued demand for seaborne transportation of such cargoes. |
· | Increasing growth of electric vehicles and other measures intended to reduce CO2 emissions could lead to a decrease in trading and the movement of crude oil and petroleum products worldwide. |
· | We conduct a substantial amount of business in China. The legal system in China has inherent uncertainties that could limit the legal protections available to us and could have a material adverse impact on our business, results of operations, financial condition and cash flows. |
· | An oversupply of vessel capacity may depress rates, which may affect our ability to operate our vessels profitably. |
· | Fuel price fluctuations may have an adverse effect on our profits. |
· | If we expand the size of our fleet in the future, we generally will be required to make significant installment payments for acquisitions of vessels even prior to their delivery and generation of revenue. Depending on whether we finance our expenditures through cash from operations or by issuing debt or equity securities, our ability to make cash distributions to unitholders, to the extent we are making distributions, may be diminished or our financial leverage could increase or our unitholders could be diluted. |
· | We are subject to various laws, regulations, and international conventions, particularly environmental and safety laws, that could require significant expenditures both to maintain compliance with such laws and to pay for any uninsured environmental liabilities, including any resulting from a spill or other environmental incident. |
· | Climate change and government laws and regulations related to climate change could negatively impact our financial condition. |
· | We are subject to vessel security regulations and we incur costs to comply with adopted regulations. We may be subject to costs to comply with similar regulations that may be adopted in the future in response to terrorism. |
· | Changing laws and evolving reporting requirements could have an adverse effect on our business. |
· | Our international activities increase the compliance risks associated with economic and trade sanctions imposed by the United States, the European Union and other jurisdictions/authorities. |
· | We could be materially adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and anti-corruption laws in other applicable jurisdictions. |
· | The operation of ocean-going vessels entails the possibility of marine disasters including damage or destruction of the vessel due to accident, the loss of a vessel due to piracy or terrorism, damage or destruction of cargo and similar events that may cause a loss of revenue from affected vessels and damage our business reputation, which may in turn lead to loss of business. |
· | Maritime claimants could arrest or attach one or more of our vessels, which could interrupt our cash flow. |
· | The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us. |
· | A failure to pass inspection by classification societies could result in one or more vessels being unemployable unless and until they pass inspection, resulting in a loss of revenues from such vessels for that period and a corresponding decrease in operating cash flows. |
· | Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business. |
· | Disruptions in global financial markets, terrorist attacks, regional armed conflicts, general political unrest, economic crisis, the emergence of a pandemic crisis and the resulting governmental action could have a material adverse impact on our results of operations, financial condition and cash flows. |
· | Our financial and operating performance may be adversely affected by the COVID-19 pandemic. |
· | Governments could requisition our vessels during a period of war or emergency, resulting in a loss of earnings. |
Risks Relating to Our Indebtedness
· | The market value of our vessels may fluctuate significantly, which could cause us to breach covenants in our credit facilities and result in foreclosure on our mortgaged vessels. |
· | We may be unable to obtain additional financing and our debt levels may limit our ability to do so and pursue other business opportunities, and our interest rates under our credit facilities may fluctuate and may impact our operations. |
· | As LIBOR is replaced as the reference rate under our debt obligations, it could affect our profitability, earnings and cash flow. |
· | Our credit facilities contain restrictive covenants, which may limit our business and financing activities and may prevent us from paying distributions to unitholders, if our board of directors determines to do so again in the future. |
Risks Relating to Our Units
· | Our board of directors may not declare cash distributions in the foreseeable future. |
· | Any dividend payments on our common units would be declared in U.S. dollars, and any unit holder whose principal currency is not the U.S. dollar would be subject to risks of exchange rate fluctuations. |
· | The New York Stock Exchange may delist our securities from trading on its exchange, which could limit your ability to trade our securities and subject us to additional trading restrictions. |
· | The price of our common units may be volatile. |
· | Increases in interest rates may cause the market price of our common units to decline. |
· | Substantial future sales of our common units in the public market, including through our continuous offering sales program, could cause the price of our common units to fall, and would dilute your ownership interests. |
· | Unitholders may be liable for repayment of distributions. |
· | Common unitholders have limited voting rights and our partnership agreement restricts the voting rights of common unitholders owning more than 4.9% of our common units. |
Risks Relating to Our Organizational Structure, Taxes and Other Legal Matters
· | Navios Holdings and their affiliates may compete with us. |
· | We are a holding company and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make distributions. |
· | We depend on the Managers to assist us in operating and expanding our business. |
· | The loss of key members of our senior management team could disrupt the management of our business. |
· | The Managers may be unable to attract and retain qualified, skilled employees or crew necessary to operate our vessels and business or may have to pay increased costs for its employees and crew and other vessel operating costs. | |
· | We may be subject to taxes, which may reduce our cash available for distribution to our unitholders. |
· | U.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to U.S. unitholders. |
· | We may have to pay tax on U.S.-source income, which would reduce our earnings. |
· | Actions taken by holders of our common units could result in our being treated as a “controlled foreign corporation,” which could have adverse U.S. federal income tax consequences to certain U.S. holders. |
· | You may be subject to income tax in one or more non-U.S. countries, including Greece, as a result of owning our common units if, under the laws of any such country, we are considered to be carrying on business there. Such laws may require you to file a tax return with and pay taxes to those countries. |
· | We have been organized as a limited partnership under the laws of the Republic of the Marshall Islands, which does not have a well-developed body of partnership law; as a result, unitholders may have more difficulty in protecting their interests than would unitholders of a similarly organized limited partnership in the United States. |
· | Because we are organized under the laws of the Marshall Islands and our business is operated primarily from our office in Monaco, it may be difficult to serve us with legal process or enforce judgments against us, our directors or our management. |
· | We rely on the master limited partnership (“MLP”) structure and its appeal to investors for accessing debt and equity markets to finance our growth and repay or refinance our debt. The depressed trading price of our common units may affect our ability to access capital markets and, as a result, our ability to pay distributions or repay our debt. |
· | Our partnership agreement limits our general partner's and our directors' fiduciary duties to our unitholders and restricts the remedies available to unitholders for actions taken by our general partner or our directors. |
· | Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price. |
· | Our general partner may transfer its general partner interest to, and the control of our general partner may be transferred to a third party without unitholder consent. |
· | Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove our current management or our general partner, and even if our public unitholders are dissatisfied, they will need a qualified majority to remove our general partner |
· | Unitholders may not have limited liability if a court finds that unitholder action constitutes control of our business. |
· | We can borrow money to pay distributions, it would reduce the amount of credit available to operate our business. |
· | Our management will have broad discretion with respect to the use of the proceeds resulting from the issuance of common units whether under a continuous offering program or a secondary offering. |
· | Our general partner and its affiliates, including Navios Holdings, own a significant interest in us and may have conflicts of interest and limited fiduciary and contractual duties, which may permit them to favor their own interests to the detriment of unitholders. |
· | Our officers face conflicts of interest and conflicts in the allocation of their time to our business. |
· | Fees and cost reimbursements, which the Managers determines for services provided to us, represent significant percentage of our revenues, are payable regardless of profitability and reduce our cash available for distributions. |
Risks Relating to Our Business and our Industry
Our growth depends on continued growth in Our Business
We may not have sufficient cash from operations to enable us to pay quarterly distributions on our common units following the establishment of cash reserves and payment of fees and expenses or to reinstate distributions.
We may not have sufficient cash available to pay quarterly distributions or to reinstate distributions following the establishment of cash reserves and payment of fees and expenses. In February 2016, we announced that our board of directors decided to suspend the quarterly cash distributions to our unitholders, including the distribution for the quarter ended December 31, 2015, in order to conserve cash and improve our liquidity. Our ability to reinstate distributions will be at the discretion of our board of directors. The amount of cash we can distribute on our common units depends principally upon the amount of cash we generate from our operations, which may fluctuate based on numerous factors including, among other things:
The actual amount of cash we will have available for distribution also will depend on other factors, some of which are beyond our control, such as:
Our growth strategy focuses on expansion in its discretion.
The amount of cash we generate from our operations may differ materially from our profit or loss for the period, which will be affected bynon-cash items. As a result of this and the other factors mentioned above, we may make cash distributions during periods when we record losses and may not make cash distributions during periods when we record net income.
The cyclical nature of the international drybulk and container shipping industry may lead to decreases in charter rates and lower vessel values, resulting in decreased distributions to our common unitholders.
The shipping business, including the dry cargo, market, is cyclicalcontainer and tanker shipping sectors. Accordingly, our growth depends on continued growth in varying degrees, experiencing severe fluctuations in charter rates, profitabilityworld and consequently, vessel values. For example, during the period from January 1, 2015, to February 27, 2017, the Baltic Exchange’s Panamax time charter average daily rates experienced a low of $2,260regional demand for dry and a high of $12,478. Additionally, during the period from January 1, 2015, to February 27, 2017, the Baltic Exchange’s Capesize time charter average(BCI-5TCA) daily rates experienced a low of $1,985 and a high of $20,601,liquid bulk commodities, finished or semi-finished goods and the Baltic Dry Index (“BDI”) experiencedshipping of containers, dry and liquid cargoes, which could be negatively affected by a lownumber of 290 pointsfactors, such as declines in prices for dry or liquid bulk commodities or containerized cargoes, or general political, social and a high of 1,257 points. While the BDI was 878 as of February 27, 2017, there can be no assurance that the drybulk charter market will increase further, and the market could decline. economic conditions.
We anticipate that the future demand for our drybulk carriers, container and drybulktanker vessels and their charter rates will be dependent upon demand for imported commodities, economic growth in the emerging markets, including the Asia Pacific region, of which China is particularly important, India, Brazil and Russia and the rest of the world, seasonal and regional changes in demand and changes to the capacity of the world fleet.Russia. In past years, China and India have had two of the world’sworld's fastest growing economies in terms of gross domestic product and have been the main driving force behind increases in marine drybulk tradeand tanker trades and the demand for drybulk vessels.vessels and tankers. The Asia Pacific and Indian economies have also been significant suppliers of manufactured goods currently shipped by container to the developed markets of the Organisation for Economic Cooperation and Development (“OECD”) and worldwide. If economic growth declines in China, Japan, India and other countries in the AsianAsia Pacific region, we may face decreases in demand of such drybulk, tradetanker and demand.container shipping trades. For example, the recent slowdownslowdowns of the Chinese economy hashave adversely affected demand for Capesize bulk carriers and, as a result, spot and period rates, as well as asset values, are currently at low levels. Moreover,levels below their peaks in the fall of 2021. Global economic conditions, while somewhat more stable than in the immediate aftermath of the financial crisis, remain uncertain with respect to long-term economic growth. In particular, the uncertainty surrounding the future of the Eurozone; the economic prospects of the United States (sometimes referred to as the “U.S.”); the future economic growth of China, Brazil, Russia, India, and other emerging markets; the current armed conflict between Russia and Ukraine; and changing oil production and consumption patterns due to efficiencies, environmental concerns, new technologies and government policy changes are all expected to affect demand for drybulk carriers, container vessels, and product and crude tankers going-forward.
The past global financial crisis, the continuing U.S. shale production expansion and the ongoing effects of COVID-19 have intensified the unpredictability of tanker rates. Furthermore, the extension of refinery capacity in China, India and particularly the Middle East through 2022 is expected to exceed the immediate consumption in these areas, and an increase in exports of refined oil products is expected as a result. Changes in product trading patterns due to the implementation of the IMO 2020 sulphur reduction rules and closure of refineries due to the pandemic should increase trade in refined oil products.
If oil demand grows in the future, it is expected to come primarily from emerging markets which have been historically volatile, such as China and India, and a slowdown in these countries’ economies may severely affect global oil demand growth, and may result in protracted, reduced consumption of oil products and a decreased demand for our vessels and lower charter rates, which could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to make cash distributions.
Should the United StatesOrganization of the Petroleum Exporting Countries (“OPEC”) significantly reduce oil production or should there be significant declines in non-OPEC oil production, that may result in a protracted period of reduced oil shipments and Japanese economiesa decreased demand for our vessels and lower charter rates, which could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to make cash distributions.
While containership rates are at or near all time highs due to governments’ responses to the pandemic, and the disruption of supply chains, there is no guarantee that they will remain elevated and could return to levels at or below their long term averages.
A slowdown in the economies of the European Union (the “EU”), as has occurred recently,U.S. or the EU, or certain other Asian countries will likelymay also adversely affect economic growth in China, Indiathe Asia Pacific region and elsewhere. Adverse economic, political, social or other developments can decrease demand and prospects for growth in the shipping industry and thereby could reduce revenue significantly.India. A decline in demand for commodities transported in drybulk carriers, tankers and/or containerships, or an increase in supply of drybulk vessels, tankers or containerships could cause a further decline in charter rates, which could materially adversely affect our cashflows, profitability and our results of operations and financial condition. If we sell a vessel at a time when the market value of our vessels has fallen, the sale may be at less than the vessel’svessel's carrying amount, resulting in a loss.
Demand for container shipments declined significantly from 2008 to 2009 in the aftermathThe cyclical nature of the global financial crisis but has increased each year from 2009international shipping industry may lead to 2016. From 2009 to 2011, there was improvement on the FarEast-to-Europe and Trans-Pacific Eastbound container trade lanes, alongside improvements also witnessed on other,non-main lane, trade routes including certain intra-Asia and North-South trade routes. However, Trans-Pacific Eastbound trade lane growth was less than 1% per yeardecreases in 2011 and 2012, while the Far East to Europe trade was positive in 2011 but turned negative in 2012 due to the impact of the continuing European sovereign debt crisis and global economic slowdown, as well as uncertainty regarding the resolution of the budget ceiling and budgetary cuts in the United States. More recently, since the second half of 2015, a slowdown in demand in certain key container trade routes, including the Asia to Europe route at a time of increased vessel supply, has resulted in the highest annual scrapping on record. The oversupply in our market continued to prevent any significant rise in time charter rates for both short- and long-term periods. Additional orders for large and very large containerships were placed during 2014 and 2015, both increasing the expected future supply of larger vessels and having a spillover effect on the market segment for smaller vessels. Ordering of container ships slowed significantly in 2016. Liner companies have experienced a substantialdrop-off in container shipping activity, resulting in decreased average freight rates since the second half of 2011, and the continuation of such decreased freight rates or any further declines in freight rates would negatively affect the liner companies to which we charter our containerships. The recent global economic slowdown and disruptions in the credit markets significantly reduced demand for products shipped in containers and, in turn, containership capacity.
The continuation of such containership oversupply or any declines in container freight rates could negatively affect the liner companies to which we seek to charter our containerships. The decline in the containership market has affected the major liner companies and the value of container vessels, which follow the trends of freight rates and containership charter rates and can affect the earnings on our charters, and similarly, our cash
flows and liquidity. The decline in the containership charter market has had and may continue tolower vessel values. Charter hire rates have additional adverse consequences for the container industry, including a less active secondhand market for the sale of vessels and charterers not performing under, or requesting modifications of, existing time charters.
The demand for vessels has generally been influenced by, among other factors:
The supply of vessel capacity has generally been influenced by, among other factors:
The market value of our vessels, which hassignificantly declined from historically high levels may fluctuate significantly, which could cause us to breach covenants in our credit facilities and result in the foreclosure on our mortgaged vessels.
Factors that influence vessel values include:
If the market value of our owned vessels decreases, we may breach covenants contained in our credit facilities. We purchased the majority of our drybulk vessels from Navios Holdings based on market prices that were for certain vessels at historically high levels. If we breach the covenants in our credit facilities andrecently, are unable to remedy any relevant breach, our lenders could accelerate our debt and foreclose on the collateral, including our vessels. Any loss of vessels would significantly decrease our ability to generate positive cash flow from operations and therefore service our debt. In addition, if the book value of a vessel is impaired due to unfavorable market conditions, or a vessel is sold at a price below its book value, we would incur a loss. If a charter expires or is terminated, we may be unable tore-charter the vessel at an acceptable rate and, rather than continue to incur costs to maintain the vessel, may seek to dispose of it. Our inability to dispose of a vessel at a reasonable price could result in a loss on its sale and adversely affect our results of operations and financial condition.
Charter rates in the drybulk and container shipping industry have decreased from their historically high levelsvolatile and may remain depressed or reach low levels or decrease further in the future, which may adversely affect our earnings, revenue, profitability and ability to pay dividends.distributions.
The currentdrybulk shipping industry is cyclical with attendant volatility in charter hire rates and profitability. The degree of charter hire rate volatility among different types of drybulk vessels has varied widely, and charter hire rates for drybulk vessels have declined significantly from historically high levels. For example, in the past time charter and spot market rates for drybulk vessels have declined below operating costs of vessels. The Baltic Dry Index, or BDI, an index published by the Baltic Exchange Limited of shipping rates for 26 key drybulk routes, fell 97% from a peak of 11,793 in May 2008 to a low of 290 in February 2016. While the BDI showed improvement since then, it has ranged from a low of 393 in May 2020 to a high of 5,650 in October 2021, and at 2,689 on March 15, 2022 it remains at low levels compared to historical highs and there can be no assurance that the drybulk charter market will not decline further.
The ocean-going container shipping industry is both cyclical and volatile in terms of charter rates, profitability and, consequently, vessel values. According to industry data, containership charter rates peaked in 2005, with the Containership Timecharter Rate Index (a $/day per twenty-foot equivalent units (“TEU”) weighted average of 6-12 month time charter rates of Panamax and smaller vessels (1993=100)) reaching 172 points in March and April 2005, and generally stayed above 100 points until the middle of 2008, when the effects of the economic crisis began to affect global container trade, driving the Containership Timecharter Rate Index to a 10-year low of 32 points in the period from November 2009 to January 2010. As of the end of January 2020, the Containership Timecharter Rate Index stood at 61 points, hit a bottom of 41 points as of the end of June 2020 and then rose to 115 points at the beginning of March 2021 and has steadily risen to an all time high of 433 as of the beginning of March 2022. Current container charter rates are at or close to all time highs but there is no guarantee that they will remain elevated and could return to average or below average levels when they fall.
Charter rates in the crude oil, product and chemical tanker sectors have significantly declined from historically high levels in 2008 and may remain depressed or decline further. For example, the Baltic Exchange Dirty Tanker Index (BDTI) declined from a high of 2,347 in July 2008 to 453 in mid-April 2009, which represents a decline of approximately 81%. Since January 2020, it has traded between an all time low of 403 and a high of 1,550; as of March 15, 2022, it stood at 1,279. The Baltic Exchange Clean Tanker Index (BCTI) fell from 1,509 in the early summer of 2008 to 345 in April 2009, or an approximate 77% decline. It has traded between an all time low of 309 and an all time high of 2,190 since January 2020 and stood at 1,032 as of March 15, 2022. Tanker charter rates for drybulkVLCCs, LR1s and container vesselsMR2s experienced the lowest annual average time charter earnings on record in 2021, although current rates are higher than those recorded lows. Of note is that Chinese imports of crude oil have significantly decreasedsteadily increased from their historic highs reachedthree million barrels per day in 2008 to a record 13 million barrels per day in June 2020 and stood at 10.9 million barrels per day in January 2022. Additionally, since the second quarterU.S. removed its ban at the end of 2008. 2015, U.S. crude oil exports increased by over 800% from 0.4 million barrels per day to a record 3.6 million barrels per day in March 2020; and averaged 3.3 MBPD in January 2022. The U.S. has steadily increased its total petroleum product exports by about 500% to a record 6.2 million barrels per day in December 2021 from one million barrels per day in January 2006.
If the drybulk, tanker or container shipping industry,industries, which hashave been highly cyclical isand volatile, are depressed in the future when our charters expire or when we are otherwise seeking new charters, we may be forced to re-charter our vessels at reduced or even unprofitable rates, or we may not be able to re-charter them at all and/or we may be forced to scrap them, which may reduce or eliminate our earnings, make our earnings volatile, affect our ability to generate cash flows and availablemaintain liquidity. However, the drybulk, tanker and containership rate cycles have peaked and have fallen to low points at different times, which may mitigate overall cash flow may be adversely affected.reductions. We cannot assure yougive any assurance that we will be able to successfully charter our vessels in the future or renew our existing
charters at rates sufficient to allow us to operate our business profitably, to meet our obligations, including payment of debt service to our lenders, or to pay dividends to our unitholders. Our ability to renew the charters onre-charter our vessels upon the expiration or termination of ourtheir current charters, or on vessels that we may acquire in the future, as well as, the charter rates payable under any replacement charters will depend upon, among other things, economic conditions in the sectors in which our vessels operate at that time, changes in the supply and demand for vessel capacity and changes in the supply and demand for the transportation of commodities.commodities or manufactured goods.
AllAdditionally, if the spot market rates or short-term time charter rates become significantly lower than the time charter equivalent rates that some of our drybulk timecharterers are obligated to pay us under our existing charters, are scheduledthe charterers may have incentive to expire on dates ranging from February 2017default under that charter or attempt to September 2022.renegotiate the charter. If upon expiration or termination of these or other contracts, long-term recharterour charterers fail to pay their obligations, we would have to attempt to re-charter our vessels at lower charter rates, are lower than existing rates, particularly considering that we intendwhich would affect our ability to enter into long-term charters, or ifcomply with our loan covenants and operate our vessels profitably. If we are unablenot able to obtain replacement charters,comply with our earnings, cash flowloan covenants and our lenders choose to accelerate our indebtedness and foreclose their liens, we could be required to sell vessels in our fleet and our ability to make cash distributionscontinue to conduct our business would be impaired.
Fluctuations in charter rates result from changes in the supply and demand for vessel capacity and changes in the supply and demand for the major commodities and finished goods carried by water internationally. Because the factors affecting the supply and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in charter rates are also unpredictable.
Furthermore, a significant decrease in charter rates would cause asset values to decline, and we may have to record an impairment charge in our consolidated financial statements which could adversely affect our financial results. Because the market value of our vessels may fluctuate significantly, we may also incur losses when we sell vessels, which may adversely affect our earnings. If we sell vessels at a time when vessel prices have fallen and before we have recorded an impairment adjustment to our unitholders couldfinancial statements, the sale may be materially adversely affected.at less than the vessel's carrying amount in our financial statements, resulting in a loss and a reduction in earnings.
FiveFactors that influence demand for vessels capacity include:
The supply of vessel capacity has generally been influenced by, among other factors:
In addition to the prevailing and anticipated charter rates, factors that affect the rate of newbuilding, scrapping and laying-up include newbuilding prices, secondhand vessel values in relation to newbuilding and scrap prices, costs of bunkers and other operating costs, costs associated with classification society surveys, normal maintenance and insurance coverage costs, the efficiency and age profile of the existing drybulk and tanker fleet in the market is depressed whenand government and industry regulation of maritime transportation practices, particularly environmental protection laws and regulations. These and other factors influencing the supply of and demand for shipping capacity are outside of our containerships’ time charters expire, we may be forced tore-charter our containerships at reduced or even unprofitable rates, orcontrol, and we may not be able tore-charter them at all, correctly assess the nature, timing and degree of changes in industry conditions.
Historically, the drybulk, tanker and containership markets have been volatile as a result of the many conditions and factors that can affect the price, supply and demand for tanker capacity. The consequences of any future global economic crisis may further reduce demand for transportation of dry and liquid commodities over long distances and supply of ships that carry those dry and liquid commodities and finished goods, which may reducematerially affect our future revenues, profitability and cash flows. In addition, public health threats, such as the coronavirus, influenza and other highly communicable diseases or eliminateviruses, outbreaks of which have from time to time occurred in various parts of the world in which we operate, including China, could adversely impact our earnings,operations, and the operations of our customers. Armed conflicts, wars and insurrections could also adversely impact our operations and the operations of our customers. We anticipate that the future demand for our vessels will be dependent upon economic growth in all of the world's economies, particularly China and India, seasonal and regional changes in demand, changes in the capacity of the global dry, tanker and container fleets and the sources and supply of drybulk, liquid or containerized cargo to be transported by sea.
A decrease in the level of China's imports of raw materials, exports of goods, or a decrease in trade globally could have a material adverse impact on our charterers' business and, in turn, could cause a material adverse impact on our results of operations, financial condition and cash flows.
China imports significant quantities of raw materials, and exports significant amounts of finished or semi-finished goods. For example, in 2021, China imported 1.107 billion tons of iron ore by sea out of a total of 1.517 billion tons shipped globally, accounting for about 73% of the global seaborne iron ore trade. While it accounted for approximately 23% of seaborne coal movements of coal in 2021 according to current estimates (281 million tons imported compared to 1.231 billion tons of seaborne coal traded globally), and 25% of all crude oil shipped globally in 2021 (463 million tons imported compared to 1.827 billion tons of seaborne crude oil traded globally). Our drybulk vessels, tankers and containerships are deployed by our charterers on routes involving trade in and out of emerging markets, and our charterers' revenue may be derived from the shipment of goods within the Asia Pacific region and to or from various overseas export markets. Any reduction in or hindrance to China-based importers or exporters could have a material adverse effect on the growth rate of China's imports and exports and on our charterers' business. For instance, the government of China has implemented economic policies aimed at reducing pollution, increasing consumption of domestically produced Chinese coal and Chinese-made goods, or promoting the export of Chinese coal or increasing consumption of natural gas or banning imports of coal or other commodities from certain countries to China or increasing the production of electricity from renewable resources.
This may have the effect of (i) reducing the demand for imported raw materials and may, in turn, result in a decrease in demand for drybulk or tanker shipping, and (ii) reducing the supply of goods available for export and may, in turn, result in a decrease of demand for container shipping. Additionally, though in China there is an increasing level of autonomy and a gradual shift in emphasis to a “market economy” and enterprise reform, many of the reforms, particularly some limited price reforms that result in the prices for certain commodities being principally determined by market forces, are unprecedented or experimental and may be subject to revision, change, reversal or abolition. The level of imports to and exports from China could be adversely affected by changes to these economic reforms by the Chinese government, as well as by changes in political, economic and social conditions or other relevant policies of the Chinese government. The conflict between Ukraine and Russia and any sanctions resulting therefrom, the pandemic and ongoing global trade war between the U.S. and China may contribute to an economic slowdown in China.
Our operations expose us to the risk that increased trade protectionism from China or other nations will adversely affect our business. If the global recovery is undermined by downside risks and the recent economic downturn returns or if sanctions related to the current Ukraine Russia conflict or any other war causes a downturn in China or worldwide, governments may turn to trade barriers to protect their domestic industries against foreign imports, thereby depressing the demand for shipping. Specifically, increasing trade protectionism in the markets that our charterers serve may cause (i) a decrease in cargoes available to our charterers in favor of Chinese charterers and Chinese owned ships and (ii) an increase in the risks associated with importing goods to China. Any increased trade barriers or restrictions on trade, especially trade with China, would have an adverse impact on our charterers' business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us. This could have a material adverse effect on our earnings volatile, affectbusiness, results of operations, financial condition and our ability to generatepay cash distributions to our unitholders.
In recent years, China has been one of the world's fastest growing economies in terms of gross domestic product, which has had a significant impact on shipping demand. However, if China's growth in gross domestic product declines and other countries in the Asia Pacific region experience slower or negative economic growth in the future, this may negatively affect the fragile recovery of the economies of the United States and the European Union, and thus, may negatively impact the shipping industry. For example, the possibility of the introduction of impediments to trade within the European Union member countries in response to increasing terrorist activities, and the possibility of market reforms to float the Chinese renminbi, either of which development could weaken the euro against the Chinese renminbi, could adversely affect consumer demand in the European Union. Moreover, the revaluation of the renminbi may negatively impact the United States' demand for imported goods, many of which are shipped from China. Political events such as a global trade war or any moves by either China, the United States or the European Union to levy additional tariffs on imported goods as part of protectionist measures or otherwise, could decrease shipping demand. Such weak economic conditions or protectionist measures could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unitholders.
China has enacted a tax for non-resident international transportation enterprises engaged in the provision of services of passengers or cargo, among other items, in and maintain liquidity.out of China using their own, chartered or leased vessels, including any stevedore, warehousing and other services connected with the transportation. The regulation broadens the range of international transportation companies which may find themselves liable for Chinese enterprise income tax on profits generated from international transportation services passing through Chinese ports. This tax or similar regulations by China may reduce our operating results and may also result in an increase in the cost of goods exported from China and the risks associated with exporting goods from China, as well as a decrease in the quantity of goods to be shipped from or through China, which would have an adverse impact on our charterers' business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us.
Similarly, an extension or expansion of the current worldwide pandemic, or withdrawals or changes to economic stimulus packages or initiations or endings to local lockdowns or quarantines by China or other nations to combat the pandemic may reduce our operating results and may also result in an increase in the cost of goods exported from China and the risks associated with exporting goods from China, as well as a decrease in the quantity of goods including petroleum products and manufactured products to be shipped from or through China or imports of commodities including iron ore, coal and crude oil to China, which would have an adverse impact on our charterers' business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us.
Any sanctions levied against Russia or any other country involved in a conflict that affect or begin to affect China or other nations involved in commodity or manufactured goods trades which have the effect of raising prices for such goods or causing economic downturns due to such price rises which would have an adverse impact on our charterers' business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us.
For a description of the economic and trade sanctions and other compliance requirements under which we operate please see “Item 4. Information on the Partnership. B. Business Overview - Economic Sanctions and Compliance ”
Any decrease in shipments of crude oil from the Arabian Gulf or the Atlantic basin may adversely affect our financial performance.
The demand for VLCC oil tankers derives primarily from demand for Arabian Gulf and Atlantic basin (West Africa, United States, Brazil, North Sea, Guyana and other) crude oils, which, in turn, primarily depend on the economies of the world’s industrial countries and competition from alternative energy sources. A wide range of economic, social and other factors can significantly affect the strength of the world’s industrial economies and their demand for Arabian Gulf and Atlantic basin crude oil.
Among the factors that could lead to a decrease in demand for exported Arabian Gulf and Atlantic basin crude oil are:
Any significant decrease in shipments of crude oil from the Arabian Gulf or Atlantic basin may materially adversely affect our financial performance.
Increasing energy self-sufficiency in the United States could lead to a decrease in imports of oil to that country, which to date has been one of the largest importers of oil worldwide.
According to the 2022 Annual Energy Outlook published in March 2022 by the US Energy Information Agency (“EIA”): The United States is both an importer and exporter of petroleum liquids, importing mostly heavy crude oil and exporting mostly light crude as well as petroleum products such as gasoline and diesel. The AEO2022 Reference case projects that the US will be a net exporter of petroleum and other liquids through 2050. These high exports levels are primarily a result of less consumption of liquid fuels in the US and, to a lesser extent, because domestic crude oil cannot be processed economically and is more valuable when exported. The US is expected to be a net importer of crude alone (excluding products and other petroleum liquids) over the same period. Similarly in the annual World Energy Outlook (October 2021), the International Energy Agency (“IEA”) forecast that U.S. crude oil output will expand by 3.4 million barrels per day (“MBPD”) by 2030 in their Stated Policies Scenario (STEPS) while Saudi Arabia increases production by about 2.0 MBPD by 2030, making the U.S. the world’s largest oil producer from now until 2030 ahead of both Saudi Arabia and Russia. Brazil and Guyana will increase oil net exports by 2.0 MBPD by 2030 adding to Atlantic Basin supply. Emerging markets will increase oil demand by 12 MBPD from 2020 to 2030 an increase of nearly 30% which will continue the trend of shipping more Atlantic basin oil to China, India and Other Asian countries.
In recent years the share of total U.S. consumption met by net imports, including both crude oil and products, has been decreasing since peaking at over 68% in 2008 according to BP’s 2021 Statistical Review and stood at 46% for 2020. EIA statistics for 2020 show that U.S. crude oil imports fell 14% to an average of 5.9 MBPD under the 6.8 MBPD for 2019 but rose slightly in 2021 to 6.1 MBPD (4%), and the average imports are still below the June 2005 peak of 10.8 MBPD. EIA statistics note that U.S. crude oil exports have risen steadily since the ban on exports was lifted in 2015 reaching an all-time high of 3.6 MBPD in March 2020 and stood at 3.5 MBPD in December2021, which was a very significant increase over the most recent low of 9,100 barrels per day exported in 2002 on average. A slowdown in oil imports to or exports from the United States, one of the most important oil trading nations worldwide, may result in decreased demand for our vessels and lower charter rates, which could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to make cash distributions.
An increase in trade protectionism and the unraveling of multilateral trade agreements could have a material adverse impact on our charterers' business and, in turn, could cause a material adverse impact on our results of operations, financial condition and cash flows.
Our operations expose us to the risk that increased trade protectionism will adversely affect our business. In past years, government leaders have declared that their countries may turn to trade barriers to protect or revive their domestic industries in the face of foreign imports, thereby depressing the demand for shipping. Concerns regarding terrorist threats from groups in Europe and the refugee crisis may advance protectionist policies and may negatively impact globalization and global economic growth, which could disrupt financial markets, and may lead to weaker consumer demand in the European Union, the United States, and other parts of the world which could have a material adverse effect on our business. The deterioration in the global economy has caused, and may continue to cause, a decrease in worldwide demand for dry cargo and certain goods shipped in containerized form.
Uncertainty has been created about the future relationship between the United States, China, Russia and other importing and exporting countries, including with respect to trade policies, treaties, government regulations and tariffs. Protectionist developments, or the perception that they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade. Restrictions on imports, including in the form of tariffs, could have a major impact on global trade and demand for shipping. Specifically, increasing trade protectionism in the markets that our charterers serve may cause an increase in (i) the cost of goods exported from exporting countries, (ii) the length of time required to deliver goods from exporting countries, (iii) the costs of such delivery and (iv) the risks associated with exporting goods. These factors may result in a decrease in the quantity of goods to be shipped and the distances those goods travel. Protectionist developments, or the perception they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade, including trade between the United States and China or between Russia and other countries. These developments would have an adverse impact on our charterers' business, operating results and financial condition. This could, in turn, affect our charterers' ability to make timely charter hire payments to us and impair our ability to renew charters and grow our business. This could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unitholders.
We are focused on employing vessels on long-term charters and we may have difficulties in doing so if a more active short-term or spot market develops.
One of our principal strategies is to enter into long-term charters, although we believe it is impractical to determine the typical charter length for vessels in our sectors due to factors such as market dynamics, charter strategy and the private nature of charter agreements. If a market for long-term time charters in the sectors in which we operate does not develop, we may have increased difficulty entering into long-term time charters upon expiration or early termination of the time charters for our vessels. As a result, our revenues and cash flows may become more volatile. In addition, an active short-term or spot charter market may require us to enter into charters based on changing market prices, as opposed to contracts based on fixed rates, which could result in a decrease in our revenues and cash flows, including cash available for distribution to unitholders, if we enter into charters during periods when the market price for shipping dry or liquid cargoes or containerships is depressed or these markets become depressed during the period of any adjustable rate charter.
While we favor longer term charters for all the tanker, dry bulk and container vessels we own or control, we may from time to time have to rely on chartering our vessels in the spot market either because our charter ended during a period of weak demand or we need to reposition a vessel out of a geographically or seasonally disadvantaged position. Additionally some of the longer term charters we have are indexed to spot rates. Spot market rates for tanker, dry bulk and container vessels are highly volatile and may decrease in the future, which may materially adversely affect our earnings in the event that our vessels are chartered in the spot market.
We may deploy at least some of our product tankers, chemical tankers and Very Large Crude Carriers (“VLCCs”) in the spot market directly or in pools. Although spot chartering is common in the product, chemical, tanker and VLCC sectors, product tankers, chemical tanker and VLCC charter hire rates are highly volatile and may fluctuate significantly based upon demand for seaborne transportation of crude oil and oil products and chemicals, as well as tanker supply. World oil demand is influenced by many factors, including international economic activity (including reactions to any economic or health crises or conflicts); geographic changes in oil production, processing, and consumption; oil price levels; inventory policies of the major oil and oil trading companies; and strategic inventory policies of countries such as the United States and China.
We may deploy our dry bulk vessels on term charters either at fixed rates or rates that vary with an index of spot voyages such as those published by the Baltic Exchange. Some of these charters have the ability to fix rates for succeeding quarters or for longer durations into the future and we have exercised those options when we believe it is advantageous to do so to maximize earnings or to defend against a perceived market weakness. If we do not fix rates going forward or the index charter does not have an ability to do so or a long term charter ends during a period of market weakness, we may be exposed to volatile spot rates that can be lower than the rates in the existing term charters on our other dry bulk vessels which may materially adversely affect our earnings.
The container ship market generally favors longer term charters so that liner companies can establish set schedules for deliveries of containerized cargoes and we may deploy our container vessels on longer term charters at fixed rates or in some instances at rates linked to a spot index such as the Contex. Should term charters on our container vessels end during periods of market weakness, we may be exposed to charters of shorter duration or charters linked to a spot index, which would expose our container ships to volatile spot rates that can be lower than the existing rates in the term charters on our other container ships, which may materially adversely affect our earnings.
The successful operation of our vessels in the spot charter market depends upon, among other things, obtaining profitable spot charters and minimizing, to the extent possible, time spent waiting for charters and time spent traveling unladen to pick up cargo. Furthermore, as charter rates for spot charters are fixed for a single voyage that may last up to several weeks, during periods in which spot charter rates are rising, we will generally experience delays in realizing the benefits from such increases. The spot market is highly volatile, and, in the past, there have been periods when spot rates have declined below the operating cost of vessels.
Currently, spot charter hire rates are at or below operating costs for some tanker vessel sizes and there is no assurance that the crude oil, product and chemical tanker charter market will rise over the next several months or will not decline further. Dry bulk and container vessels spot rates are currently above operating costs, but there is no assurance that these rates will remain or will not decline further. A decrease in spot rates may decrease the revenues and cash flow we derive from vessels employed in pools or on index linked charters. Such volatility in pool or index linked charters may be mitigated by any minimum rate due to us that we negotiate with our charterers.
Additionally, if the spot market rates or short-term time charter rates become significantly lower than the time charter equivalent rates that some of our charterers are obligated to pay us under our existing charters, the charterers may have incentive to default under that charter or attempt to renegotiate the charter. If our charterers fail to pay their obligations, we would have to attempt to re-charter our vessels at lower charter rates, which would affect our ability to comply with our loan covenants and operate our vessels profitably. If we are not able to comply with our loan covenants and our lenders choose to accelerate our indebtedness and foreclose their liens, we could be required to sell vessels in our fleet and our ability to continue to conduct our business would be impaired.
Certain of our tanker, dry bulk and container vessels are contractually committed to time charters. We are not permitted to unilaterally terminate the charter agreements of these vessels due to upswings in the tanker industry cycle, when spot market voyages might be more profitable. We may also decide to sell a vessel in the future. In such a case, should we sell a vessel that is committed to a long-term charter, we may not be able to realize the full charter free fair market value of the vessel during a period when spot market charters are more profitable than the charter agreement under which the vessel operates. We may re-charter our tanker vessels on long term charters or charter them in the spot market or place them in pools upon expiration or termination of the vessels’ current charters.
Our growth depends on our ability to expand relationships with existing customers, obtain new customers and enter new shipping sectors, for which we will face substantial competition from new entrants and established companies with significant resources.
Long-term time charters have the potential to provide income at pre-determined rates over more extended periods of time. However, the process for obtaining longer term time charters is highly competitive and generally involves a lengthy, intensive and continuous screening and vetting process and the submission of competitive bids that often extends for several months. In addition to the quality, age and suitability of the vessel, longer term shipping contracts tend to be awarded based upon a variety of other factors relating to the vessel operator, including:
It is likely that we will face substantial competition for long-term charter business from a number of experienced companies. We may not be able to compete profitably as we expand our business into new geographic regions or provide new services. New markets may require different skills, knowledge or strategies than we use in our current markets. Many of these competitors have significantly greater financial resources than we do. It is also likely that we will face increased numbers of competitors entering into our transportation sectors, including in the tanker, containership and drybulk sector. Many of these competitors have strong reputations and extensive resources and experience. Increased competition may cause greater price competition, especially for long-term charters, as well as for the acquisition of high-quality secondhand vessels and newbuilding vessels. Further, since the charter rate is generally considered to be one of the principal factors in a charterer's decision to charter a vessel, the rates offered by our competitors can place downward pressure on rates throughout the charter market.
Additionally, the consolidation among liner companies and the creation of alliances among liner companies have increased their negotiation power and oil companies facing declining fossil fuel use in the developed world may decrease the number of long term charters that they hold. However, participation in three shipping sectors should mitigate some of the volatility inherent in a focus on one particular market and allow us access to long term charter deals or asset purchases when single market competitors maybe constrained.
As a result of these factors, we may be unable to expand our relationships with existing customers or obtain new customers for long-term charters on a profitable basis, if at all. However, even if we are successful in employing our vessels under longer term charters, our vessels will not be available for trading in the spot market during an upturn in the dry cargo, tanker or container market cycles, when spot trading may be more profitable. If we cannot successfully employ our vessels in profitable time charters our results of operations and financial condition, as well as operating cash flow could be adversely affected.
As we expand our business, we may have difficulty managing our growth, which could increase expenses.
We intend to continue growing our fleet, either through purchases, ordering newbuilt vessels, the increase of the number of chartered-in vessels or through the acquisitions of businesses, as is the case with the acquisitions of Navios Containers’ and Navios Acquisition’s fleets. The addition of vessels to our fleet or the acquisition of new businesses will impose significant additional responsibilities on our management. We will also have to increase our customer base to provide continued employment for the new vessels. Our growth will depend on our success in locating and acquiring suitable vessels, identifying and entering into shipbuilding contracts at acceptable prices and consummating acquisitions or joint ventures, integrating any acquired business successfully with our existing operations, enhancing our customer base, managing our expansion, and obtaining required financing.
During periods in which charter rates are high, vessel values are generally high as well, and it may be difficult to consummate ship acquisitions or potentially enter into shipbuilding contracts at favorable prices. During periods in which charter rates are low and employment is scarce, vessel values are low and any vessel acquired without time charter attached will automatically incur additional expenses to operate, insure, maintain and finance the vessel thereby significantly increasing the acquisition cost. In addition, any vessel acquisition may not be profitable at or after the time of acquisition and may not generate cash flows sufficient to justify the investment. We may not be successful in executing any future growth plans and we cannot give any assurance that we will not incur significant expenses and losses in connection with such growth efforts.
Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel, continuing to meet technical and safety performance standards, managing relationships with customers and suppliers, dealing with potential delays in deliveries of newbuilding vessels, and integrating newly acquired operations into existing infrastructures. We may not be successful in executing our growth plans. We may incur significant expenses and losses in connection therewith or our acquisitions may not perform as expected, which could materially adversely affect our results of operations and financial condition.
We may be unable to make or realize expected benefits from acquisitions, and implementing our growth strategy through acquisitions may harm our business, financial condition and operating results.
Our growth strategy depends, in part, on a gradual expansion of our fleet. Any acquisition of a vessel or a fleet may not be profitable to us at or after the time we acquire it and may not generate cash flow sufficient to justify our investment. We may also fail to realize anticipated benefits of our growth, such as new customer relationships, cost-savings or cash flow enhancements, or we may be unable to hire, train or retain qualified shore and seafaring personnel to manage and operate our growing business and fleet.
Our growth strategy could decrease our liquidity by using a significant portion of our available cash or borrowing capacity to finance acquisitions. To the extent that we incur additional debt to finance acquisitions, it could significantly increase our interest expense or financial leverage. We may also incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges.
Additionally, the marine transportation and logistics industries are capital intensive, traditionally using substantial amounts of indebtedness to finance vessel acquisitions, capital expenditures and working capital needs. If we finance the purchase of our vessels through the issuance of debt securities, it could result in:
In addition, our business plan and strategy is predicated on buying vessels at what we believe is near the low end of the cycle in what has typically been a cyclical industry. However, charter rates and vessel asset values may sink lower, and shipping costs or vessel asset values may not increase in the near-term or at all.
Delays in deliveries of secondhand vessels, our decision to cancel an order for purchase of a vessel or our inability to otherwise complete the acquisitions of additional vessels for our fleet, could harm our business, financial condition and results of operations.
We expect to purchase secondhand vessels from time to time. The delivery of these vessels could be delayed, not completed or cancelled, which would delay or eliminate our expected receipt of revenues from the employment of these vessels. The seller could fail to deliver these vessels to us as agreed, or we could cancel a purchase contract because the seller has not met its obligations. The ability and willingness of each of our counterparties to perform its obligations under a contract with us will depend upon a number of factors that are beyond our control and may include, among other things, general economic conditions, the state of the capital markets, the condition of the dry and container shipping industry and charter hire rates.
If the delivery of any vessel is materially delayed or cancelled, especially if we have committed the vessel to a charter for which we become responsible for substantial liquidated damages to the customer as a result of the delay or cancellation, we could sustain significant losses and our business, financial condition and results of operations could be adversely affected.
If we purchase any newbuilding vessels, delays, cancellations or non-completion of deliveries of newbuilding vessels could harm our operating results.
If we purchase any newbuilding vessels, the shipbuilder could fail to deliver the newbuilding vessel as agreed. In addition, under charters that are related to a newbuilding, delays in our delivery of the newbuilding to our customer could result in liquidated damages payable to a customer, and for prolonged delays, the customer may terminate the charter and, in addition to the resulting loss of revenues, we may be responsible for additional, substantial liquidated damages. We do not derive any revenue from a vessel until after its delivery and will be required to pay substantial sums as progress payments during construction of a newbuilding. While we expect to have refund guarantees from financial institutions with respect to such progress payments in the event the vessel is not delivered by the shipyard or is otherwise not accepted by us, there is the potential that we may not be able to collect all portion of such refund guarantees, in which case we would lose the amounts of monies we have advanced to the shipyards for such progress payments.
The completion and delivery of newbuildings could be delayed, cancelled or otherwise not completed because of:
• | shortages of or delays in the receipt of necessary component machinery or equipment; |
If delivery of a vessel is materially delayed, it could materially adversely affect our results of operations and financial condition and our ability to make cash distributions.
The loss of a customer, charter or vessel could result in a loss of revenues and cash flow in the event we are unable to replace such customer, charter or vessel.
Payments to us by our charterers under time charters are and will be our main source of operating cash flow. Weaknesses in demand for our shipping services, increased operating costs due to changes in environmental or other regulations and the oversupply of vessels increase the likelihood of one or more of our customers being unable or unwilling to pay us contracted charter rates or going bankrupt.
For the year ended December 31, 2021, Singapore Marine Pte. Ltd (“Singapore Marine”) represented approximately 14.5% of our total revenues. For the year ended December 31, 2020, Hyundai Merchant Marine Co. (“HMM”), Singapore Marine, and Cargill International S.A. (“Cargill”), represented approximately 23.4%, 19.5% and 11.4%, respectively, of our total revenues. For the year ended December 31, 2019, HMM, Swissmarine Asia Pte. Ltd. (“Swissmarine”) and Cargill, represented approximately 25.9%, 12.3% and 10.9%, respectively, of our total revenues. No other customers accounted for 10% or more of total revenues for any of the years presented. The charterers in the containership sector consist of a limited number of liner companies and the charterers in the tanker sector consist of a limited number of oil companies and oil traders. The combination of any surplus of vessel capacity, the expected entry into service of new technologically advanced vessels, and the expected increase in the size of the world dry bulk, tanker and container fleets over the next few years may make it difficult to secure substitute employment for any of our vessels if our counterparties fail to perform their obligations under the currently arranged time charters, and any new charter arrangements we are able to secure may be at lower rates. Furthermore, the surplus of capacity available at lower charter rates and lack of demand for our customers could negatively affect our charterers' willingness to perform their obligations under our time charters, which in many cases provide for charter rates significantly above current market rates. The number of leading liner companies which are our client base may continue to shrink and we may depend on an even more limited number of customers to generate a substantial portion of our revenues. The cessation of business with these liner companies or their failure to fulfill their obligations under the time charters for our containerships could have a material adverse effect on our financial condition and results of operations, as well as our cash flows, including cash available for distributions to our unitholders.
We could lose a customer or the benefits of our time charter arrangements for many different reasons, including if the customer is unable or unwilling to make charter hire or other payments to us because of a deterioration in its financial condition, disagreements with us or if the charterer exercises certain termination rights or otherwise. Our customers may go bankrupt or fail to perform their obligations under the contracts, they may delay payments or suspend payments altogether, they may terminate the contracts prior to the agreed-upon expiration date or they may attempt to renegotiate the terms of the contracts. If any of these customers terminates its charters, chooses not to re-charter our ships after charters expire or is unable to perform under its charters and we are not able to find replacement charters on similar terms or are unable to re-charter our ships at all, we will suffer a loss of revenues that could have a material adverse effect on our business, results of operations and financial condition and our ability to make distributions to our unitholders, as we will not receive any revenues from such a vessel while it is un-chartered, but we will be required to pay expenses necessary to maintain and insure the vessel and service any indebtedness on it. Accordingly we may have to grant concessions to our charterers in the form of lower charter rates for the remaining duration of the relevant charter or part thereof, or to agree to re-charter vessels coming off charter at reduced rates compared to the charter then ended.
For example, in 2016, HMM faced financial difficulties and developed a restructuring plan, which included restructuring agreements for five of our containerships (see Note 19 — Notes Receivable to our consolidated financial statements, included elsewhere in this Annual Report). In addition, Navios Partners has filed claims for lost revenues in connection with the 2016 filing by Hanjin for rehabilitation, which was later followed by entry into liquidation in 2017. In October 2020, the bankruptcy court ruled against one of the two claims filed by the Company. The relevant court is still assessing the claim regarding the Navios Luz. The Company has fully provided for these amounts in its books (see Note 2(f) — Summary of Significant Accounting Policies to our consolidated financial statements, included elsewhere in this Annual Report).
All of our drybulk time charters are scheduled to expire on dates ranging from April 2022 to June 2024. All of our tanker time charters are scheduled to expire on dates ranging from April 2022 to February 2031. All of our containerships are scheduled to expire on dates ranging from October 2022 to April 2030 (excluding the two containerships agreed to be sold).
If, upon expiration or termination of these or other contracts, long-term recharter rates are lower than existing rates, particularly considering that we intend to enter into long-term charters, or if we are unable to obtain replacement charters, our earnings, cash flow and our ability to make cash distributions to our unitholders could be materially adversely affected. Our ability to re-charter our containerships upon the expiration or termination of their current time charters and the charter rates payable under any renewal options or replacement time charters will depend upon, among other things, the prevailing state of the containership charter market, which can be affected by the demand of the container industry.
The failure of a customer to perform its obligations under a contract may mean we increase our exposure to the spot market, which is subject to greater rate fluctuation than the time charter market. The loss of any of our charterers, time charters or vessels, or a decline in payments under our time charters, could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unitholders.
The aging of our vessels may result in increased operating costs in the future, which could adversely affect our earnings.
As of April 1, 2022, the vessels in our fleet had an average age of approximately 9.7 years, basis fully delivered fleet, when drybulk and tanker vessels have an expected life of approximately 25 years and containerships have an expected life of approximately 30 years and we may acquire older vessels in the future. Older vessels are typically more costly to maintain than more recently constructed vessels due to improvements in engine technology. As our fleet ages, we will incur increased costs. In some instances, charterers prefer newer vessels that are more fuel efficient than older vessels. Cargo insurance rates also increase with the age of a vessel, making older vessels less desirable to charterers as well. Therefore, as vessels age it can be more difficult to employ them on profitable time charters, particularly during periods of decreased demand in the charter market. Accordingly, we may find it difficult to continue to find profitable employment for our vessels as they age. Governmental regulations, safety or other equipment standards related to the age of the vessels may require expenditures for alterations or the addition of new equipment to our vessels and may restrict the type of activities in which these vessels may engage. Older vessels may require longer and more expensive dry-dockings, resulting in more off-hire days and reduced revenue. We cannot assure you that as our vessels age, market conditions will justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives. If we sell vessels, we may have to sell them at a loss, and if charterers no longer charter our vessels due to their age, it could materially adversely affect our earnings.
A number of third party owners have ordered so-called “eco-type” vessel designs or have retrofitted scrubbers to remove sulphur from exhaust gases, which may offer substantial bunker savings as compared to older designs or vessels without exhaust gas scrubbers. Increased demand for and supply of “eco-type” or scrubber retrofitted vessels could reduce demand for our vessels that are not classified as such and expose us to lower vessel utilization and/or decreased charter rates.
New eco-type vessel designs or scrubber retrofits purport to offer material bunker savings compared to older designs, including certain of our vessels. Fitting scrubbers will allow a ship to consume high sulphur fuel oil (“HSFO”) which, to date, has been cheaper than the low sulphur fuel oil (“LSFO”) that ships without scrubbers must consume to comply with the IMO 2020 low sulphur emission requirements. Depending on the magnitude of the difference in prices between LSFO and HSFO, such savings could result in a substantial reduction of bunker cost for charterers compared to such vessels of our fleet which may not have scrubbers. As the supply of such “eco-type” or scrubber retrofitted vessels increases, if the differential between the cost of HSFO and LSFO remains high, or if charterers prefer such vessels over our vessels that are not classified as such, this may reduce demand for our non-”eco-type”, non-scrubber retrofitted vessels, impair our ability to re-charter such vessels at competitive rates and have a material adverse effect on our business, financial condition, cash flows and results of operations.
Our vessels may be subject to unbudgeted periods of off-hire, which could materially adversely affect our business, financial condition and results of operations.
Under the terms of the charter agreements under which our vessels operate, when a vessel is “off-hire,” or not available for service or otherwise deficient in its condition or performance, the charterer generally is not required to pay the hire rate, and we will be responsible for all costs (including the cost of bunker fuel) unless the charterer is responsible for the circumstances giving rise to the lack of availability.
As we do not maintain off-hire insurance except in cases of loss of hire up to a limited number of days due to war or piracy events any extended off-hire period could have a material adverse effect on our results of operations, cash flows and financial condition.
For more information on “off-hire” see “Item 4. Information on the Partnership - B. Business Overview – Off-hire.”
Vessels may suffer damage and we may face unexpected drydocking costs, which could affect our cash flow and financial condition.
If our owned vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and can be substantial. We may have to pay drydocking costs that insurance does not cover. The loss of earnings while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, could decrease our revenues and earnings substantially, particularly if a number of vessels are damaged or drydocked at the same time. Under the terms of the Management Agreements with the Managers, the costs of drydocking repairs are not included in the daily management fee, but are be reimbursed at cost upon occurrence.
In addition, we often purchase secondhand vessels that, unlike newbuilt vessels, typically do not carry warranties as to their condition, and our vessel inspections would not normally provide us with as much knowledge of a vessel's condition as we would possess if it had been built for us and operated by us during its life. Repairs and maintenance costs for secondhand vessels are difficult to predict and may be substantially higher than for vessels we have operated since they were built. These costs could decrease our cash flows, liquidity and our ability to pay dividends to our unitholders.
The market value of our vessels may fluctuate significantly, which could cause us to breach covenants in our credit facilities, result in the foreclosure of certain of our vessels, limit the amount of funds that we can borrow and adversely affect our ability to purchase new vessels and our operating results. Depressed vessel values could also cause us to incur impairment charges. If vessel values are low at a time when we are attempting to dispose of a vessel, we could incur a loss.
The factors that influence vessel values include:
If the book value of a vessel is impaired due to unfavorable market conditions, or a vessel is sold at a price below its book value, we would incur a loss. If a charter expires or is terminated, we may be unable to re-charter the vessel at an acceptable rate and, rather than continue to incur costs to maintain the vessel, may seek to dispose of it. Our inability to dispose of a vessel at a reasonable price could result in a loss on its sale and could materially and adversely affect our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unitholders.
If the market value of our vessels decreases, we may breach some of the covenants contained in the financing agreements relating to our indebtedness at the time. Our credit facilities contain covenants including maximum total net liabilities over total net assets (effective in general after delivery of the vessels), minimum net worth and loan to value ratio covenants. As of December 31, 2021, Navios Partners was in compliance with the financial covenants and/or the prepayments and/or the cure provisions, as applicable, in each of its credit facilities and certain financial liabilities. If we breach any such covenants in the future and we are unable to remedy the relevant breach, our lenders could accelerate or require us to prepay a portion of our debt and foreclose on our vessels. In addition, if the book value of a vessel is impaired due to unfavorable market conditions, we would incur a loss that could have a material adverse effect on our business, financial condition and results of operations.
In addition, as vessels grow older, they generally decline in value. We will review our vessels for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
We review certain indicators of potential impairment, such as undiscounted projected operating cash flows expected from the future operation of the vessels, which can be volatile for vessels employed on short-term charters or in the spot market. Any impairment charges incurred as a result of declines in charter rates would negatively affect our financial condition and results of operations. In addition, if we sell any vessel at a time when vessel prices have fallen and before we have recorded an impairment adjustment to our financial statements, the sale may be at less than the vessel’s carrying amount on our financial statements, resulting in a loss and a reduction in earnings. Conversely, if vessel values are elevated at a time when we wish to acquire additional vessels, the cost of acquisition may increase and this could materially adversely affect our business, financial condition and results of operations.
We must make substantial capital expenditures to maintain the operating capacity of our fleet, which will reduce our cash available for distribution. In addition, each quarter our board of directors is required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less or no cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted.
We must make substantial capital expenditures to maintain and replace, over the long term, the operating capacity of our fleet. We generally expect to finance these maintenance capital expenditures with cash balances or credit facilities. These maintenance and replacement capital expenditures include capital expenditures associated with drydocking a vessel, modifying an existing vessel or acquiring a new vessel to the extent these expenditures are incurred to maintain the operating capacity of our fleet. These expenditures could increase as a result of changes in the cost of our labor and materials, the cost of suitable replacement vessels, customer/market requirements, increases in the size of our fleet, the length of charters, governmental regulations and maritime self-regulatory organization standards relating to safety, security or the environment, competitive standards, and the age of our ships. In addition, we will need to make substantial capital expenditures to acquire vessels in accordance with our growth strategy. The inability to replace the vessels in our fleet upon the expiration of their useful lives could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unitholders.
Our significant maintenance and replacement capital expenditures, including without limitation the vessel operating expenses paid to the Managers pursuant to the Management Agreements, to maintain and replace, over the long-term, the operating capacity of our fleet, as well as to comply with environmental and safety regulations, may reduce or eliminate the amount of cash we have available for distribution to our unitholders. Our partnership agreement requires our board of directors to deduct estimated, rather than actual, maintenance and replacement capital expenditures from operating surplus each quarter in an effort to reduce fluctuations in operating surplus. The amount of estimated capital expenditures deducted from operating surplus is subject to review and change by the Conflicts Committee of our board of directors at least once a year. If our board of directors underestimates the appropriate level of estimated maintenance and replacement capital expenditures, we may have less, if any, cash available for distribution in future periods when actual capital expenditures begin to exceed previous estimates.
For detailed information on the amount of vessel operating expenses owed under the Management Agreements, please see the section entitled, “Item 5. Operating and Financial Review and Prospects - A. Operating results – Vessel operating expenses”.
We may be subject to litigation that, if not resolved in our favor or not sufficiently insured against, could have a material adverse effect on us.
We have been and may be, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury claims, environmental claims or proceedings, potential costs due to environmental damage and vessel collisions, and other tort claims, employment matters, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of our business. We cannot predict with certainty the outcome or effect of any claim or other litigation matter, and the ultimate outcome of any litigation or the potential costs to resolve them may have a material adverse effect on us. Insurance may not be applicable or sufficient in all cases and/or insurers may not remain solvent which may have a material adverse effect on our financial condition.
Because we generate all of our revenues in U.S. dollars but incur a portion of our expenses in other currencies, exchange rate fluctuations could cause us to suffer exchange rate losses thereby increasing expenses and reducing income.
We engage in worldwide commerce with a variety of entities. Although our operations may expose us to certain levels of foreign currency risk, our transactions are at present predominantly U.S. dollar-denominated. Transactions in currencies other than the functional currency are translated at the exchange rate in effect on the date of each transaction. Expenses incurred in foreign currencies against which the U.S. dollar falls in value can increase thereby decreasing our income or vice versa if the U.S. dollar increases in value. For example, as of December 31, 2021, the value of the U.S. dollar as compared to the Euro increased by approximately 8.3% compared with the respective value as of December 31, 2020. A greater percentage of our transactions and expenses in the future may be denominated in currencies other than the U.S. dollar.
Security breaches and disruptions to our information technology infrastructure could interfere with our operations and expose us to liability which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
In the ordinary course of business, we rely on information technology networks and systems to process, transmit, and store electronic information, and to manage or support a variety of business processes and activities.
Additionally, we collect and store certain data, including proprietary business information and customer and employee data, and may have access to other confidential information in the ordinary course of our business. Despite our cybersecurity measures, which includes active monitoring, training, reporting and other activities designed to protect and secure our data, our information technology networks and infrastructure may be vulnerable to damage, disruptions, or shutdowns due to attack by hackers or breaches, employee error or malfeasance, data leakage, power outages, computer viruses and malware, telecommunication or utility failures, systems failures, natural disasters, or other catastrophic events. Any such events could result in legal claims or proceedings, liability or penalties under privacy or other laws, disruption in operations, and damage to our reputation, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
In addition, some of our technology networks and systems are managed by third-party service providers (including cloud-service providers) for a variety of reasons, and such providers also may have access to proprietary business information and customer and employee data, and may have access to confidential information on the conduct of our business. Like us, these third-party providers are subject to risks imposed by data breaches and disruptions to their technology infrastructure. A cyber-attack could defeat one or more of our third-party service providers' security measures, allowing an attacker access to proprietary information from our company including our employees', customers' and suppliers' data. Most recently, the Russia/Ukraine conflict has been accompanied by cyber-attacks, including other countries in the region, which could adversely affect our operations. Any such security breach or disruption to our third-party service providers could result in a disruption in operations and damage to our reputation and liability claims, which could have a material adverse effect on our business, financial condition, cash flows and results of operations.
We may not have adequate insurance to compensate us if we lose our vessels or to compensate third parties.
There are a number of risks associated with the operation of ocean-going vessels, including mechanical failure, collision, fire, human error, war, terrorism, piracy, loss of life, contact with floating objects, property loss, cargo loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. Any of these events may result in loss of revenues, increased costs and decreased cash flows. In addition, the operation of any vessel is subject to the inherent possibility of marine disaster, including oil spills and other environmental mishaps.
There are also liabilities arising from owning and operating vessels in international trade. We procure insurance for our fleet in relation to risks commonly insured against by vessel owners and operators. Our current insurance includes (i) hull and machinery and war risk insurance covering damage to our vessels' hulls and machinery from, among other things, collisions and contact with fixed and floating objects, (ii) war risks insurance covering losses associated with the outbreak or escalation of hostilities and (iii) protection and indemnity insurance (which includes environmental damage) covering, among other things, third-party and crew liabilities such as expenses resulting from the injury or death of crew members, passengers and other third parties, the loss or damage to cargo, third-party claims arising from collisions with other vessels, damage to other third-party property and pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal.
We do not currently maintain strike or off-hire insurance, which would cover the loss of revenue during extended vessel off-hire periods, such as those that occur during an unscheduled drydocking due to damage to the vessel from accidents except in cases of loss of hire up to a limited number of days due to war or a piracy event.
Other events that may lead to off-hire periods include natural or man-made disasters that result in the closure of certain waterways and prevent vessels from entering or leaving certain ports. Accordingly, any extended vessel off-hire, due to an accident or otherwise, could have a material adverse effect on our business and our ability to pay distributions to our unitholders.
We can give no assurance that we are adequately insured against all risks or that our insurers will pay a particular claim. Even if our insurance coverage is adequate to cover our losses, we may not be able to obtain a timely replacement vessel in the event of a vessel loss. Under the terms of our credit facilities, we are subject to restrictions on the use of any proceeds we may receive from claims under our insurance policies.
Because we obtain some of our insurance through protection and indemnity associations, we may also be subject to calls, or premiums, in amounts based not only on our own claim records, but also the claim records of all other members of the protection and indemnity associations. There is no cap on our liability exposure for such calls or premiums payable to our protection and indemnity association. Our payment of these calls could result in significant expenses to us, which could have a material adverse effect on our business, results of operations and financial condition. In addition, we cannot assure you that we will be able to renew our insurance policies on the same or commercially reasonable terms, or at all, in the future. For example, more stringent environmental regulations have led in the past to increased costs for, and in the future may result in the lack of availability of, protection and indemnity insurance against risks of environmental damage or pollution. Any uninsured or underinsured loss could harm our business, financial condition, cash flows and results of operations. In addition, our insurance may be voidable by the insurers as a result of certain of our actions, such as our vessels failing to maintain certification with applicable maritime self-regulatory organizations. Further, we cannot assure you that our insurance policies will cover all losses that we incur, or that disputes over insurance claims will not arise with our insurance carriers. Any claims covered by insurance would be subject to deductibles, and since it is possible that a large number of claims may be brought, the aggregate amount of these deductibles could be material. In addition, our insurance policies are subject to limitations and exclusions, which may increase our costs or lower our revenues, and could have a material adverse effect on our business, financial condition, cash flows and results of operations. A catastrophic oil spill or marine disaster could exceed our insurance coverage, which could have a material adverse effect on our business, results of operations and financial condition and our ability to make distributions to our unitholders. Any uninsured or underinsured loss could harm our business and financial condition. In addition, the insurance may be voidable by the insurers as a result of certain actions, such as vessels failing to maintain required certification.
Our charterers may in the future engage in legally permitted trading in locations or with persons which may still be subject to restrictions due to sanctions or boycott. However, no vessels in our fleet have called on ports in sanctioned countries or in countries designated as state sponsors of terrorism by the U.S. State Department like Iran or Syria. Our insurers may be contractually or by operation of law prohibited from honoring our insurance contract for such trading on such locations or countries or trading with such persons, which could result in reduced insurance coverage for losses incurred by the related vessels. Changes in the insurance markets attributable to the risk of terrorism in certain locations around the world could make it difficult for us to obtain certain types of coverage. In addition, the insurance that may be available to us may be significantly more expensive than our existing coverage. Furthermore, our insurers and we may be prohibited from posting or otherwise be unable to post security in respect of any incident in such locations or countries or as a result of trading with such persons, resulting in the loss of use of the relevant vessel and negative publicity for our Company which could negatively impact our business, results of operations, cash flows and unit price.
Our growth depends on continued growth in demand for crude oil, refined petroleum products (clean and dirty) and bulk liquid chemicals and the continued demand for seaborne transportation of such cargoes.
Our growth strategy depends in part on expansion in the crude oil, product and chemical tanker sectors. Accordingly, our growth depends on continued growth in world and regional demand for crude oil, refined petroleum (clean and dirty) products and bulk liquid chemicals and the transportation of such cargoes by sea, which could be negatively affected by a number of factors, including:
The refining and chemical industries may respond to any economic downturn and demand weakness by reducing operating rates, partially or completely closing refineries or bulk liquid chemical production facilities and by reducing or cancelling certain investment expansion plans, including plans for additional refining or production capacity. Continued reduced demand for refined petroleum products and bulk liquid chemicals and the shipping of such cargoes or the increased availability of pipelines used to transport refined petroleum products, and bulk liquid chemicals would have a material adverse effect on our future growth and could harm our business, results of operations and financial condition.
Increasing growth of electric vehicles and other measures intended to reduce CO2 emissions could lead to a decrease in trading and the movement of crude oil and petroleum products worldwide.
The IEA noted in its Global EV Outlook 2021 that total electric cars registered worldwide grew from about 17,000 in 2010 to 10 million at the end of 2020. Electric car sales in 2020 were 3 million and electric car registrations increased by 41% in 2020 despite the pandemic related worldwide downturn in car sales in which car sales dropped 16%. IEA forecasts are for electric vehicles (“EVs”) to grow from 8 million in 2019 to about 50 million registered vehicles by 2025 and 145 million by 2030, which the IEA forecasts would reduce worldwide demand for oil products by over 2 million barrels per day in 2030. IEA stated that EV operations in 2020 avoided the consumption of 0.5 million barrels per day of oil products. According to the World Economic Forum, there were about 1.1 billion cars registered in 2015 and there will be about 2 billion cars registered by 2040.
In the World Energy Outlook 2021, published in October 2021, the IEA states that current governmental pledges to reduce emissions will cover less than 20% of the gap in emissions reductions that need to be closed by 2030 to keep a 1.5 degree C path within reach (the rise of global mean surface temperatures above pre-industrial levels). Although these announced pledges imply a doubling of clean energy investment and finance over the next decade, this acceleration is depressed.not sufficient to overcome the inertia of today’s energy system. In particular, over the crucial period to 2030, the actions under this IEA scenario fall well short of the emissions reductions that would be required to keep the door open to Net Zero Emissions by 2050.
A growth in EVs or a speed up in climate goals aimed to reduce CO2 and other emissions or a slowdown in imports or exports of crude or petroleum products worldwide may result in decreased demand for our vessels and lower charter rates, which could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to make cash distributions.
We conduct a substantial amount of business in China. The legal system in China has inherent uncertainties that could limit the legal protections available to us and could have a material adverse impact on our business, results of operations, financial condition and cash flows.
Many of our vessels regularly call to ports in China and we may enter into sale and leaseback transactions with Chinese financial institutions. Although our charters and sale and leaseback agreements are governed by English law, we may have difficulties enforcing a judgment rendered by an English court (or other non-Chinese court) in China. Such charters and any additional agreements that we enter into with Chinese counterparties, may be subject to new regulations in China that may require us to incur new or additional compliance or other administrative costs and pay new taxes or other fees to the Chinese government. Changes in laws and regulations, including with regards to tax matters, and their implementation by local authorities could affect our vessels chartered to Chinese customers as well as our vessels calling to Chinese ports and could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unitholders.
An oversupply of drybulk carriervessel capacity may prolong or further depress the current low charter rates, and, in turn, adverselywhich may affect our profitability.ability to operate our vessels profitably.
The market supply of drybulk carriers has been increasing as a result of the delivery of numerous newbuilding orders over the last few years. Newbuildings have been delivered in significant numbers sinceover the beginning of 2006last few years and, as of December 21, 2016,March 1, 2022, newbuilding orders had been placed for an aggregate of less than 11%about 7% of the existing global drybulk fleet, with deliveries expected during the next three years. Due to lack of financing many analysts expect significant cancellations and/or slippage of newbuilding orders.That 7% is an all-time low since records began in January 1996, but there is no guarantee that the orderbook will continue at these low levels in the future. While vessel supply will continue to be affected by the delivery of new vessels and the removal of vessels from the global fleet, either through scrapping or accidental losses, an over-supply of drybulk carrier capacity could exacerbate decreases in charter rates or prolong the period during which low charter rates prevail which may have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.
An oversupply of containership capacity may prolong or further depress the current charter rates and adversely affect our ability tore-charter our existing containerships at profitable rates or at all.
From 2005 through the first quarter of 2010, the containership order-bookorderbook was at historically high levels as a percentage of thein-water fleet. Although order-book volumes have decreased as fleet reaching a high of 61% in November 2007, according to industry data. Since that time, deliveries of previously ordered
containerships increased substantially some renewedand ordering in 2012 maintainedmomentum slowed somewhat with the order-book at average levels. Duringtotal orderbook declining as a percentage of the period 2013existing fleet to 2015, orderingan all-time low of larger8% as of October 2020, but has since increased to 25% as of March 2022. The orderbook remains significantly skewed towards vessels continued to increase as liner companies looked to renew and modernize their fleets as the number of vessels ordered has generally declined, but the average vessel size on order has increased.over 8,000 TEU. An oversupply of large newbuilding vesselsvessel and/or vessels available forre-charterre-chartered containership capacity entering the market, combined with any future decline in the demand for containerships, may result in a reduction ofprolong or further depress current charter rates and may decrease our ability tore-charter charter our containerships when we are seeking new or replacement charters other than for reduced ratesunprofitable or unprofitablereduced rates, or we may not be able tore-charter charter our containerships at all.
A numberSimilarly the market supply of third party owners havetankers has been increasing as a result of the delivery of numerous newbuilding orders over the last few years; however the percentage of the total tanker fleet on order as a percent of the total fleet declined from 20% at the start of 2016 to 7% at the beginning of March 2022. From 2004 through 2010, the tanker orderbook was at historically high levels as a percentage of the in-water fleet reaching highs of 64% in January 2007 for product tankers and 54% in October 2008 for VLCCs, according to industry data. Since that time, deliveries of previously orderedso-called“eco-type” vessel designs, which offer substantial bunker savings tankers increased substantially and ordering momentum slowed with the total orderbook declining as compareda percentage of the existing fleet to older designs. Increasedan all-time low of 5% as of March 2022 for product tankers, and a relative low of 7% as of March 2022 for VLCCs. An oversupply of newbuilding vessels entering the market, combined with any decline in the demand for crude or product tankers, may prolong or further depress current charter rates and supply of“eco-type” vessels could reduce demand for our vessels that are not classified as such and expose us to lower vessel utilization and/or decreased charter rates.
The new vessel designs purport to offer material bunker savings compared to older designs, which include certain of our vessels. Such savings could result in a substantial reduction of bunker cost for charterers compared to such vessels of ours. As the supply of such“eco-type” vessel increases and if charterers prefer such vessels over our vessels that are not classified as such, this may reduce demand for ournon-“eco-type” vessels, impairdecrease our ability to recharter such vesselscharter our tankers when we are seeking new or replacement charters other than for unprofitable or reduced rates, or we may not be able to charter our tankers at competitive rates andall.
Fuel price fluctuations may have a materialan adverse effect on our cash flowsprofits.
The cost of fuel is a significant factor in negotiating charter rates and operations.
We must make substantial capital expenditures to maintaincan affect us in both direct and indirect ways. This cost will be borne by us when our vessels are not employed or are employed on voyage charters or contracts of affreightment so an increase in the operating capacityprice of fuel beyond our fleet, which will reduceexpectations may adversely affect our cash available for distribution. In addition, each quarter our board of directors is required to deduct estimated maintenance and replacement capital expenditures from operating surplus, which may result in less or no cash available to unitholders than if actual maintenance and replacement capital expenditures were deducted.
We must make substantial capital expenditures to maintain, over the long term, the operating capacity of our fleet. These maintenance and replacement capital expenditures include capital expenditures associated with drydocking a vessel, modifying an existing vessel or acquiring a new vessel to the extent these expenditures are incurred to maintain the operating capacity of our fleet.
These expenditures could increase as a result of changes in:
Our significant maintenance and replacement capital expenditures may reduce their charter hire, limit their employment opportunities and force us to employ them at a discount compared to the charter rates commanded by more fuel efficient vessels or eliminatenot at all.
Falling costs of fuel may lead our charterers to abandon slow steaming, thereby releasing additional capacity into the amountmarket and exerting downward pressure on charter rates or may lead our charterers to employ older, less fuel efficient vessels which may drive down charter rates and make it more difficult for us to secure employment for our newer vessels.
The price and supply of cash we have availablefuel is unpredictable and fluctuates based on events outside our control, including geo-political developments, supply and demand for distribution to our unitholders. In eachoil, actions by members of October 2013, August 2014, February 2015,the Organization of the Petroleum Exporting Countries and February 2016, Navios Partners amended its existing management agreement with the Manager to fix the fees for ship management services of its owned fleet excluding drydocking expenses, which are reimbursed at cost by Navios Partners at: (a) $4,100 daily rate per Ultra-Handymax vessel; (b) $4,200 daily rate per Panamax vessel; (c) $5,250 daily rate per Capesize vessel; (d) $6,700 daily rate per container vessel of TEU 6,800; (e) $7,400 daily rate per container vessel of more than TEU 8,000;other oil and (f) $8,750 daily rate per very large Container vessel of more than TEU 13,000 through December 31, 2017.gas producers, economic or other sanctions levied against oil and gas producing countries, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns and regulations.
Our partnership agreement requires our board of directors to deduct estimated, rather than actual, maintenance and replacement capital expenditures from operating surplus each quarter in an effort to reduce fluctuations in
operating surplus. The amount of estimated capital expenditures deducted from operating surplus is subject to review and change by the conflicts committee of our board of directors at least once a year. If our board of directors underestimates the appropriate level of estimated maintenance and replacement capital expenditures, we may have less or no cash available for distribution in future periods when actual capital expenditures begin to exceed previous estimates.
If we expand the size of our fleet in the future, we generally will be required to make significant installment payments for acquisitions of vessels even prior to their delivery and generation of revenue. Depending on whether we finance our expenditures through cash from operations or by issuing debt or equity securities, our ability to make cash distributions to unitholders, to the extent we are making distributions, may be diminished or our financial leverage could increase or our unitholders could be diluted.
The actual cost of a vessel varies significantly depending on the market price, the size and specifications of the vessel, governmental regulations and maritime self-regulatory organization standards.
If we purchase additional vessels in the future, we generally will be required to make installment payments prior to their delivery. If we finance these acquisition costs by issuing debt or equity securities, we will increase the aggregate amount of interest payments or distributions, to the extent we are making distributions, prior to generating cash from the operation of the vessel. We rely on the master limited partnership (“MLP”) structure and its appeal to investors for accessing debt and equity markets to finance our growth and repay or refinance our debt. The recent drop in energy prices has, among other factors, caused increased volatility and contributed to a dislocation in pricing for MLPs compared to their recent pricing history. The depressed trading price of our common units may affect our ability to access capital markets and, as a result, our ability to make cash distributions to our unitholders.
To fund the remaining portion of these and other capital expenditures, we will be required to use cash from operations or incur borrowings or raise capital through the sale of debt or additional equity securities. Use of cash from operations may reduce or eliminate cash available for distributions to unitholders. Our ability to obtain bank financing or to access the capital markets for future offerings may be limited by our financial condition at the time of any such financing or offering as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. Our failure to obtain the funds for necessary future capital expenditures could have a material adverse effect on our business, results of operations and financial condition and on our ability to make cash distributions. Even if we successfully obtain necessary funds, the terms of such financings could limit our ability to pay cash distributions to unitholders. In addition, incurring additional debt may significantly increase our interest expense and financial leverage, and issuing additional preferred and common equity securities may result in significant unitholder dilution and would increase the aggregate amount of cash required to make distributions to our common unitholders, to the extent we are making distributions, which could have a material adverse effect on our ability to make cash distributions to all of our unitholders.
Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other business opportunities and our interest rates under our credit facilities may fluctuate and may impact our operations.
As of December 31, 2016, all of our facilities were fully drawn and the total borrowings under our credit facilities amounted to $526.6 million. We have the ability to incur additional debt, subject to limitations in our credit facilities. Our level of debt could have important consequences to us, including the following:
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Our ability to service our debt depends upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. Our ability to service debt under our credit facilities also will depend on market interest rates, since the interest rates applicable to our borrowings will fluctuate with the London Interbank Offered Rate, or LIBOR, or the prime rate. We do not currently hedge against increases in such rates and, accordingly, significant increases in such rate would require increased debt levels and reduce distributable cash. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing distributions, reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital or bankruptcy protection. We may not be able to affect any of these remedies on satisfactory terms, or at all.
Our credit facilities contain restrictive covenants, which may limit our business and financing activities and may prevent us from paying distributions to unitholders, if our Board determines to do so again in the future.
We have a credit facility with Commerzbank AG and DVB Bank AG (the “July 2012 Credit Facility”), a term loan facility (the “Term Loan B Facility”) and we currently repaid the credit facility with ABN AMRO Bank N.V. (the “June 2016 Credit Facility”) and the credit facility with HSH Nordbank AG (the “April 2015 Credit Facility”). As of December 31, 2016, the outstanding loan balance under Navios Partners’ credit facilities was $526.6 million.
The operating and financial restrictions and covenants in our credit facilities and any future credit facilities could adversely affect our ability to finance future operations or capital needs to engage, expand or pursue our business activities and reduce cash available for distribution on our common units. For example, our credit facilities require the consent of our lenders or limit our ability to, among other items:
Our credit facilities also require us to comply with the International Safety Management Code, or ISM Code, and International Ship and Port Facilities Security Code, or ISPS Code and to maintain valid safety management certificates and documents of compliance at all times.
The July 2012 Credit Facility, the September 2014 Credit Facility, the April 2015 Credit Facility and the June 2016 Credit Facility also require compliance with a number of financial covenants, including: (i) maintain a required security amount ranging over 105% to 140%; (ii) minimum free consolidated liquidity of $15.0 million
as at December 31, 2016 and at least the higher of $20.0 million and the aggregate of interest and principal falling due during the previous six months all the other times; (iii) maintain a ratio of EBITDA to interest expense of at least 2.00:1.00; (iv) maintain a ratio of total liabilities to total assets (as defined in our credit facilities) ranging of less than 0.75 or 0.80:1.00; and (v) maintain a minimum net worth to $135,000 for the periods prior to any distributions by the Company. It is an event of default under the credit facilities if such covenants are not complied with in accordance with the terms and subject to the prepayment or cure provision of each facility.
The Term Loan B facility is secured by first priority mortgages covering certain vessels owned by subsidiaries of Navios Partners, in addition to other collateral, and is guaranteed by each subsidiary of Navios Partners. The Term Loan B Agreement requires maintenance of a loan to value ratio of 0.8 to 1.0, and other restrictive covenants customary for facilities of this type (subject to negotiated exceptions and baskets), including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Term Loan B Agreement also provides for customary events of default, prepayment and cure provisions.
Our ability to comply with the covenants and restrictions that are contained in our credit facilities and any other debt instruments we may enter into in the future may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we are in breach of any of the restrictions, covenants, ratios or tests in our credit facilities, especially if we trigger a cross default currently contained in certain of our loan agreements, a significant portion of our obligations may become immediately due and payable, and our lenders’ commitment to make further loans to us may terminate. We may not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, our obligations under our credit facilities are secured by certain of our vessels, and if we are unable to repay borrowings under such credit facilities, lenders could seek to foreclose on those vessels.
In addition, our credit facilities prohibit the payment of distributions if we are not in compliance with certain financial covenants or upon the occurrence of an event of default.
Events of default under our credit facilities include, among other things, the following:
We anticipate that any subsequent refinancing of our current debt or any new debt will have similar restrictions.
We are a holding company, and we depend on the ability of our subsidiaries to dividend funds to us in order to satisfy our financial obligations or pay distributions, if any, in the future.
We are a holding company and our subsidiaries conduct all of our operations and own all of our operating assets. We have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to make distribution payments, if any, in the future depends on our subsidiaries and their ability to dividend funds to us. If
we are unable to obtain funds from our subsidiaries, our board of directors may not exercise its discretion to pay distributions in the future. In addition, the declaration and payment of distributions, if any, in the future will depend on the provisions of Marshall Islands law affecting the payment of dividends to us. Marshall Islands law generally prohibits the payment of dividends if the subsidiary is insolvent or would be rendered insolvent upon payment of such dividend, and our distribution may be declared and paid out of our operating surplus. Dividends may be declared or paid out of net profits for the fiscal year in which the dividend is declared and for the preceding fiscal year. Our ability to pay distributions, if any, in the future will also be subject to our satisfaction of certain requirements in accordance with financial covenants contained in our credit facilities.
We depend on Navios Holdings and its affiliates to assist us in operating and expanding our business.
Pursuant to the Management Agreement between us and the Manager, the Manager provides to us significant commercial and technical management services (including the commercial and technical management of our vessels, vessel maintenance and crewing, purchasing and insurance and shipyard supervision). In addition, pursuant to the Administrative Services Agreement between us and the Manager, the Manager provides to us significant administrative, financial and other support services. Our operational success and ability to execute our growth strategy depends significantly upon the Manager’s satisfactory performance of these services. Our business will be harmed if the Manager fails to perform these services satisfactorily, if the Manager cancels either of these agreements, or if the Manager stops providing these services to us. We may also in the future contract with Navios Holdings for it to have newbuildings constructed on our behalf and to incur the construction-related financing. We would purchase the vessels on or after delivery based on an agreed-upon price.
Our ability to enter into new charters and expand our customer relationships will depend largely on our ability to leverage our relationship with Navios Holdings and its reputation and relationships in the shipping industry. If Navios Holdings suffers material damage to its reputation or relationships, it may harm our ability to:
If our ability to do any of the things described above is impaired, it could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions.
As we expand our business, we may have difficulty managing our growth, which could increase expenses.
We intend to seek to grow our fleet, either through purchases, the increase of the number ofchartered-in vessels or through the acquisitions of businesses. The addition of vessels to our fleet or the acquisition of new businesses will impose significant additional responsibilities on our management. We will also have to increase our customer base to provide continued employment for the new vessels. Our growth will depend on:
Growing any business by acquisition presents numerous risks such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel, and managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures. We cannot give any assurance that we will be successful in executing our growth plans or that we will not incur significant expenses and losses in connection therewith or that our acquisitions will perform as expected, which could materially adversely affect our results of operations and financial condition.
Unlike newbuilding vessels, secondhand vessels typically do not carry warranties as to their condition. While we generally inspect existing vessels prior to purchase, such an inspection would normally not provide us with as much knowledge of a vessel’s condition as we would possess if it had been built for us and operated by us during its life. Repairs and maintenance costs for secondhand vessels are difficult to predict and may be substantially higher than for vessels we have operated since they were built. These costs could decrease our cash flows, liquidity and our ability to pay dividends to our unitholders.
Our growth depends on continued growth in demand for drybulk commodities, finished or semi-finished goods, and the shipping of drybulk cargoes as well as the shipping of containers.
Our growth strategy focuses on expansion in the drybulk and container shipping sectors. Accordingly, our growth depends on continued growth in world and regional demand for drybulk commodities, finished or semi-finished goods and the shipping of drybulk and containerized cargoes, which could be negatively affected by a number of factors, such as declines in prices for drybulk commodities or containerized cargoes, or general political and economic conditions.
Reduced demand for drybulk commodities and the shipping of drybulk and containerized cargoes would have a material adverse effect on our future growth and could harm our business, results of operations and financial condition. In particular, Asian Pacific economies, of which China is especially important, and India have been the main driving force behind the current increase in seaborne drybulk trade and the demand for drybulk carriers. The Asian Pacific (particularly the Chinese) and Indian economies have also been significant suppliers of manufactured goods currently shipped by container to the developed markets of the OECD. A negative change in economic conditions in any Asian Pacific country, but particularly in China, Japan or India, may have a material adverse effect on our business, financial condition and results of operations, as well as our future prospects, by reducing demand and resultant charter rates.
A decrease in the level of China’s imports of raw materials or a decrease in trade globally could have a material adverse impact on our charterers’ business and, in turn, could cause a material adverse impact on our results of operations, financial condition and cash flows.
China imports significant quantities of raw materials. For example, in 2016, China imported 1.008 billion tons of iron out of a total of 1.412 billion tons shipped globally accounting for about 71% of the global seaborne iron ore trade. While it only accounted for 18% of seaborne coal movements of coal in 2016 according to current estimates (201 million tons imported compared to 1.135 billion tons of seaborne coal traded globally), that is a decline from over 22% in 2013 (265 million tons imported compared to 1.180 billion tons of seaborne coal traded globally). Our dry bulk vessels are deployed by our charterers on routes involving dry bulk trade in and out of emerging markets, and our charterers’ dry bulk shipping and business revenue may be derived from the shipment of goods within and to the Asia Pacific region from various overseas export markets. Any reduction in or hindrance to China-based importers could have a material adverse effect on the growth rate of China’s imports and on our charterers’ business. For instance, the government of China has implemented economic policies aimed at reducing pollution, increasing consumption of domestically produced Chinese coal or promoting the export of such coal. This may have the effect of reducing the demand for imported raw materials and may, in turn, result in a decrease in demand for dry bulk shipping. Additionally, though in China there is an increasing level of autonomy and a gradual shift in emphasis to a “market economy” and enterprise reform, many of the reforms, particularly some limited price reforms that result in the prices for certain commodities being
principally determined by market forces, are unprecedented or experimental and may be subject to revision, change or abolition. The level of imports to and exports from China could be adversely affected by changes to these economic reforms by the Chinese government, as well as by changes in political, economic and social conditions or other relevant policies of the Chinese government.
Our operations expose us to the risk that increased trade protectionism from China or other nations will adversely affect our business. If the global recovery is undermined by downside risks and the recent economic downturn returns, governments may turn to trade barriers to protect their domestic industries against foreign imports, thereby depressing the demand for shipping. Specifically, increasing trade protectionism in the markets that our charterers serve may cause (i) a decrease in cargoes available to our charterers in favor of Chinese charterers and Chinese owned ships and (ii) an increase in the risks associated with importing goods to China. Any increased trade barriers or restrictions on trade, especially trade with China, would have an adverse impact on our charterers’ business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their time charters with us. This could have a material adverse effect on our business, results of operations, financial condition and our ability to pay cash distributions to our unitholders.
Our growth depends on our ability to expand relationships with existing customers and obtain new customers, for which we will face substantial competition.
Long-term time charters have the potential to provide income atpre-determined rates over more extended periods of time. However, the process for obtaining longer term time charters is highly competitive and generally involves a lengthy, intensive and continuous screening and vetting process and the submission of competitive bids that often extends for several months. In addition to the quality, age and suitability of the vessel, longer term shipping contracts tend to be awarded based upon a variety of other factors relating to the vessel operator, including:
It is likely that we will face substantial competition for long-term charter business from a number of experienced companies. We may not be able to compete profitably as we expand our business into new geographic regions or provide new services. New markets may require different skills, knowledge or strategies that we use in our current markets. Many of these competitors have significantly greater financial resources than we do. It is also likely that we will face increased numbers of competitors entering into our transportation sectors, including in the drybulk sector. Many of these competitors have strong reputations and extensive resources and experience. Increased competition may cause greater price competition, especially for long-term charters.
As a result of these factors, we may be unable to expand our relationships with existing customers or obtain new customers for long-term charters on a profitable basis, if at all. However, even if we are successful in employing
our vessels under longer term charters, our vessels will not be available for trading in the spot market during an upturn in the drybulk and container market cycle, when spot trading may be more profitable. If we cannot successfully employ our vessels in profitable time charters our results of operations and operating cash flow could be adversely affected.
We may be unable to make or realize expected benefits from acquisitions, and implementing our growth strategy through acquisitions may harm our business, financial condition and operating results.
Our growth strategy focuses on a gradual expansion of our fleet. Any acquisition of a vessel may not be profitable to us at or after the time we acquire it and may not generate cash flow sufficient to justify our investment. In addition, our growth strategy exposes us to risks that may harm our business, financial condition and operating results, including risks that we may:
Additionally, the marine transportation and logistics industries are capital intensive, traditionally using substantial amounts of indebtedness to finance vessel acquisitions, capital expenditures and working capital needs. If we finance the purchase of our vessels through the issuance of debt securities, it could result in:
In addition, our business plan and strategy is predicated on buying vessels at what we believe is near the low end of the cycle in what has typically been a cyclical industry. However, there is no assurance that charter rates and vessel asset values will not sink lower, or that there will be an upswing in shipping costs or vessel asset values in the near-term or at all, in which case our business plan and strategy may not succeed in the near-term or at all.
If we purchase any newbuilding vessels, delays, cancellations ornon-completion of deliveries of newbuilding vessels could harm our operating results.
If we purchase any newbuilding vessels, the shipbuilder could fail to deliver the newbuilding vessel as agreed or their counterparty could cancel the purchase contract if the shipbuilder fails to meet its obligations. In addition,
under charters we may enter into that are related to a newbuilding, if our delivery of the newbuilding to our customer is delayed, we may be required to pay liquidated damages during the delay. For prolonged delays, the customer may terminate the charter and, in addition to the resulting loss of revenues, we may be responsible for additional, substantial liquidated damages. We do not derive any revenue from a vessel until after its delivery and will be required to pay substantial sums as progress payments during construction of a newbuilding. While we expect to have refund guarantees from financial institutions with respect to such progress payments in the event the vessel is not delivered by the shipyard or is otherwise not accepted by us, there is a the potential that we may not be able to collect all portion of such refund guarantees, in which case we would lose the amounts of monies we have advanced to the shipyards for such progress payments.
The completion and delivery of newbuildings could be delayed, cancelled or otherwise not completed because of:
If delivery of a vessel is materially delayed, it could materially adversely affect our results of operations and financial condition and our ability to make cash distributions.
We rely on the MLP structure and its appeal to investors for accessing debt and equity markets to finance our growth and repay or refinance our debt. The recent drop in energy prices has, among other factors, caused increased volatility and contributed to a dislocation in pricing for MLPs. The depressed trading price of our common units may affect our ability to access capital markets and, as a result, our ability to pay distributions or repay our debt.
The fall in energy prices and, in particular, the price of oil, among other factors, has contributed to increased volatility in the pricing of MLPs and the energy debt markets, as a number of MLPs and other energy companies may be adversely affected by a lower energy prices environment. A number of MLPs, including certain maritime MLPs, have reduced or eliminated their distributions to unitholders.
We rely on our ability to raise capital in the equity and debt markets to grow our fleet and to refinance our debt. A protracted deterioration in the valuation of our common units would increase our cost of capital, make any equity issuance significantly dilutive and may affect our ability to access capital markets and, as a result, our capacity to pay distributions to our unitholders and refinance or repay our debt.
The loss of a customer, charter or vessel could result in a loss of revenues and cash flow in the event we are unable to replace such customer, charter or vessel.
For the year ended December 31, 2016, our most significant counterparties were Hyundai Merchant Marine Co., Ltd. (“HMM”), Yang Ming Marine Transport Corporation and Mediterranean Shipping Co. S.A., which
accounted for approximately 29.6%, 13.0% and 11.6%, respectively, of total revenues. For the year ended December 31, 2015, Navios Partners’ customers representing 10% or more of total revenues were Hyundai Merchant Marine Co., Ltd., Navios Corporation and Yang Ming Marine Transport Corporation, which accounted for 24.0%, 17.4% and 11.4%, respectively of total revenues. For the year ended December 31, 2014, Navios Partners’ customers representing 10% or more of total revenues were Hyundai Merchant Marine Co., Ltd and Navios Corporation, which accounted for 24.4% and 11.0%, respectively, of total revenues. No other customers accounted for 10% or more of total revenues for any of the years presented.
The charterers in the containership sector consist of a limited number of liner companies. The five container vessels acquired and delivered into our fleet in the fourth quarter of 2013 and the two container vessels acquired and delivered into our fleet in the third and fourth quarter of 2014, are respectively chartered out to the same counterparty on long-term charters, which have a significant impact on our revenues. An additional container vessel acquired and delivered into our fleet in the second quarter of 2015, which is chartered out on long-term charter, with significant impact in our revenue. We agreed in June 2016 to sell this container vessel and was delivered to the purchaser in January 2017. The combination of any surplus of containership capacity and the expected increase in the size of the world containership fleet over the next few years may make it difficult to secure substitute employment for any of our containerships if our counterparties fail to perform their obligations under the currently arranged time charters, and any new charter arrangements we are able to secure may be at lower rates. Furthermore, the surplus of containerships available at lower charter rates and lack of demand for our customers’ liner services could negatively affect our charterers’ willingness to perform their obligations under our time charters, which in many cases provide for charter rates significantly above current market rates. We expect that a limited number of leading liner companies will continue to generate a substantial portion of our revenues. The cessation of business with these liner companies or their failure to fulfill their obligations under the time charters for our containerships could have a material adverse effect on our financial condition and results of operations.
Recently, HMM has faced financial difficulties and has developed a restructuring plan, which included restructuring agreements for five of our container vessels (see Note 19—Notes Receivable). The loss of these customers could result in a significant loss of revenues, cash flows and our ability to maintain or improve distributions over the long term, and to service or refinance our debt. We could lose this or any customer or the benefits of a charter if, among other things:
If we lose a charter, we may be unable tore-deploy the related vessel on terms as favorable to us due to the long-term nature of most charters and the cyclical nature of the industry or we may be forced to charter the vessel on the spot market at then market rates which may be less favorable than the charter that has been terminated. If we are unable tore-deploy a vessel for which the charter has been terminated, we will not receive any revenues from that vessel, but we may be required to pay expenses necessary to maintain the vessel in proper operating
condition. If we lose a vessel, any replacement or newbuilding would not generate revenues during its construction acquisition period, and we may be unable to charter any replacement vessel on terms as favorable to us as those of the terminated charter.
Even if we successfully charter our vessels in the future, our charterers may go bankrupt or fail to perform their obligations under the charter agreements, they may delay payments or suspend payments altogether, they may terminate the charter agreements prior to the agreed-upon expiration date or they may attempt to renegotiate the terms of the charters. The permanent loss of a customer, time charter or vessel, or a decline in payments under our charters, could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions in the event we are unable to replace such customer, time charter or vessel.
On August 31, 2016, Hanjin filed for rehabilitation. Navios Partners had two Capesize vessels chartered to Hanjin at a net rate of $29,356 per day until December 2020. In September, both vessels were redelivered to Navios Partners’ commercial management and were rechartered to third parties. Navios has filed claims for the lost revenues in accordance with the rehabilitation process. Rehabilitation proceedings were cancelled on February 2, 2017 and Hanjin entered into liquidation on February 17, 2017. Navios Partners’ claims will be assessed during these proceedings.
In August 2015, the Seoul Central District Court approved the second rehabilitation proceedings of Samsun Logix. One of our vessels chartered to Samsun Logix was redelivered in August 2015 and has been rechartered. The rehabilitation claim was sold to an unrelated third party. Navios Partners has no outstanding receivable from Samsun Logix.
As of March 25, 2014, the Company terminated the amended credit default insurance policy. In connection with the termination, Navios Partners received compensation of $31.0 million (which was received in April 2014). From the total compensation, $1.2 million was recorded immediately in the Statements of Operations within the caption of “Revenue”, which represents reimbursements for insurance claims submitted for the period prior to the date of the termination and the remaining amount of $29.8 million was recorded immediately in the Statements of Operations within the caption of “Other income”. The Company has no future requirement to repay any of the lump sum cash payment back to the insurance company or provide any further services.
On November 15, 2012 (as amended in March 2014), Navios Holdings and Navios Partners entered into an agreement (the “Navios Holdings Guarantee”) by which Navios Holdings will provide supplemental credit default insurance with a maximum cash payment of $20.0 million. During the year ended December 31, 2016 and 2015, the Company submitted claims for charterers’ default under this agreement to Navios Holdings for a total amount of $9.2 million and $3.6 million, respectively, net of applicable deductions, of which $9.6 million and $3.8 million was recorded as “Other income” for the year ended December 31, 2016 and 2015, respectively.
In January 2011, Korea Line Corporation (“KLC”) which is the charterer of the Navios Melodia filed for receivership. The charter contract was affirmed and was performed by KLC on its original terms, following an interim suspension period until April 2016 during which Navios Partners traded the vessel directly. On April 1, 2016, the vessel was delivered to KLC and the charter contract was resumed.
The risks and costs associated with vessels increase as the vessels age.
As of March 10, 2017, the vessels in our fleet had an average age of approximately 10.0 years and most dry cargo vessels have an expected life of approximately25-28 years. We may acquire older vessels in the future. Older vessels are typically more costly to maintain than more recently constructed vessels due to improvements in engine technology. In some instances, charterers prefer newer vessels that are more fuel efficient than older vessels. Cargo insurance rates also increase with the age of a vessel, making older vessels less desirable to charterers as well. Governmental regulations, safety or other equipment standards related to the age of the vessels
may require expenditures for alterations or the addition of new equipment to our vessels and may restrict the type of activities in which these vessels may engage. We cannot assure you that as our vessels age, market conditions will justify those expenditures or enable us to operate our vessels profitably during the remainder of their useful lives. If we sell vessels, we may have to sell them at a loss, and if charterers no longer charter out vessels due to their age, it could materially adversely affect our earnings.
Vessels may suffer damage and we may face unexpected drydocking costs, which could affect our cash flow and financial condition.
If our owned vessels suffer damage, they may need to be repaired at a drydocking facility. The costs of drydock repairs are unpredictable and can be substantial. We may have to pay drydocking costs that insurance does not cover. The loss of earnings while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, could decrease our revenues and earnings substantially, particularly if a number of vessels are damaged or drydocked at the same time. Under the terms of the management agreement with the Manager, the costs of drydocking repairs are not included in the daily management fee, but will be reimbursed at cost upon occurrence.
We are subject to various laws, regulations, and international conventions, includingparticularly environmental and safety laws, that could require significant expenditures both to maintain compliance with such laws and to pay for any uninsured environmental liabilities, including any resulting from a spill or other environmental incident.
The shipping businessVessel owners and vessel operationoperators are materially affected bysubject to government regulation in the form of international conventions, and national, state, and local laws and regulations in force in the jurisdictions in which their vessels operate, in international waters, as well as in the country or countries where their vessels are registered. Such laws and regulations include those governing the management and disposal of hazardous substances and wastes, ship recycling, the cleanup of oil spills and other contamination, air emissions, discharges of operational and other wastes into the water, and ballast water management. In particular, ballast water management requirements will likely result in compliance costs relating to the installation of equipment on our vessels to treat ballast water before it is discharged and other additional ballast water management and reporting requirements. Investments in ballast water treatment may have a material adverse effect on our future performance, results of operations, cash flows and financial position.
Port State regulation significantly affects the operation of vessels, as it commonly is more stringent than international rules and standards. This is the case particularly in the United States and, increasingly, in Europe. Non-compliances with such laws and regulations can give rise to civil or criminal liability, and/or vessel delays and detentions in the jurisdictions in which we operate.
Our vessels are subject to scheduled and unscheduled inspections by regulatory and enforcement authorities, as well as private maritime industry entities. This includes inspections by Port State Control authorities, including the U.S. Coast Guard, harbor masters or equivalent entities, classification societies, flag Administrations (country in which the vessel is registered), charterers, and terminal operators. Certain of these entities require vessel owners to obtain permits, licenses, and certificates for the operation of their registration. Governmental regulations,vessels. Failure to maintain necessary permits or approvals could result in the imposition of substantial penalties or require a vessel owner to incur substantial costs or temporarily suspend operation of one or more of its vessels.
Heightened levels of environmental and quality concerns among insurance underwriters, regulators, and charterers continue to lead to greater inspection and safety orrequirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. Vessel owners are required to maintain operating standards for all vessels that will emphasize operational safety, quality maintenance, continuous training of officers and crews, and compliance with U.S. and international regulations.
The legal requirements and maritime industry standards to which we and our vessels are subject are set forth below, along with the risks associated therewith. We may be required to make substantial capital and other equipmentexpenditures to ensure that we remain in compliance with these requirements and standards, as well as compliance with standards imposed by maritime self-regulatory organizations and customer requirements or competition, may require us to make capital and other expenditures. Because such conventions, laws and regulations are often revised, we cannot predict the ultimate cost of complying with such conventions, laws and regulations, or the impact thereof on the fair market price or useful life of our vessels. In order to satisfy any such requirements, we may be required to take any of our vessels out of service for extended periods of time, with corresponding losses of revenues. In the future, market conditions may not justify these expenditures or enable us to operate our vessels, particularly older vessels, profitably during the remainder of their economic lives. This could lead to significant asset write downs. In addition, violations of environmental and safety regulations can result in substantial penalties and, in certain instances, seizure or detention of our vessels.
Additional conventions, laws and regulations may be adopted that could limit our ability to do business, require capital expenditures or otherwise increase our cost of doing business, which may materially adversely affect our operations, as well as the shipping industry generally. For example, in various jurisdictions, legislation has been enacted, or is under consideration, that would impose more stringent requirements on air pollution and effluent discharges from our vessels. For example, the IMO periodically proposes and adopts amendments to revise the International Convention for the Prevention of Pollution from Ships (“MARPOL”), such as the revision to Annex VI which came into force on July 1, 2010. The revised Annex VI implements a phased reduction of the sulfur content of fuel and allows for stricter sulfur limits in designated emission control areas (“ECAs”). Thus far, ECAs have been formally adopted for the Baltic Sea area (limiting SOx emissions only), the North Sea areacustomers, including the English Channel (limiting SOx emissions only), and the North American ECA (which came into effect on August 1, 2012 limiting SOx, NOx and particulate matter emissions). In October 2016, the IMO approved the designation of the North Sea and Baltic Sea as ECAs for NOx under Annex VI, which is scheduled for adoption in 2017 and would take effect in January 2021. The United States Caribbean Sea ECA entered into force on January 1, 2013 and has been effective since January 1, 2014, limiting SOx, NOx and particulate matter emissions. In January 2015, the limit for fuel oil sulfur levels fell to 0.10% m/m in ECAs established to limit SOx and particulate matter emissions.
After considering the issue for many years, the IMO announced on October 27, 2016 that it was proceeding with a requirement for 0.5% m/m sulfur content in marine fuel (down from current levels of 3.5%) outside the ECAs starting on January 1, 2020. Under Annex VI, the 2020 date was subject to review as to the availability of the required fuel oil. Annex VI required the fuel availability review to be completed by 2018 but was ultimately completed in 2016. Therefore, by 2020, ships will be required to remove sulfur from emissions through the use of emission control equipment, or purchase marine fuel with 0.5% sulfur content, which may see increased demand and higher prices due to supply constraints. Installing pollution control equipment or using lower sulfur fuel could result in significantly increased costs to our company. Similarly MARPOL Annex VI requires Tier III standards for NOx emissions to be applied to ships constructed and engines installed in ships operating in NOx ECAs from January 1, 2016.
California has adopted more stringent low sulfur fuel requirements within California-regulated waters. In addition, the IMO, the U.S. and states within the U.S. have proposed or implemented requirements relating to the management of ballast water to prevent the harmful effects of foreign invasive species.
In February 2004, the IMO adopted the International Convention for the Control and Management of Ships’ Ballast Water and Sediments (the “BWM Convention”). The BWM Convention’s implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits, as well as other obligations, including recordkeeping requirements and implementation of a Ballast Water and Sediments Management Plan. The BWM Convention stipulates that it will enter into force twelve months after it has been adopted by at least 30 states, the combined merchant fleets of which represent at least 35% of the gross tonnage of the world’s merchant shipping. With Finland’s accession to the Agreement on September 8, 2016, the 35% threshold was reached, and the BWM convention will enter into force on September 8, 2017. As of February 7, 2017, the BWM Convention had 54 contracting states for 53.30% of world gross tonnage. The BWM Convention requires ships to manage ballast water in a manner that removes, renders harmless or avoids the update or discharge of aquatic organisms and pathogens within ballast water and sediment. Recently updated Ballast Water and Sediment Management Plan guidance includes more robust testing and performance specifications. The entry of the BWM Convention and revised guidance will likely result in additional compliance costs.
The operation of vessels is also affected by the requirements set forth in the International Safety Management (“ISM”) Code. The ISM Code requires shipowners and bareboat charterers to develop and maintain an extensive “Safety Management System” that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe vessel operation and describing procedures for dealing with emergencies. Further to this, the IMO has introduced the first ever mandatory measures for an international greenhouse gas reduction regime for a global industry sector. The Energy Efficiency measures took effect on January 1, 2013 and apply to all ships of 400 gross tonnage and above. They include the development of a ship energy efficiency management plan (“SEEMP”) which is akin to a safety management plan, with which the industry will have to comply. The failure of a ship owner or bareboat charterer to comply with the ISM Code and IMO measures may subject such party to increased liability, may decrease available insurance coverage for the affected vessels, and may result in a denial of access to, or detention in, certain ports.
We operate a fleet of dry cargo vessels that are subject to national and international laws governing pollution from such vessels. Several international conventions impose and limit pollution liability from vessels. An owner of a tanker vessel carrying a cargo of “persistent oil” as defined by the International Convention for Civil Liability for Oil Pollution Damage (the “CLC”) is subject under the convention to strict liability for any pollution damage caused in a contracting state by an escape or discharge from cargo or bunker tanks. This liability is subject to a financial limit calculated by reference to the tonnage of the ship, and the right to limit liability may be lost if the spill is caused by the shipowner’s intentional or reckless conduct. Liability may also be incurred under the CLC for a bunker spill from the vessel even when she is not carrying such cargo, but is in ballast.
When a tanker is carrying clean oil products that do not constitute “persistent oil” that would be covered under the CLC, liability for any pollution damage will generally fall outside the CLC and will depend on other
international conventions or domestic laws in the jurisdiction where the spillage occurs. The same principle applies to any pollution from the vessel in a jurisdiction which is not a party to the CLC. The CLC applies in over 100 jurisdictions around the world, but it does not apply in the United States, where the corresponding liability laws such as the Oil Pollution Act of 1990 (the “OPA”) discussed below, are particularly stringent.
For vessel operations not covered by the CLC, including those operated under our fleet, at present, international liability for oil pollution is governed by the International Convention on Civil Liability for Bunker Oil Pollution Damage (the “Bunker Convention”). In 2001, the IMO adopted the Bunker Convention, which imposes strict liability on shipowners for pollution damage and response costs incurred in contracting states caused by discharges, or threatened discharges, of bunker oil from all classes of ships not covered by the CLC. The Bunker Convention also requires registered owners of ships over a certain size to maintain insurance to cover their liability for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime, including liability limits calculated in accordance with the Convention on Limitation of Liability for Maritime Claims 1976, as amended (the “1976 Convention”), discussed in more detail in the following paragraph. The Bunker Convention became effective in contracting states on November 21, 2008, and as of February 7, 2017, had 83 contracting states. Innon-contracting states, liability for such bunker oil pollution typically is determined by the national or other domestic laws in the jurisdiction where the spillage occurs.
The CLC and Bunker Convention also provide vessel owners a right to limit their liability, depending on the applicable national or international regime. The CLC includes its own liability limits. The 1976 Convention is the most widely applicable international regime limiting maritime pollution liability. Rights to limit liability under the 1976 Convention are forfeited where a spill is caused by a shipowner’s intentional or reckless conduct. Certain jurisdictions have ratified the IMO’s Protocol of 1996 to the 1976 Convention, referred to herein as the “Protocol of 1996.” The Protocol of 1996 provides for substantially higher liability limits in those jurisdictions than the limits set forth in the 1976 Convention. Finally, some jurisdictions, such as the United States, are not a party to either the 1976 Convention or the Protocol of 1996, and, therefore, a shipowner’s rights to limit liability for maritime pollution in such jurisdictions may be uncertain.
Environmental legislation in the United States merits particular mention as it is in many respects more onerous than international laws, representing a high-water mark of regulation with which ship owners and operators must comply, and of liability likely to be incurred in the event ofnon-compliance or an incident causing pollution.
Such regulation may become even stricter if laws are changed as a result of the April 2010 Deepwater Horizon oil spill in the Gulf of Mexico. In the United States, the OPA establishes an extensive regulatory and liability regime for the protection and cleanup of the environment from cargo and bunker oil spills from vessels, including tankers. The OPA covers all owners and operators whose vessels trade in the United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States’ territorial sea and its 200 nautical mile exclusive economic zone (the “EEZ”). Under the OPA, vessel owners, operators and bareboat charterers are “responsible parties” and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment andclean-up costs and other damages arising from discharges or substantial threats of discharges, of oil from their vessels. In response to the 2010 Deepwater Horizon oil incident in the Gulf of Mexico, the U.S. House of Representatives passed and the U.S. Senate considered but did not pass a bill to strengthen certain requirements of the OPA; similar legislation may be introduced in the future.
In addition to potential liability under the federal OPA, vessel owners may in some instances incur liability on an even more stringent basis under state law in the particular state where the spillage occurred. For example, California regulations prohibit the discharge of oil, require an oil contingency plan be filed with the state, require that the ship owner contract with an oil response organization and require a valid certificate of financial responsibility, all prior to the vessel entering state waters.
In recent years, the EU has become increasingly active in the field of regulation of maritime safety and protection of the environment. In some areas of regulation the EU has introduced new laws without attempting to procure a corresponding amendment to international law. Notably, in 2005 the EU adopted a directive, as amended in 2009, on ship-source pollution, imposing criminal sanctions for pollution not only where pollution is caused by intent or recklessness (which would be an offence under MARPOL), but also where it is caused by “serious negligence.” The concept of “serious negligence” may be interpreted in practice to be little more than ordinary negligence. The directive could therefore result in criminal liability being incurred in circumstances where it would not be incurred under international law. In February 2017, EU members states met to consider independently regulating the shipping industry under the Emissions Trading System (“ETS”), which requiresETS-regulated businesses to report on carbon emissions and provides for a credit trading system for carbon allowances. On February 15, 2017, European Parliament voted in favor of a bill to include maritime shipping in the ETS by 2023 if the IMO has not promulgated a comparable system by 2021. If the bill becomes law, the ETS may result in additional compliance costs for our vessels.
In response to the Deepwater Horizon incident, the EU issued “Directive 2013/30/EU of the European Parliamentship modifications and of the Council of June 12, 2013 on safety of offshore oil and gas operations.” The objective of this Directive is to reduce as far as possible the occurrence of major accidents relating to offshore oil and gas operations and to limit their consequences, thus increasing the protection of the marine environment and coastal economies against pollution, establishing minimum conditions for safe offshore exploration and exploitation of oil and gas and limiting possible disruptions to Union indigenous energy production, and to improve the response mechanismschanges in case of an accident. The Directive was implemented on July 19, 2015. As far as the environment is concerned, the UK has various new or amended regulations such as: the Offshore Petroleum Activities (Offshore Safety Directive) (Environmental Functions) Regulations 2015 (OSDEF), the 2015 amendments to the Merchant Shipping (Oil Pollution Preparedness, Response and Cooperation Convention) Regulations 1998 (OPRC 1998) and other environmental Directive requirements, specifically the Environmental Management System. The Offshore Petroleum Licensing (Offshore Safety Directive) Regulations 2015 will implement the licensing Directive requirements.
Criminal liability for a pollution incident could not only result in us incurring substantial penalties or fines, but mayoperating procedures. We also in some jurisdictions, facilitate civil liability claims for greater compensation than would otherwise have been payable.
We maintain insurance coverage for each owned vessel in our fleet against pollution liability risks for all of our vessels in the amount of $1.0 billion in the aggregate for any one event. The insured risks include penalties and fines, as well as civil liabilities and expenses resulting from accidental pollution. However, this insurance coverage is subject to exclusions, deductibles, and other terms and conditions. In addition, claims relating to pollution incidents for international or knowing violations of U.S. environmental laws or the International Convention for the Prevention of Pollution from Ships may be considered by our protection and indemnity associations on a discretionary basis only. If any liabilities or expenses fall within an exclusion from coverage, or if damages from a catastrophic incident exceed the aggregate liability of $1.0 billion for any one event, our cash flow, profitability and financial position wouldcould be adversely impacted.
Because international conventions, laws, regulations, and other requirements are often revised, we cannot predict the ultimate cost of compliance or the impact on the fair market price or useful life of our vessels. Nor can we assure that our vessels will be able to attain and maintain certifications of compliance with various regulatory requirements.
Similarly, governmental regulation of the shipping industry, particularly in the areas of safety and environmental requirements, is expected to become stricter in the future. We believe that the heightened environmental, quality, and security concerns of insurance underwriters, regulators, and charterers will lead to additional requirements, including enhanced risk assessment and security requirements, greater inspection and safety requirements, and heightened due diligence obligations. We also may be required to take certain of our vessels out of service for extended periods of time to address changing legal requirements, which would result in lost revenue. In the future, market conditions may not justify these expenditures or enable us to operate our vessels, particularly older vessels, profitably during the remainder of their economic lives. This could lead to significant asset write-downs.
Specific examples of expected changes that could have a significant, and potentially material, impact on our business include:
Climate change and government laws and regulations related to climate change could negatively impact our financial condition.
We are and will be, directly and indirectly, subject to the effects of climate change and may, directly or indirectly, be affected by governmentlocal and national laws, as well as international treaties and conventions, and implementing regulations related to climate change. A numberAny passage of climate control treaties, legislation, or other regulatory initiatives by the IMO, the European Union, the United States or other countries have adopted or are consideringwhere we operate that restrict emissions of greenhouse gases (“GHGs”) could require us to make significant financial expenditures that we cannot predict with certainty at this time. This could include, for example, the adoption of regulatory frameworks to reduce greenhouse gasGHG emissions, such as carbon dioxide, methane and nitrogen oxides. In the U.S., the United States Environmental Protection Agency (“EPA”) has declared greenhouse gases to be dangerous pollutants and has issued greenhouse gas reporting requirements for emissions sources in certain industries (which currently do not include the shipping industry). The EPA does require owners of vessels subject to MARPOL Annex VI to maintain records for nitrogen oxides standards andin-use fuel specifications.
In addition, while the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change (the “UNFCC”), which requires
adopting countries to implement national programs to reduce greenhouse gas emissions, the IMO intends to develop limits on greenhouse gases from international shipping. It has responded to the global focus on climate change and greenhouse gas emissions by developing specific technical and operational efficiency measures and a work plan for market-based mechanisms in 2011. These include the mandatory measures of the ship energy efficiency management plan (“SEEMP”), outlined above, and an energy efficiency design index (“EEDI”) for new ships. The IMO is also considering its position on market-based measures through an expert working group. Among the numerous proposals being considered by the working groupefforts undertaken to date are the following: a port state levy based on the amount of fuel consumed by the vessel on its voyage to the port in question; a global emissions trading scheme which would allocate emissions allowances and set an emissions cap; and an international fund establishing a global reduction target for international shipping, to be set either by the UNFCCC or the IMO.
At its 64th session (2012), the IMO’s Marine Environment Protection Committee (the “MEPC”) indicated that 2015 was the target year for member states to identify market-based measures for international shipping. At its 66th session (2014), the MEPC continued its work on developing technical and operational measures relating to energy-efficiency measures for ships, following the entry into force of the mandatory efficiency measures on January 1, 2013. It adopted the 2014 Guidelines on the Method of Calculation of the Attained EEDI, applicable to new ships. It further adopted amendments to MARPOL Annex VI concerning the extension of the scope of application of the EEDI to Liquefied Natural Gas (“LNG”) carriers,ro-ro cargo ships (vehicle carriers),ro-ro cargo ships,ro-ro passenger ships and cruise passengers ships with nonconventional propulsion. At its 67th session (2014), the MEPC adopted the 2014 Guidelines on survey and certification of the EEDI, updating the previous version to reference ships fitted with dual-fuel engines using LNG and liquid fuel oil. The MEPC also adopted amendments to the 2013 Interim Guidelines for determining minimum propulsion power to maintain the maneuverability of ships in adverse conditions, to make the guidelines applicable to phase 1 (starting January 1, 2015) of the EEDI requirements. At its 68th session (2015), the MEPC amended the 2014 Guidelines on EEDI survey and certification as well as the method of calculating of EEDI for new ships, the latter of which was again amended at the 70th session (2016). At its 70th session, the MEPC also adopted mandatory requirements for ships of 5,000 gross tonnage or greater to collect fuel consumption data for each type of fuel used, and report the data to the flag State after the end of each calendar year.
In December 2011, UN climate change talks took place in Durban and concluded with an agreement referred to as the Durban Platform for Enhanced Action. The Durban Conference did not result in any proposals specifically addressing the shipping industry’s role in climate change but the progress that has been made by the IMO in this area was widely acknowledged throughout the negotiating bodies of the UNFCCC process, and an ad hoc working group was established.
Although regulation of greenhouse gas emissions in the shipping industry was discussed during the 2015 UN Climate Change Conference in Paris (the “Paris Conference”), the agreement reached among the 195 nations did not expressly reference the shipping industry. Following the Paris Conference, the IMO announced it would continue its efforts on this issue at the MEPC, and at its 70th session, the MEPC approved a Roadmap for developing a comprehensive GHG emissions reduction strategy for ships, which includes the goal of adopting an initial strategy and emission reduction commitments in 2018. The Roadmap also provides for additional studies and further intersessional work, to be continued at the 71st session in 2017, with a goal of adopting a revised strategy in 2023 to include short-,mid- and long-term reduction measures and schedules for implementation.
The EU announced in April 2007 that it planned to expand the EU emissions trading scheme by adding vessels, and a proposal from the European Commission (“EC”) was expected if no global regime for reduction of seaborne emissions had been agreed to by the end of 2011. As of January 31, 2013, the EC had stopped short of proposing that emissions from ships be included in the EU’s emissions-trading scheme. However, on October 1, 2012, it announced that it would propose measures to monitor, verify and report ongreenhouse-gas emissions from the shipping sector. On June 28, 2013, the EC adopted a communication setting out a strategy for progressively including greenhouse gas emissions from maritime transport in the EU’s policy for reducing its overall GHG emissions. The first step proposed by the EC was an EU Regulation (as defined below) to an
EU-wide system for the monitoring, reporting and verification of carbon dioxide emissions from large ships starting in 2018. The EU Regulation (2015/757) was adopted on April 29, 2015 and took effect on July 1, 2015, with monitoring, reporting and verification requirements beginning on January 1, 2018. This Regulation may be seen as indicative of an intention to maintain pressure on the international negotiating process. The EC also adopted an Implementing Regulation, which entered into force in November 2016, setting templates for monitoring plans, emissions reports and compliance documents pursuant to Regulation 2015/757.detailed below.
We cannot predict with any degree of certainty what effect, if any, possible climate change and government laws and regulations relatedlegal requirements relating to climate change will have on our operations, whether directly or indirectly.operations. However, we believe that climate change, including the possible increaseincreases in severe weather events, resulting from climate change, and government laws and regulations relatedlegal requirements relating to climate change may affect, directly or indirectly, (i) the cost of the vessels we may acquire in the future, (ii) our ability to continue to operate as we have in the past, (iii) the cost of operating our vessels, and (iv) insurance premiums and deductibles, and the availability of insurance coverage. As a result, our financial condition could be negativelymaterially impacted by significant climate change and related governmental regulation, and that impact could be material.legal requirements.
The loss of key members of our senior management team could disrupt the management of our business.
We believe that our success depends on the continued contributions of the members of our senior management team, including Ms. Angeliki Frangou, our Chairman and Chief Executive Officer. The loss of the services of Ms. Frangou or one of our other executive officers or those of Navios Holdings who provide us with significant managerial services could impair our ability to identify and secure new charter contracts, to maintain good customer relations and to otherwise manage our business, which could have a material adverse effect on our financial performance and our ability to compete.
The Manager acting on our behalf may be unable to attract and retain qualified, skilled employees or crew necessary to operate our business or may have to pay substantially increased costs for its employees and crew.
Our success will depend in part on the Manager’s ability to attract, hire, train and retain highly skilled and qualified personnel. In crewing our vessels, we require technically skilled employees with specialized training who can perform physically demanding work. Competition to attract, hire, train and retain qualified crew members is intense, and crew manning costs continue to increase. If we are not able to increase our hire rates to compensate for any crew cost increases, our business, financial condition, results of operations and ability to make cash distributions to our unitholders may be adversely affected. Any inability we experience in the future to attract, hire, train and retain a sufficient number of qualified employees could impair our ability to manage, maintain and grow our business.
We are subject to vessel security regulations and willwe incur costs to comply with recently adopted regulations and weregulations. We may be subject to costs to comply with similar regulations that may be adopted in the future in response to terrorism.
SinceWe are subject to local and national laws, including in the terrorist attacks of September 11, 2001, there have been a variety of initiativesUnited States, as well as international treaties and conventions, intended to enhance and ensure vessel security. On November 25, 2002, the Maritime Transportation Security Act of 2002, or MTSA, came into effect. To implement certain portions of the MTSA, in July 2003, the U.S. Coast Guard issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subjectThese laws are detailed below. The Managers have and will continue to the jurisdiction of the United States. Similarly, in December 2002, amendments to the International Convention for the Safety of Life at Sea, or SOLAS, created a new chapter of the convention dealing specifically with maritime security. The new chapter went into effect in July 2004, and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the newly created ISPS Code. Among the various requirements are:
Furthermore, additional security measures could be required in the future which could have a significant financial impact on us. The U.S. Coast Guard regulations, intended to be aligned with international maritime security standards, exemptnon-U.S. vessels from MTSA vessel security measures, provided such vessels have on board a valid International Ship Security Certificate, or ISSC, that attests to the vessel’s compliance with SOLAS security requirements and the ISPS Code. We will implement the various security measures addressed by the MTSA, SOLASall applicable laws and the ISPS Code andwill take measures for theour vessels or vessels that we charter to attain compliance with all applicable security requirements within the prescribed time periods. Although management doeswe do not believe that these additional requirements will have a material financial impact on our operations, there can be no assurance that there will not be an interruption in operations to bring vessels into compliance with the applicable requirements and any such interruption could cause a decrease in charter revenues. Furthermore, additional security measures could be required in the future whichthat could have a significant financial impact on us.
The cost of vessel security measures has also been affected by the escalation in recent years in the frequency and seriousness of acts of piracy against ships, notably off the coast of Somalia, including the Gulf of Aden and Arabian Sea area. Attacks of this kind have commonly resulted in vessels and their crews being detained for several months, and being released only on payment of large ransoms. Substantial loss of revenue and other costs may be incurred as a result of such detention. Although we insure against these losses to the extent practicable, the risk of uninsured losses which could significantly affect our business remains. Costs are incurred in taking additional security measures in accordance with Best Management Practices to Deter Piracy, notably those contained in the BMP3 industry standard. A number of flag States have signed the 2009 New York Declaration, which expresses commitment to Best Management Practices in relation to piracy and calls for compliance therewith them as an essential part of compliance with the International Ship and Port Facility Security Code (“ISPS Code”).
Changing laws and evolving reporting requirements could have an adverse effect on our business.
Changing laws, regulations and standards relating to reporting requirements, including the European Union General Data Protection Regulation (“GDPR”), GHG and additional climate disclosure rules proposed by the SEC in March 2022 and expected to be finalized in 2022, along with other anticipated ESG reporting rules which are expected in 2022, may create additional compliance requirements for us. We may receive pressure from investors, lenders and other market participants, who are focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. To maintain high standards of corporate governance and public disclosure, we have invested in, and intend to continue to invest in, reasonably necessary resources to comply with evolving standards.
Companies that do not adapt to, or comply with, investor, lender, or other industry shareholder expectations and standards which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a accompany could be materially and adversely affected.
Our international activities increase the compliance risks associated with economic and trade sanctions imposed by the U.S.,United States, the EUEuropean Union and other jurisdictions.jurisdictions/authorities.
Our international operations and activities could expose us to risks associated with trade and economic sanctions prohibitions or other restrictions imposed by the U.S. or other governments or organizations, including the United Nations, the EU and its member countries.countries, as described in this report. Under economic and trade sanctions laws, governments may seek to impose modifications to, or prohibitions/restrictions on business practices and activities, and modifications to compliance programs, which may increase compliance costs, and, in the event of a violation, may subject us to fines and other penalties.penalties and result in our being excluded or restricted in our access to international banking and finance markets. To reduce the risk of violating economic sanctions, we have a policy of compliance with applicable economic sanctions laws and have implemented and continue to implement and diligently follow compliance procedures to avoid economic sanctions violations.
Iran
DuringConsidering U.S. as well as EU sanctions (sanctions currently imposed by the last few years,UK - whose law frequently governs relations with our contractual counterparts - are broadly similar to the scope of sanctions imposed against the government of Iran and persons engaging in certain activities or doing certain business with and relating to Iran was expanded by a number of jurisdictions, including the United States, the European Union and Canada. In 2010, the U.S. enacted the Comprehensive Iran Sanctions Accountability and Divestment Act (“CISADA”), which expanded the scope of the former Iran Sanctions Act. The scope of U.S. sanctions against Iran were expanded subsequent to CISADA by, among other U.S. laws, the National Defense Authorization Act of 2012 (the “2012 NDAA”), the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”), Executive Order 13662,EU) and the Iran Freedom and Counter-Proliferation Actnature of 2012 (“IFCA”). The foregoing laws, among other things, expandedour business, there is a constant sanctions-related risk for us due to the applicationworldwide trade of prohibitionsour vessels, which we seek tonon-U.S. companies, such as our company, and introduced limits on the ability of companies and persons to do business or trade with Iran when such activities relate to specific trade and investment activities involving Iran.
U.S. economic sanctions on Iran fall into two general categories: “Primary” sanctions, which prohibit U.S. companies and their foreign branches, U.S. citizens, U.S. permanent residents, persons within the territory of the United States from engaging in all direct and indirect trade and other transactions with Iran without U.S. government authorization, and “secondary” sanctions, which are mainly nuclear-related sanctions. While most of the nuclear-related sanctions with respect to Iran (including, among others, CISADA, ITRA, and IFCA) were lifted on January 16, 2016 through minimize by the implementation of the Joint Comprehensive Plan of Action (“JCPOA”) entered into between the permanent members of the United Nations Security Council (China, France, Russia, the United Kingdom and the United States) and Germany, there are still certain limitations in place with which we need to comply. The primary sanctions with which U.S. persons or transactions with a U.S. nexus must comply are still in force and have not been lifted or relaxed, except in a very limited fashion. Additionally, the sanctions lifted under the JCPOA could be reimposed (“snapped back”) at any time if Iran violates the JCPOA.
After the lifting of most of the nuclear-related sanctions on January 16, 2016, EU sanctions remain in place in relation to the export of arms and military goods listed in the EU common military list, missiles-related goods and items that might be used for internal repression. The main nuclear-related EU sanctions which remain in place include restrictions on:
Dealing with the above is no longer prohibited, but prior authorization must be obtained first and is granted on acase-by-case basis. The remaining restrictions apply to the sale, supply, transfer or export, directly or indirectly, to any Iranian person/for use in Iran, as well as the provision of technical assistance, financing or financial assistance in relation to the restricted activity. Certain individuals and entities remain sanctioned and the prohibition to make available, directly or indirectly, economic resources or assets to or for the benefit of sanctioned parties remains. “Economic resources” is widely defined and it remains prohibited to provide vessels for a fixture from which a sanctioned party (or parties related to a sanctioned party) directly or indirectly benefits. It is therefore still necessary to carry out due diligence on the parties and cargoes involved in fixtures involving Iran.
Russia/Ukraine
As a result of the crisis in Ukraine and the annexation of Crimea by Russia in 2014, both the U.S. and EU have implemented sanctions against certain persons and entities.
The EU has imposed travel bans and asset freezes on certain persons and entities pursuant to which it is prohibited to make available, directly or indirectly, economic resources or assets to or for the benefit of the sanctioned parties. Certain Russian ports, including Kerch Commercial Seaport, Sevastopol Commercial Seaport and Port Feodosia, are subject to the above restrictions. Other entities are subject to sectoral sanctions which limit the provision of loans or credit to the listed entities. In addition, various restrictions on trade have been implemented which, amongst others, include a prohibition on the import into the EU of goods originating in Crimea or Sevastopol as well as restrictions on trade in certaindual-use and military items and restrictions in relation to various items of technology associated with the oil industry for use in deep water exploration and production, Arctic oil exploration and production or shale oil projects in Russia. As such, it is important to carry out due diligence on the parties and cargoes involved in fixtures relating to Russia.
The U.S. has imposed sanctions against certain designated Russian entities and individuals (“U.S. Russian Sanctions Targets”). These sanctions block the property and all interests in property of the U.S. Russian Sanctions Targets. This effectively prohibits U.S. persons from engaging in any economic or commercial transactions with the U.S. Russian Sanctions Targets unless the same are authorized by the U.S. Treasury Department. Similar to EU sanctions, U.S. sanctions also entail restrictions on certain exports from the United States to Russia. While the prohibitions of these sanctions are not directly applicable to us, we have compliance measures in place to guard against transactions with U.S. Russian Sanctions Targets which may involve the United States or U.S. persons and thus implicate prohibitions. The United States also maintains prohibitions on imports from Crimea, and it has also tightened restrictions on exports of certain goods and technology to Russia.
Other U.S.our corporate Economic Sanctions Targets
In addition to IranCompliance Policy and certain Russian entitiesProcedures and individuals, as indicated above, the United States maintains economic sanctions against Syria, Sudan, Cuba, North Korea, and sanctions against entities and individuals (such as entities and individuals in the foregoing targeted countries, designated terrorists, narcotics traffickers) whose names appear on the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Treasury Department (collectively, “Sanctions Targets”). We are subject to the prohibitions of these sanctions to the extent that any transaction or activity we engage in involves Sanctions Targets and a U.S. person or otherwise has a nexus to the United States.
Other EU Economic Sanctions Targets
The EU also maintains sanctions against Syria, Sudan, North Korea and certain other countries and against individuals listed by the EU. These restrictions apply to our operations and as such, to the extent that these countries may be involved in any business it is important to carry out checks to ensure compliance with all relevant restrictions and to carry out due diligence checks on counterparties and cargoes.
Compliance
Although we believe that we are in compliance with all applicable sanctions and embargo laws and regulations, andregulations. Although we intend to maintain such compliance,Economic Sanctions Compliance Policy and Procedures, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations, and the law may change. Moreover, despite, for example, relevant provisions in charter parties forbidding the use of our vessels in trade that would violate economic sanctions, our charterers may nevertheless violate applicable sanctions and embargo laws and regulations as a result of actions that do not involve us or our vessels, and those violations could in turn negatively affect our reputation and be imputed to us. In addition, given our relationship with Navios Midstream and Navios Holdings, we cannot give any assurance that an adverse finding against Navios Midstream or Navios Holdings by a governmental or legal authority or others with respect to the matters discussed herein or any future matter related to regulatory compliance by Navios Midstream, Navios Holdings or ourselves will not have a material adverse impact on our business, reputation or the market price or trading of our common units.
We are constantly monitoringmonitor developments in the United States,U.S., the European UnionE.U., UK and other jurisdictions that maintain economic sanctions against Iran, Russia, Crimea, Venezuela other countries,countries/areas, and other sanctions targets, including developments in implementation and enforcement of such sanctions programs. Expansion of sanctions programs, embargoes and other restrictions in the future (including additional designations of countries and persons subject to sanctions), or modifications in how existing sanctions are interpreted or enforced, could prevent our vessels from calling in ports in sanctioned countries, being chartered to certain parties or for certain trade, or could limit their cargoes. restrict he cargoes of our vessels.
In addition, given our relationship with Navios Holdings (and/or its affiliates), we cannot give any assurance that an adverse finding against them by a governmental or legal authority or others, with respect to sanction matters or any future matter related to regulatory compliance by Navios Holdings (and/or its affiliates) will not have a material adverse impact on our business, reputation or the market price or trading of our common stock.
If any of the risks described above materialize,herein materializes, it could have a material adverse impact on our business and results of operations.
To reduceFor a description of the risk of violating economic and trade sanctions and other compliance requirements under which we have a policy of compliance with applicable economic sanctions lawsoperate please see “Item 4. Information on the Partnership. B. Business Overview - Economic Sanctions and have implemented and continue to implement and diligently follow compliance procedures to avoid economic sanctions violations.Compliance”
We could be materially adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and anti-corruption laws in other applicable jurisdictions.
As an international shipping company, we may operate in countries known to have a reputation for corruption. The U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”) and other anti-corruption laws and regulations in applicable jurisdictions generally prohibit companies registered with the SEC and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. Under the FCPA, U.S. companies may be held liable for some actions taken by strategic or local partners or representatives.
Legislation in other countries includes the U.K. Bribery Act 2010 (the “U.K. Bribery Act”) which is broader in
scope than the FCPA because it does not contain an exception for facilitation payments. We and our customers may be subject to these and similar anti-corruption laws in other applicable jurisdictions. Failure to comply with legal requirements could expose us to civil and/or criminal penalties, including fines, prosecution and significant reputational damage, all of which could materially and adversely affect our business and the results of operations, including our relationships with our customers, and our financial results. Compliance with the FCPA, the U.K. Bribery Act and other applicable anti-corruption laws and related regulations and policies imposesimpose potentially significant costs and operational burdens on us. Moreover, the compliance and monitoring mechanisms that we have in place including our Code of Ethics and our anti-bribery and anti-corruption policy, may not adequately prevent or detect all possible violations under applicable anti-bribery and anti-corruption legislation. However, we believe that the procedures we have in place to prevent bribery are adequate and that they should provide a defense in most circumstances to a violation or a mitigation of applicable penalties, at least under the U.K.’s Bribery Act.
The operation of ocean-going vessels entails the possibility of marine disasters including damage or destruction of the vessel due to accident, the loss of a vessel due to piracy or terrorism, damage or destruction of cargo and similar events that may cause a loss of revenue from affected vessels and damage our business reputation, which may in turn lead to loss of business.
The operation of ocean-going vessels entails certainin international trade is inherently risky. The ownership and operation of ocean-going vessels in international trade is affected by a number of inherent risks, that may materially adversely affect ourincluding mechanical failure, personal injury, vessel and cargo loss or damage, business and reputation, including:
Any of these circumstances or events could substantially increase our costs. For example, the costs of replacing a vessel or cleaning up a spill could substantially lower our revenues by taking vessels out of operation permanently or for periods of time. The involvement of our vessels in a disaster or delays in delivery or damages or loss of cargo may harm our reputation as a safe and reliable vessel operator and cause us to lose business.reputation.
The operation of vessels, such as drybulk carriers has certain unique risks. With a drybulk carrier, the cargo itself and its interaction with the vessel can be an operational risk. By their nature, certain drybulk cargoes are often heavy, dense, easily shift,shifted, and may react badly to water exposure. In addition, drybulk carriers are often subjected to battering treatment during unloading operations with grabs, jackhammers (to pry encrusted cargoes out of the hold), and small bulldozers. This treatment may cause damage to the vessel. Vessels damaged due to harsh treatment during unloading procedures may be more susceptible to breach to theat sea. Hull breaches in drybulk carriers may lead to the flooding of the vessels’vessels' holds. IfFor example, if a drybulk carrier suffers flooding in its forward holds, the bulk cargo may become so dense and waterlogged that its pressure may buckle the vessel’svessel's bulkheads leading to the loss of a vessel. Damage and loss could also arise as a consequence of a failure in the services required to support the industry, for example, due to inadequate dredging. We have procedures and policies in place to ameliorate these risks, including a robust inspection system.
In addition, increased operational risks arise as a consequence of the complex nature of the crude oil, product and chemical tanker industry, the nature of services required to support the industry, including maintenance and repair services, and the mechanical complexity of the tankers themselves. Compared to other types of vessels, tankers are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision or other cause, due to the high flammability and high volume of the oil transported in tankers. Damage and loss could also arise as a consequence of a failure in the services required to support the industry, for example, due to inadequate dredging. Inherent risks also arise due to the nature of the product transported by our vessels. Any damage to, or accident involving, our vessels while carrying crude oil could give rise to environmental damage or lead to other adverse consequences. Each of these inherent risks may also result in death or injury to persons, loss of revenues or property, higher insurance rates, damage to our customer relationships, delay or rerouting.
Similarly, the operation of containerships has certain unique risks. Containerized cargoes, which can be high value manufactured goods, dangerous cargoes or smaller quantity commodities, are sealed and locked in containers at the factory or port of origin. Some dangerous cargoes are either mis-declared or not declared at all posing a risk to the ship and other containerized cargo. Certain containerized cargoes are often loaded above the weather deck of a containership and although lashed in place in those above deck stacks, are subject to storms and heavy weather which may cause a container or group of containers to damage the containership if they fall or get thrown overboard. In additional the cargo in each container can be improperly stowed causing the cargo to shift or to self ignite or explode, which may damage the vessel. Certain containers are built with refrigeration units which are powered by electrical generators onboard the containership. Should those refrigeration units fail, they could cause damage to the containership due to fires caused by electrical faults or by raising the temperature of a cargo that needed to be kept below a certain threshold. Other cargo can be carried uncontainerized in so-called “flat racks” generally above the weather deck, which can pose a risk to the vessel or other cargo in a storm or if improperly stowed on the flat rack. Any loss of cargo, which may be covered by insurance, does expose the shipowner to potential monetary and reputational costs. Damage and loss could also arise as a consequence of a collision or grounding or a failure in the services required to support the industry, for example, due to inadequate dredging or icing in the harbors. We have procedures and policies in place to ameliorate these risks, including a robust inspection system during each cargo operation.
Any of these circumstances or events could substantially increase our costs. For example, the costs of replacing a vessel or cleaning up environmental damage could substantially lower our revenues by taking vessels out of operation permanently or for periods of time. Furthermore, the involvement of our vessels in a disaster or delays in delivery, damage or the loss of cargo may harm our reputation as a safe and reliable vessel operator and cause us to lose business. Our vessels could be arrested by maritime claimants, which could result in the interruption of business and decrease revenue and lower profitability.
Some of these inherent risks could result in significant damage, such as marine disaster or environmental incidents, and any resulting legal proceedings may be complex, lengthy, costly and, if decided against us, any of these proceedings or other proceedings involving similar claims or claims for substantial damages may harm our reputation and have a material adverse effect on our business, results of operations, cash flow and financial position. In addition, the legal systems and law enforcement mechanisms in certain countries in which we operate may expose us to risk and uncertainty. Further, we may be required to devote substantial time and cost defending these proceedings, which could divert attention from management of our business. Acts of piracy have historically affected ocean-going vessels trading in certain regions of the world, such as the South China Sea and the Gulf of Aden off the coast of Somalia. Piracy continues to occur in the Gulf of Aden off the coast of Somalia and increasingly in the Gulf of Guinea. Other areas where piracy has affected shipping include the Indian Ocean, the Strait of Malacca, the Arabian Sea, and the Mozambique Channel.
Acts of piracy are a material risk to the shipping industry. Our vessels regularly travel through regions where pirates are active. In January 2014, the Nave Atropos, a vessel currently owned by us, came under attack from a pirate action group in international waters off the coast of Yemen and in February 2016, the Nave Jupiter, a vessel also currently owned by us, came under attack from pirate action groups on her way out from her loading terminal about 50 nautical miles off Bayelsa, Nigeria. In both instances, the crew and the on-board security team successfully implemented the counter piracy action plan and standard operating procedures to deter the attack with no consequences to the vessels or their crew. In December 2019, the Nave Constellation was boarded by armed pirates whilst sailing from Bonny, Nigeria. 19 crewmembers were taken as hostages and were released after 18 days of captivity. Piracy attacks have resulted in certain regions being characterized by insurers as “war risk” zones or Joint War Committee “war and strikes” listed areas.
Premiums payable for insurance coverage could increase significantly and insurance coverage may be more difficult to obtain. Crew costs, including those due to employing onboard security guards, could increase in such circumstances. While the use of security guards is intended to deter and prevent the hijacking of our vessels, it could also increase our risk of liability for death or injury to persons or damage to personal property. In addition, while we believe the charterer remains liable for charter payments when a vessel is seized by pirates, the charterer may dispute this and withhold charter hire until the vessel is released. Although we insure against these losses to the extent practicable, the risk remains of uninsured losses which could significantly affect our business. Costs are incurred in taking additional security measures in accordance with Best Management Practices to Deter Piracy, notably those contained in the BMP3 industry standard. A number of flag states have signed the 2009 New York Declaration, which expresses commitment to Best Management Practices in relation to piracy and calls for compliance with them as an essential part of compliance with the ISPS Code. A charterer may also claim that a vessel seized by pirates was not “on-hire” for a certain number of days and it is therefore entitled to cancel the charter party, a claim that we would dispute. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us, our results of operations, financial condition and ability to pay dividends. In addition, detention hijacking as a result of an act of piracy against our vessels, an increase in cost, or unavailability of insurance for our vessels, could have a material adverse impact on our business, financial condition, results of operations and cash flows. Acts of piracy on ocean-going vessels could adversely affect our business and operations.
The total loss or damage of any of our vessels or cargoes could harm our reputation as a safe and reliable vessel owner and operator. Any extended vessel off-hire, due to an accident or otherwise, or strikes, could have a materially adverse effect on our business. If we are unable to adequately maintain or safeguard our vessels, we may be unable to prevent any such damage, costs, or loss that could negatively impact our business, financial condition, results of operations, cash flows and ability to pay distributions.
Maritime claimants could arrest or attach one or more of our vessels, which could interrupt our cash flow.
Crew members, tort claimants, claimants for breach of certain maritime contracts, vessel mortgages, suppliers of goods and services to a vessel, shippers or receivers of cargo, and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages, against such vessel.including, in some jurisdictions, for debts incurred by previous owners. In many jurisdictions, a maritime lien holder may enforce its lien by arresting a vessel through foreclosure proceedings.vessel. The arrest or attachment of one or more of our vessels, if such arrest or attachment is not timely discharged, could cause us to default on a charter or breach covenants in certain of our credit facilities, could interrupt our cash flow and require us to pay large sums of fundsmoney to have the arrest or attachment lifted. We are not currently awareAny of the existence of any such maritime lienthese occurrences could have a material adverse effect on our vessels.business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unitholders.
In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel which is subject to the claimant’sclaimant's maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert “sister ship” liability against one vessel in our fleet for claims relating to another vessel in the fleet.
The smuggling of drugs or other contraband onto our vessels may lead to governmental claims against us.
Our vessels may call in ports where smugglers may attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent our vessels are found with contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face reputational damage and governmental or other regulatory claims or penalties, which could have an adverse effect on our business, financial condition, results of operations, cash flows, andfinancial condition, as well as our abilitycash flows, including cash available for distributions to pay dividends.our unitholders. Under some jurisdictions, vessels used for the conveyance of illegal drugs could result in forfeiture of the vessel to the government of such jurisdiction.
A failure to pass inspection by classification societies could result in one or more vessels being unemployable unless and until they pass inspection, resulting in a loss of revenues from such vessels for that period and a corresponding decrease in operating cash flows.
The hull and machinery of every commercial vessel must be classedinspected and approved by a classification society authorized by its country of registry. The classification society certifies that a vessel has been built and maintained, is safe and seaworthy in accordance with the applicable rules and regulations of the country of registry of the vessel and with SOLAS.SOLAS (as defined below). Our owned fleet is currently enrolled withclassed by American Bureau of Shipping, Nippon Kaiji Kiokai, Bureau Veritas, DNVGL, and Lloyd’sLloyd's Register.
A vessel must undergo an annual survey, an intermediate survey and a special survey. In lieu of a special survey, a vessel’svessel's machinery may be on a continuous survey cycle, under which the machinery would be surveyed periodically over a five-year period. Our vessels are on special survey cycles for hull inspection and continuous survey cycles for machinery inspection. Every vessel is also required to be drydocked every two to three years for inspection of the underwater parts of such vessel.
If any vessel fails any annual survey, intermediate survey or special survey, the vessel may be unable to trade between ports and, therefore, would be unemployable, potentially causing a negative impact on our revenues due to the loss of revenues from such vessel until she is able to trade again. Further, if any vessel fails a classification survey and the condition giving rise to the failure is not cured within a reasonable time, the vessel may lose coverage under various insurance programs, including hull and machinery insurance and/or protection and indemnity insurance, which would result in a breach of relevant covenants under our financing arrangements. Failure to maintain the class of one or more of our vessels could have a material adverse effect on our financial condition and results of operations, as well as our cash flows.
Increased inspection procedures and tighter import and export controls could increase costs and disrupt our business.
International shipping is subject to various security and customs inspectioninspections and related procedures in countries of origin and destination and trans-shipment points. Inspection procedures maycan result in the seizure of contents of our vessels, delays in the loading, offloading, trans-shipment or delivery and the levying of customs, duties, fines or other penalties against us.penalties.
It is possible that changes to inspection procedures could impose additional financial and legal obligations on us. ChangesFurthermore, changes to inspection procedures could also impose additional costs and obligations on our future customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to make cash distributions.
We are subject to inherent operational risks that may not be adequately covered by our insurance.
The operationDisruptions in global financial markets, terrorist attacks, regional armed conflicts, general political unrest, economic crisis, the emergence of ocean-going vessels in international trade is inherently risky. Although we carry insurance for our fleet against risks commonly insured against by vessel ownersa pandemic crisis and operators, including hull and machinery insurance, war risks insurance and protection and indemnity insurance (which include environmental damage and pollution insurance), all risks may not be adequately insured against, and any particular claim may not be paid. We do not currently maintain strike oroff-hire insurance, which would cover the loss of revenue during extended vesseloff-hire periods, such as those that occur during an unscheduled drydocking due to damage to the vessel from accidents except in cases of loss of hire up to a limited number of days due to war or a piracy event. Other events that may lead tooff-hire periods include natural orman-made disasters that result in the closure of certain waterways and prevent vessels from entering or leaving certain ports. Accordingly, any extended vesseloff-hire, due to an accident or otherwise,resulting governmental action could have a material adverse effectimpact on our business and our ability to pay distributions to our unitholders. Any claims covered by insurance would be subject to deductibles, and since it is possible that a large numberresults of claims may be brought, the aggregate amount of these deductibles could be material.
We may be unable to procure adequate insurance coverage at commercially reasonable rates in the future. For example, more stringent environmental regulations have led in the past to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. A catastrophic oil spill or marine disaster could exceed our insurance coverage, which could harm our business,operations, financial condition and operating results. Changes in the insurance markets attributable to terrorist attacks may also make certain types of insurance more difficult for us to obtain. In addition, the insurance that may be available to us may be significantly more expensive than our existing coverage.cash flows.
Even if our insurance coverage is adequate to cover our losses, we may not be able to timely obtain a replacement vessel in the event of a loss. Furthermore, in the future, we may not be able to obtain adequate insurance coverage at reasonable rates for our fleet. Our insurance policies also contain deductibles, limitations and exclusions which can result in significant increased overall costs to us.
Because we obtain some of our insurance through protection and indemnity associations, we may also be subject to calls, or premiums, in amounts based not only on our own claim records, but also the claim records of all other members of the protection and indemnity associations.
We may be subject to calls, or premiums, in amounts based not only on our claim records but also the claim records of all other members of the protection and indemnity associations through which we receive insurance coverage for tort liability, including pollution-related liability. Our payment of these calls could result in significant expenses to us, which could have a material adverse effect on our business, results of operations and financial condition.
Because we generate all of our revenues in U.S. dollars but incur a portion of our expenses in other currencies, exchange rate fluctuations could cause us to suffer exchange rate losses thereby increasing expenses and reducing income.
We engage in worldwide commerce with a variety of entities. Although our operations may expose us to certain levels of foreign currency risk, our transactions are at present predominantly U.S. dollar-denominated. Transactions in currencies other than the functional currency are translated at the exchange rate in effect at the date of each transaction. Expenses incurred in foreign currencies against which the U.S. dollar falls in value can increase thereby decreasing our income or vice versa if the U.S. dollar increases in value. For example, as of December 31, 2016, the value of the U.S. dollar asThe global economy remains relatively weak, especially when compared to the Euro increased by approximately 4.0% compared withperiod prior to the respective value as of December 31, 2015. A greater percentage of our transactions2008-2009 financial crisis. The current global recovery is proceeding at varying speeds across regions and expenses in the future may be denominated in currencies other than the U.S. dollar.
Political and government instability,is still subject to downside economic risks stemming from factors like terrorist attacks increased hostilities or war could lead to further economic instability, increased costs and disruptionin certain parts of our business.
We are an international company and primarily conduct our operations outside the United States. Changing economic, political and governmental conditions in the countries where we are engaged in business or where our vessels are registered will affect us. Terrorist attacks, such as the attacks in the United States on September 11, 2001 and the United States’ continuing response to these attacks, and in Paris on January 7, 2015 and on November 13, 2015, the bombings in Spain on March 11, 2004 and in Brussels on March 22, 2016, and the attacks in London on July 7, 2005, the recent conflicts in Iraq, Afghanistan, Syria, Ukraine and other current and future conflicts,world and the continuing response of the United States and other countries to these attacks, as well as the threat of future terrorist attacks, the continuing refugee crisis in the European Union, the war in and the general political unrest in Ukraine, the continuing war in Syria and the presence of terrorist organizations in the Middle East, conflicts and turmoil in Yemen, Iraq, Afghanistan and Iran, political tension, continuing concerns related to Brexit, concerns regarding epidemics and pandemics, including the ongoing effects of COVID-19, and other viral outbreaks or conflicts in the Asia Pacific Region have all led to increased volatility in global credit and equity markets and continue to cause uncertainty and volatility in the world financial markets, including the energy markets. Continuing hostilitieswhich may in the Middle East may lead to additional armed conflicts or to further acts of terrorism and civil disturbance in the United States or elsewhere, which could result in increased volatility and turmoil in the financial markets and may contribute further to economic instability. Current and future conflicts and terrorist attacks may adverselyturn affect our business, operating results financial condition, ability to raise capital and future growth. Terrorist attacks on vessels, such as the October 2002 attack on the M/V Limburg, a VLCC not related to us, may in the future also negatively affect ourof operations and financial condition and directly impact our vessels or our customers.conditions.
Furthermore, our operations may be adversely affected by changing or adverse political and governmental conditions in the countries where our vessels are flagged or registered and in the regions where we otherwise engage in business. Any disruption caused by these factors may interfere with the operation of our vessels, which could harm our business, financial condition and results of operations. Our operations may also be adversely affected by expropriation of vessels, taxes, regulation, tariffs, trade embargoes, economic sanctions or a disruption of or limit to trading activities, or other adverse events or circumstances in or affecting the countries and regions where we operate or where we may operate in the future.
Governments could requisition our vessels during a period of war Adverse economic, political, social or emergency, resulting in a loss of earnings.
A government could requisition title or seize our vessels. Requisition of title occurs when a government takes a vesselother developments can decrease demand and becomes the owner. A government could also requisition our vesselsprospects for hire, which would resultgrowth in the government’s taking control of a vesselshipping industry and effectively becoming the charterer at a dictated charter rate. Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances. Requisition of one or more of our vessels would have a substantial negative effect on us as we would potentially lose all revenues and earnings from the requisitioned vessels and permanently lose the vessels. Such losses might be partially offset if the requisitioning government compensated us for the requisition.thereby could reduce revenue significantly.
We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.
The efficient operation of our business is dependent on computer hardware and software systems. Information systems are vulnerable to security breaches by computer hackers and cyber terrorists. We rely on industry accepted security measures and technology to securely maintain confidential and proprietary information maintained on our information systems. However, these measures and technology may not adequately prevent security breaches. In addition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could result in decreased performance and increased operating costs, causing our business and results of operations to suffer. Any significant interruption or failure of our information systems or any significant breach of security could adversely affect our business, results of operations and financial condition, as well as our cash flows, including cash available for dividends to our stockholders.
Acts of piracy on ocean-going vessels have increased in frequency and magnitude, which could adversely affect our business.
The shipping industry has historically been affected by acts of piracy in regions such as the South China Sea, the Indian Ocean, the Gulf of Aden off the coast of Somalia and the Red Sea. Although the frequency of sea piracy worldwide has decreased in recent years, sea piracy incidents continue to occur, particularly in the Gulf of Aden and towards the Mozambique Channel in the North Indian Ocean and increasingly in the Gulf of Guinea. A significant example of the heightened level of piracy came in February 2011 when the M/V Irene SL, a crude oil tanker which was not affiliated with us, was captured by pirates in the Arabian Sea while carrying crude oil estimated to be worth approximately $200 million. In December 2009, the Navios Apollon, one of our vessels, was seized by pirates 800 miles off the coast of Somalia while transporting fertilizer from Tampa, Florida to Rozi, India and was released on February 27, 2010. In January 2014, a vessel owned by our affiliate, Navios Maritime Acquisition Corporation, the Nave Atropos, came under attack from a pirate action group in international waters off the coast of Yemen and in February 2016, the Nave Jupiter, a vessel also owned by Navios Maritime Acquisition Corporation (“Navios Acquisition”), came under attack from pirate action groups on her way out from her loading terminal about 50NM off Bayelsa, Nigeria. In both instances, the crew and theon-board security team successfully implemented the counter piracy action plan and standard operating procedures to deter the attack with no consequences to the vessels or their crew. These piracy attacks resulted in regions (in which our vessels are deployed) being characterized by insurers as “war risk” zones or Joint War Committee (“JWC”) “war and strikes” listed areas. Premiums payable for such insurance coverage could increase significantly and such insurance coverage may be more difficult to obtain. Crew costs, including those due to employing onboard security guards, could increase in such circumstances. While the use of security guards is intended to deter and prevent the hijacking of our vessels, it could also increase our risk of liability for death or injury to persons or damage to personal property. In addition, while we believe the charterer remains liable for charter payments when a vessel is seized by pirates, the charterer may dispute this and withhold charter hire until the vessel is released. A charterer may also claim that a vessel seized by pirates was not“on-hire” for a certain number of days and it is therefore entitled to cancel the charter party, a claim that we would dispute. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, detention hijacking as a result of an act of piracy against our vessels, or an increase in cost, or unavailability of insurance for our vessels, could have a material adverse impact on our business, financial condition, results of operations and cash flows. Acts of piracy on ocean-going vessels could adversely affect our business and operations.
Disruptions in world financial markets and the resulting governmental action in the United States and in other parts of the world could have a material adverse impact on our ability to obtain financing, our results of operations, financial condition and cash flows and could cause the market price of our common units to decline.
Globalglobal financial markets and economic conditions have been severely disrupted and volatile in recent years and remain subject to significant vulnerabilities, such as the deterioration of fiscal balances and the rapid accumulation of public debt, continued deleveraging in the banking sector and a limited supply of credit. Credit markets as well as the debt and equity capital markets were exceedingly distressed during 2008 and 2009 and have been volatile since that time. The renewed crisis in Argentina, civil unrest in Ukraineresulting uncertainty and other parts of the world, and continuing concerns relating to the European sovereign debt crisis have led to increased volatility in the global creditfinancial markets may accordingly affect our business, results of operations and equity markets. Several European countries, including Greece, have been affected by increasing public debt burdens and weakening economic growth prospects. In recent years, Standard and Poor’s Rating Services and Moody’s Investors Service downgraded the long-term ratings of most European countries’ sovereign debt and initiated negative outlooks. Such downgrades could negatively affect those countries’ ability to access the public debt markets at reasonable rates or at all, materially affecting the financial conditions of banks in those countries, including those with which we maintain cash deposits and equivalents, or on which we rely on to finance our vessel and new business acquisitions.
Cash deposits and cash equivalents in excess of amounts covered by government-provided insurance are exposed to loss in the event ofnon-performance by financial institutions. We maintain cash deposits and equivalents in excess of government-provided insurance limits at banks in Greece and other European banks, which may expose us to a loss of cash deposits or cash equivalents.
The credit markets worldwide and in the U.S. have experienced significant contraction,de-leveraging and reduced liquidity, and the U.S. federal government, state governments and foreign governments took highly significant measures in response to such events, including the enactment of the Emergency Economic Stabilization Act of 2008 in the United States, and may implement other significant responses in the future. Additionally, uncertainty regarding tax policy and government spending in the United States have created an uncertain environment which could reduce demand for our services. Securities and futures markets and the credit markets are subject to comprehensive statutes, regulations and other requirements. The Securities and Exchange Commission (the “SEC”), other regulators, self-regulatory organizations and exchanges are authorized to take extraordinary actions in the event of market emergencies, and may effect changes in law or interpretations of existing laws. Any changes to securities, tax, environmental,condition. These uncertainties, as well as future hostilities or other laws or regulations,political instability in regions where our vessels trade, could also affect trade volumes and patterns and adversely affect our operations, and otherwise have a material adverse effect on our business, results of operations and financial condition, oras well as our cash flows and could causecash available for distributions to our unitholders and repurchases of common units.
Specifically, these issues, along with the market pricere-pricing of our common units to decline.
Recently, a number ofcredit risk and the difficulties currently experienced by financial institutions, have experienced serious financial difficultiesmade, and in some cases, have entered bankruptcy proceedings or are in regulatory enforcement actions. These difficulties resulted, in part, from declining markets for assets held by such institutions, particularlywill likely continue to make, it difficult to obtain financing. As a result of the reductiondisruptions in the value of their mortgage and asset-backed securities portfolios. These difficulties were compounded by financial turmoil affecting the world’s debt, credit and capital markets and the general decline in the willingness byhigher capital requirements, many lenders have increased margins on lending rates, enacted tighter lending standards, required more restrictive terms (including higher collateral ratios for advances, shorter maturities and smaller loan amounts), or have refused to refinance existing debt at all. Furthermore, certain banks and other financial institutions to extend credit, particularlythat have historically been significant lenders to the shipping industry due to the historically low vessel earnings and values, and, in part, due to changes in overall banking regulations (for example, Basel III). As a result, the ability of banks and credit institutions to finance new projects, including the acquisition of new vesselshave reduced or ceased lending activities in the future, were for a time uncertain. Followingshipping industry. Additional tightening of capital requirements and the stress tests runresulting policies adopted by the European Central Bank (the “ECB”), revised capital ratios have been communicated to European banks. This has reduced the uncertainty following the difficulties of the past several years, but it has also led to changes in each bank’slenders, could further reduce lending policies and ability to provide financing or refinancing. A recurrence of global economic weakness may adversely affect the financial institutions that provide our credit facilities and may impair their ability to continue to perform under their financing obligations to us, which could have an impact on our ability to fund current and future obligations.
Furthermore, weactivities. We may experience difficulties obtaining financing commitments including commitmentsor be unable to refinance our existing debt as balloon payments come duefully draw on the capacity under our credit facilities,committed term loans in the future, if our lenders are unwilling to extend financing to us or unable to meet their funding obligations due to their own liquidity, capital or solvency issues. Due to the factWe cannot be certain that we would possibly cover allfinancing will be available on acceptable terms or a portion of the cost of any new vessel acquisition with debtat all. If financing such uncertainty, combined with restrictions imposed by our current debt, could hamper our ability to finance vesselsis not available when needed, or new business acquisitions.
In addition, the economic uncertainty worldwide has markedly reduced demand for shipping services and has decreased shipping rates, which may adversely affect our results of operations and financial condition. Currently, the economies of China, Japan, other Pacific Asian countries and India are the main driving force behind the development in seaborne transportation. Reduced demand from such economies has in the past driven decreased rates and vessel values and could do so in the future.
In addition, as a result of the ongoing political and economic turmoil in Greece resulting from the sovereign debt crisis and the related austerity measures implemented by the Greek government, the operations of our managers located in Greeceis available only on unfavorable terms, we may be subjectedunable to new regulations and potential shift in government policies that may require usmeet our future obligations as they come due. Our failure to incur new or additional compliance or other administrative costs and may require that we pay to the Greek government new taxes or other fees. We also face the risk that strikes, work stoppages, civil unrest and violence within Greece may disrupt the shoreside operations of our managers located in Greece.
We could face risks attendant to changes in economic environments, changes in interest rates, tax policies, and instability in certain securities markets, among other factors. Major market disruptions and the uncertainty in market conditions and the regulatory climate in the U.S., Europe and worldwide could adversely affect our business or impair our ability to borrow amounts under any future financial arrangements. The current market conditions may last longer than we anticipate. These recent and developing economic and governmental factorsobtain such funds could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unitholders. In the absence of available financing, we also may be unable to take advantage of business opportunities or respond to competitive pressures.
Our financial and operating performance may be adversely affected by the COVID-19 pandemic.
Our business could be materially and adversely affected by the ongoing COVID-19 pandemic. The coronavirus or other epidemics or pandemics could potentially result in delayed deliveries of our vessels under construction, disrupt our operations and significantly affect global markets, affecting the demand for our services, global demand for goods shipped in containerships, tankers and dry bulk vessels as well as the price of international freights and hires. If the effects of the coronavirus persist, we may be unable to charter our vessels at the rates or for the length of time we currently expect. The effects of the coronavirus remain uncertain, and should customers be under financial pressure this could negatively affect our charterers' willingness to perform their obligations under our time charters. The loss or termination of any of our time charters or a decline in payments under our time charters, could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows.
In addition, certain countries have introduced travel restrictions and adopted certain hygiene measures, including quarantining. European countries and the United States have previously adopted stringent measures to contain the spread of the virus. Any prolonged measure, or the reimplementation of previously lifted measures, may affect our normal operations and those of our Manager. All these measures have further affected the process of construction and repair of vessels, as well as the presence of workers in shipyards and, of administrative personnel in their offices, which could exceed previously calculated repair periods, causing our vessels to remain off-hire for longer periods than planned. We may face increased costs operating our vessels due to travel restrictions and quarantine requirements, which can among other issues delay crew changes or which may cause us to incur off hire to effect such changes. Possible delays due to quarantine of our vessels caused by COVID-19 infection of our crew or other COVID-19 related disruptions may lead to the termination of charters leaving our vessels without employment. Any prolonged restrictive measures in order to control the novel coronavirus or other adverse global public health developments may have a material and adverse effect on our business operations and demand for our vessels generally. Furthermore, the global recession caused by the pandemic could be prolonged and could also severely affect financing institutions. If any such impact on the financial system is not addressed, we may find it difficult to finance loans that are maturing or to obtain financing for new projects, thus materially affecting our financial position.
The extent of the COVID-19 outbreak’s effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, any resurgence or mutation of the virus, the availability of vaccines and their global deployment, the development of effective treatments, the imposition of effective public safety and other protective measures and the public’s response to such measures. There continues to be a high level of uncertainty relating to how the pandemic will evolve, how governments and consumers will react and progress on the approval and distribution of vaccines, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, the ultimate severity of the COVID-19 outbreak is uncertain at this time and therefore we cannot predict the impact it may have on our future operations, which impact could be material and adverse, particularly if the pandemic continues to evolve into a severe worldwide health crisis.
At present, it is not possible to ascertain the overall impact of COVID-19 on our business. However, the occurrence of any of the foregoing events or other epidemics or an increase in the severity or duration of the COVID-19 or other epidemics could have a material adverse effect on our business, results of operations, cash flows, financial condition, value of our vessels, and ability to pay dividends.
Governments could requisition our vessels during a period of war or emergency, resulting in a loss of earnings.
A government of the jurisdiction where one or more of our vessels are registered could requisition one or more of our vessels for title or for hire. Requisition for title occurs when a government takes control of a vessel and becomes its owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes its charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances. Although we may be entitled to compensation in the event of a requisition of one or more of our vessels the amount and timing of payment would be uncertain. Government requisition of one or more of our vessels may cause us to breach covenants in certain of our credit facilities, and could have a material adverse effect on our business, financial condition, and results of operations, as well as our cash flows, including cash available for distributions to our unitholders.
Risks Relating to Our Indebtedness
The market value of our vessels may fluctuate significantly, which could cause us to breach covenants in our credit facilities and result in foreclosure on our mortgaged vessels.
If the market value of our owned vessels decreases, we may be required to record additional impairment charges in our consolidated financial statements that, among other things, could cause us to breach covenants contained in our credit facilities, which could adversely affect our financial results. If we breach the covenants in our credit facilities and are unable to remedy any relevant breach, our lenders could accelerate our debt and foreclose on the collateral, including our vessels. Any loss of vessels would significantly decrease our ability to generate positive cash flow from operations and therefore service our debt.
We may be unable to obtain additional financing and our debt levels may limit our ability to do so and pursue other business opportunities, and our interest rates under our credit facilities may fluctuate and may impact our operations.
As of December 31, 2021, the total borrowings amounted to $1,374.4 million. We have the ability to incur additional debt, subject to limitations in our credit facilities. Our level of debt could have important consequences to us, including the following:
Our ability to borrow against the ships in our existing fleet and any ships we may acquire in the future largely depends on the existence of time charter employment of the ship and on the value of the ships, which in turn depends in part on charter hire rates and the creditworthiness of our charterers. The actual or perceived credit quality of our charterers, any defaults by them, any decline in the market value of our fleet and a lack of long-term employment of our ships may materially affect our ability to obtain the additional capital resources that we will require to purchase additional vessels or may significantly increase our costs of obtaining such capital. Our inability to obtain additional financing or committing to financing on unattractive terms could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unitholders.
Our ability to service our debt depends upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. Our ability to service debt under our credit facilities also will depend on market interest rates, since the interest rates applicable to our borrowings will fluctuate with the London Interbank Offered Rate (“LIBOR”), or the prime rate. We do not currently hedge against increases in such rates and, accordingly, significant increases in such rate would require increased debt levels and reduce distributable cash. We may not be able to refinance all or part of our maturing debt on favorable terms, or at all.
If our operating income is not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing or discontinuing distributions, reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or seeking additional equity capital or bankruptcy protection. We may not be able to effect any of these remedies on satisfactory terms, or at all.
As LIBOR is replaced as the reference rate under our debt obligations, it could affect our profitability, earnings and cash flow.
Uncertainty surrounding a phase-out of LIBOR may adversely affect the trading market for LIBOR-based agreements, which could negatively affect our operating results and financial condition as well as on our cash flows, including cash available for distributions to our unitholders. We are continuing to evaluate the risks resulting from a termination of LIBOR and our credit facilities generally have fallback provisions in the event of the unavailability of LIBOR, but those fallback provisions and related successor benchmarks may create additional risks and uncertainties.
The publication of LIBOR is expected to be discontinued in mid-2023. The U.S. banking agencies issued guidance instructing banks to cease entering into new contracts referencing LIBOR no later than December 31, 2021, with certain exceptions. The Federal Reserve Bank of New York now publishes the Secured Overnight Financing Rate based on overnight U.S. Treasury repurchase agreement transactions, which has been recommended as the alternative to U.S. dollar LIBOR by the Alternative Reference Rates Committee convened by the Federal Reserve and the Federal Reserve Bank of New York. Accordingly, the method and rate used to calculate our interest rates and/or payments on our floating-rate debt in the future may result in interest rates and/or payments that are higher than, or that do not otherwise correlate over time with, the interest rates and/or payments that would have been applicable to our obligations if LIBOR was available in its current form, which could have a material adverse effect on our financial position, results of operations and liquidity.
Our credit facilities contain restrictive covenants, which may limit our business and financing activities and may prevent us from paying distributions to unitholders, if our board of directors determines to do so again in the future.
As of December 31, 2021, the outstanding loan balance under Navios Partners' borrowings, net of deferred finance costs, was $1,361.7 million.
The operating and financial restrictions and covenants in our credit facilities and any future credit facilities could adversely affect our ability to finance future operations or capital needs to engage, expand or pursue our business activities and reduce cash available for distribution on our common units. For example, our credit facilities require the consent of our lenders or limit our ability to (among other things):
Our credit facilities also require us to comply with the International Safety Management Code (the “ISM Code”), and the ISPS Code and to maintain valid safety management certificates and documents of compliance at all times.
The Company’s credit facilities and certain financial liabilities also require compliance with a number of financial covenants, including: (i) maintain a required security ranging over 105% to 140%; (ii) minimum free consolidated liquidity in an amount equal to $0.5 million per owned vessel and a number of vessels as defined in the Company’s credit facilities and financial liabilities; (iii) maintain a ratio of EBITDA to interest expense of at least 2.00:1.00; (iv) maintain a ratio of total liabilities or total debt to total assets (as defined in the Company’s credit facilities) ranging from less than 0.75 to 0.80; and (v) maintain a minimum net worth ranging from $30.0 million to $135.0 million.
It is an event of default under the credit facilities if such covenants are not complied with in accordance with the terms and subject to the prepayments or cure provisions of the facilities.
In addition, our credit facilities prohibit the payment of distributions if we are not in compliance with certain financial covenants or upon the occurrence of an event of default.
Events of default under our credit facilities include, among other things, the following:
Our ability to comply with the covenants and restrictions that are contained in our credit facilities and any other debt instruments we may enter into in the future may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we are in breach of any of the restrictions, covenants, ratios or tests in our credit facilities, especially if we trigger a cross default currently contained in certain of our loan agreements, a significant portion of our obligations may become immediately due and payable, and our lenders' commitment to make further loans to us may terminate. We may not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, our obligations under our credit facilities are secured by certain of our vessels, and if we are unable to repay borrowings under such credit facilities, lenders could seek to foreclose on those vessels. We anticipate that any subsequent refinancing of our current debt or any new debt will have similar restrictions.
Risks Relating to Our Units
Our board of directors may not declare cash distributions in the foreseeable future.
The declaration and payment of cash distributions, if any, will always be subject to the discretion of our board of directors, restrictions contained in our credit facilities and the requirements of Marshall Islands law. The timing and amount of any cash distributions declared will depend on, among other things, our earnings, financial condition and cash requirements and availability, our ability to obtain debt and equity financing on acceptable terms as contemplated by our growth strategy, the terms of our outstanding indebtedness and the ability of our subsidiaries to distribute funds to us.
The containership and drybulk sector of the shipping industry is highly volatile, and we cannot predict with certainty the amount of cash, if any, that will be available for distribution as cash distributions in any period. Also, there may be a high degree of variability from period to period in the amount of cash that is available for the payment of cash distributions.
We may not have sufficient cash available to pay quarterly distributions or to maintain or increase distributions following the establishment of cash reserves and payment of fees and expenses. In February 2016, we announced that our board of directors decided to suspend the quarterly cash distributions to our unitholders, including the distribution for the quarter ended December 31, 2015, in order to conserve cash and improve our liquidity. In March 2018, our board of directors determined to reinstate a distribution and any continued distribution will be at the discretion of our board of directors. The amount of cash we can distribute on our common units depends principally upon the amount of cash we generate from our operations, which may fluctuate based on numerous factors including, those set forth elsewhere in this section.
The actual amount of cash we will have available for distribution also will depend on other factors, some of which are beyond our control, such as the level of capital expenditures we make (including those associated with maintaining vessels, building new vessels, acquiring existing vessels and complying with regulations), our debt service requirements and restrictions on distributions contained in our debt instruments, interest rate fluctuations, the cost of acquisitions, if any, fluctuations in our working capital needs, our ability to make working capital borrowings, and the amount of any cash reserves, including reserves for future maintenance and replacement capital expenditures, working capital and other matters, established by our board of directors in its discretion.
In addition, the amount of cash we generate from our operations may differ materially from our profit or loss for the period, which will be affected by non-cash items. As a result of this and the other factors mentioned above, we may make cash distributions during periods when we record losses and may not make cash distributions during periods when we record net income.
Any dividend payments on our common units would be declared in U.S. dollars, and any unit holder whose principal currency is not the U.S. dollar would be subject to risks of exchange rate fluctuations.
Our common units, and any cash dividends or other distributions to be declared in respect of them, if any, will be denominated in U.S. dollars. Unitholders whose principal currency is not the U.S. dollar will be exposed to foreign currency exchange rate risk. Any depreciation of the U.S. dollar in relation to such foreign currency will reduce the value of such unitholders' units and any appreciation of the U.S. dollar will increase the value in foreign currency terms. In addition, we will not offer our unitholders the option to elect to receive dividends, if any, in any other currency. Consequently, unitholders may be required to arrange their own foreign currency exchange, either through a brokerage house or otherwise, which could incur additional commissions or expenses.
The New York Stock Exchange may delist our securities from trading on its exchange, which could limit your ability to trade our securities and subject us to additional trading restrictions.
Our securities are listed on the New York Stock Exchange (“NYSE”(the “NYSE”), a national securities exchange. Although we currently satisfy theThe NYSE minimum listing standards, which requiresrequire that we meet certain requirements relating to unitholders’stockholders' equity, including certain share price criteria, number ofround-lot holders, market capitalization, aggregate market value of publicly held shares and distribution requirements,requirements. For example, on March 13, 2019, we were notified by the NYSE that we were no longer in compliance with the NYSE's continued listing standards because the average closing price of our common stock over a consecutive 30 trading-day period was less than $1.00 per common unit. Although we regained compliance on May 21, 2019, following a reverse split of our common units, we cannot assure you that we will continue to satisfy the NYSE minimum listing standards and our securities will continue to be listed on the NYSE in the future.
If NYSE delists our securities from trading on its exchange, we could face significant material adverse consequences, including:
Increased competition in technology and innovation could reduce our charter hire income and the valueThe price of our vessels.common units may be volatile.
The charter ratesprice of our common units may be volatile and may fluctuate due to various factors including:
The shipping industry has been highly unpredictable and volatile. Securities markets worldwide are builtexperiencing significant price and volume fluctuations. The market price for our securities may also be volatile. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our securities in spite of our operating performance. Consequently, you may not be able to sell our securities at prices equal to or greater than those at which you pay or paid.
Increases in interest rates may cause the market price of our common units to decline.
An increase in interest rates may cause a corresponding decline in demand for equity investments in general and in particular for yield-based equity investments such as our common units. Any such increase in interest rates or reduction in demand for our common units resulting from other relatively more attractive investment opportunities may cause the trading price of our common units to decline. In addition, our interest expense will increase, since initially our debt will bear interest at a floating rate, subject to any interest rate swaps we may enter into the future.
Substantial future sales of our common units in the public market, including through our continuous offering sales program, could cause the price of our common units to fall, and would dilute your ownership interests.
In order to raise additional capital, we may in the future offer additional common units or other securities convertible into or exchangeable for our common units, including convertible debt. We have in the past entered into Continuous Offering Program Sales Agreement and performed equity raises. Whether we choose to effect future sales under continuous offering programs or through secondary offerings, will depend upon a variety of factors, including, among others, market conditions and the trading price of our common units relative to other sources of capital.
We cannot predict the size of future issuances or sales of our common units, including those made pursuant to the continuous offering program sales agreement or in connection with future acquisitions or capital activities, or the effect, if any, that are more efficientsuch issuances or more flexiblesales may have on the market price of our common units. The issuance and sale of substantial amounts of common units, including issuance and sales pursuant to the continuous offering program sales agreement, or have longer physical lives than our vessels, competition from these more technologically advanced vesselsannouncement that such issuance and sales may occur, could adversely affect the market price of our abilitycommon units, and decrease unitholders' proportionate ownership interest in us.
Unitholders may be liable for repayment of distributions.
Under some circumstances, unitholders may have to recharterrepay amounts wrongfully returned or distributed to them. Under the Marshall Islands Act, we may not make a distribution to unitholders if the distribution would cause our vessels,liabilities to exceed the amount of charter payments we receive for our vessels once their initial charters expire and the resalefair value of our vessels could significantly decrease. Asassets. Marshall Islands law provides that for a result, our financial condition, resultsperiod of operationsthree years from the date of the impermissible distribution, limited partners who received the distribution and cash flows,who knew at the time of the distribution that it violated Marshall Islands law will be liable to the limited partnership for the distribution amount.
Assignees who become substituted limited partners are liable for the obligations of the assignor to make contributions to the partnership that are known to the assignee at the time it became a limited partner and our ability to pay dividends,for unknown obligations if the liabilities could be adversely affected.
Navios Holdings, Navios Acquisition, Navios Maritime Midstream Partners L.P. (“Navios Midstream”)determined from the partnership agreement. Liabilities to partners on account of their partnership interest and their affiliates may compete with us.
Pursuantliabilities that are non-recourse to the omnibus agreement that we entered into with Navios Holdings in connection with the closingpartnership are not counted for purposes of the IPO (the “Omnibus Agreement”), Navios Holdings and its controlled affiliates (other than us, our general partner and our subsidiaries) generally agreed not to acquire or own Panamax or Capesize drybulk carriers under time charters of three or more years. The Omnibus Agreement, however, contains significant exceptions that allow Navios Holdings or any of its controlled affiliates to compete with us under specified circumstances which could harm our business. In addition, concurrently with the successful consummation of the initial business combination by Navios Acquisition, on May 28, 2010, because of the overlap between Navios Acquisition, Navios Holdings and us, with respect to possible acquisitions under the terms of the Omnibus Agreement, we entered intodetermining whether a business opportunity right of first refusal agreement which provides the types of business opportunities in the marine transportation and logistics industries, we, Navios Holdings and Navios Acquisition must share with the each other.distribution is permitted.
In connection with the Navios Midstream initial public offering and effective November 18, 2014, Navios Partners entered into the Omnibus Agreement with Navios Midstream, Navios Acquisition and Navios Holdings (the “Navios Midstream Omnibus Agreement”) pursuant to which Navios Acquisition, Navios Holdings and
Navios Partners have agreed not to acquire or own any VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers under time charters of five or more years and also providing rights of first offer on certain tanker vessels.
Common unitholders have limited voting rights and our partnership agreement restricts the voting rights of common unitholders owning more than 4.9% of our common units.
Holders of our common units have only limited voting rights on matters affecting our business. We hold a meeting of the limited partners every year to elect one or more members of our board of directors and to vote on any other matters that are properly brought before the meeting. Common unitholders may only elect four of the seven members of our board of directors. The elected directors are elected on a staggered basis and serve for three year terms. Our general partner in its sole discretion has the right to appoint the remaining three directors and to set the terms for which those directors will serve. The partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders’unitholders' ability to influence the manner or direction of management. Unitholders will have no right to elect our general partner and our general partner may not be removed except by a vote of the holders of at least 66 2/3% of the outstanding units, including any units owned by our general partner and its affiliates, voting together as a single class.
Our partnership agreement further restricts common unitholders’unitholders' voting rights by providing that if any person or group owns beneficially more than 4.9% of the common units then outstanding, any such common units owned by that person or group in excess of 4.9% may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes, except for purposes of nominating a person for election to our board, determining the presence of a quorum or for other similar purposes, unless required by law. The voting rights of any such common unitholders in excess of 4.9% will effectively be redistributed pro rata among the other common unitholders holding less than 4.9% of the voting power of all classes of units entitled to vote. Our general partner, its affiliates and persons who acquired common units with the prior approval of our board of directors will not be subject to this 4.9% limitation except with respect to voting their common units in the election of the elected independent directors.
Risks Relating to Our general partnerOrganizational Structure, Taxes and its affiliates, including Navios Holdings, own a significant interest in us and have conflicts of interest and limited fiduciary and contractual duties, which may permit them to favor their own interests to the detriment of unitholders.
Navios Holdings indirectly owns a 2.0% general partner interest in us through our general partner, which Navios Holdings owns and controls, and directly owns a 17.4% limited partner interest in us. All of our officers and three of our directors are directors and/or officers of Navios Holdings and its affiliates, and our Chief Executive Officer is also the Chief Executive Officer of Navios Acquisition, Navios Midstream, and Navios Holdings. As such these individuals have fiduciary duties to Navios Holdings, Navios Midstream, and Navios Acquisition that may cause them to pursue business strategies that disproportionately benefit Navios Holdings, Navios Midstream, or Navios Acquisition or which otherwise are not in our best interests or those of our unitholders. Conflicts of interest may arise between Navios Acquisition, Navios Holdings, Navios Midstream and their respective affiliates including our general partner, on the one hand, and us and our unitholders on the other hand. As a result of these conflicts, our general partner and its affiliates may favor their own interests over the interests of our unitholders. These conflicts include, among others, the following situations:
Although a majority of our directors will be elected by common unitholders, our general partner will likely have substantial influence on decisions made by our board of directors.
Our officers face conflicts in the allocation of their time to our business.
Navios Holdings, Navios Midstream, and Navios Acquisition conduct businesses and activities of their own in which we have no economic interest. If these separate activities are significantly greater than our activities, there will be material competition for the time and effort of our officers, who also provide services to Navios Acquisition, Navios Holdings, Navios Midstream and their respective affiliates. Our officers are not required to work full-time on our affairs and are required to devote time to the affairs of Navios Acquisition, Navios Holdings, Navios Midstream and their respective affiliates. Each of our Chief Executive Officer and our Chief Financial Officer is also an executive officer of Navios Holdings, and our Chief Executive Officer is the Chief Executive Officer of Navios Acquisition, Navios Midstream, and Navios Holdings.
Our partnership agreement limits our general partner’s and our directors’ fiduciary duties to our unitholders and restricts the remedies available to unitholders for actions taken by our general partner or our directors.
Our partnership agreement contains provisions that reduce the standards to which our general partner and directors would otherwise be held by Marshall Islands law. For example, our partnership agreement:
In order to become a limited partner of our partnership, a common unitholder is required to agree to be bound by the provisions in the partnership agreement, including the provisions discussed above.
Fees and cost reimbursements, which the Manager determines for services provided to us, are significant, are payable regardless of profitability and reduce our cash available for distribution.
Under the terms of our existing Management Agreement, as amended in each of October 2013, August 2014, February 2015 and February 2016, with the Manager, we pay a fixed daily fee of: (a) $4,100 daily rate per Ultra-Handymax vessel; (b) $4,200 daily rate per Panamax vessel; (c) $5,250 daily rate per Capesize vessel; (d) $6,700 daily rate per container vessel of TEU 6,800; (e) $7,400 daily rate per container vessel of more than TEU 8,000; and (f) $8,750 daily rate per very large container vessel of more than TEU 13,000 through December 31, 2017 for technical and commercial management services provided to us by the Manager. Maintenance for our vessels and expenses related to drydocking expenses under this agreement will be reimbursed at cost upon occurrence. The term of the management agreement is until December 31, 2017.
The fixed daily fee paid to the Manager includes all costs incurred in providing certain commercial and technical management services to us. All of the fees we are required to pay to the Manager under the management agreement are payable without regard to our financial condition or results of operations. In addition, the Manager provides us with administrative services, including the services of our officers and directors, pursuant to the Administrative Services Agreement which has a term until December 31, 2017, and we reimburse the Manager for all costs and expenses reasonably incurred by it in connection with the provision of those services. The fees and reimbursement of expenses to the Manager are payable regardless of our profitability and could materially adversely affect our ability to pay cash distributions to unitholders.
Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove our current management or our general partner.
Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove our current management or our general partner.
The control of our general partner may be transferred to a third party without unitholder consent.
Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of the unitholders. In addition, our partnership agreement does not restrict the ability of the members of our general partner from transferring their respective membership interests in our general partner to a third party.
Substantial future sales of our common units in the public market including through our continuous offering sales program could cause the price of our common units to fall.
On November 18, 2016, we entered into a continuous offering program sales agreement with S. Goldman Capital LLC, as our sales agent, for the offer and sale of up to $25 million in aggregate amount of our common units from time to time through the sales agent. Sales of the units are to be made pursuant to the Company’s shelf registration statement, filed on Form F-3 with the SEC and declared effective on January 15, 2014. The sales agent is not required to sell any specific number or dollar amount of our common units but will use its commercially reasonable efforts, subject to the terms of the continuous offering program sales agreement, to sell that number of shares up to $25 million of our common units upon our request. Sales of the shares may be made by any means permitted by law and deemed to be an “at-the-market” offering as defined in Rule 415 of the Securities Act of 1933, as amended, and will generally be made by means of brokers’ transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, or as otherwise agreed with the sales agent. Whether we choose to affect future sales under the continuous offering program will depend upon a variety of factors, including, among others, market conditions and the trading price of our common units relative to other sources of capital. The issuance from time to time of new common units through the continuous offering program or in any other equity offering, or the perception that such sales may occur, could have the effect of depressing the market price of our common units.
You may experience future dilution as a result of future equity offerings and other issuances of our common units or other securities.
In order to raise additional capital, we may in the future offer additional shares of our common units or other securities convertible into or exchangeable for our common units, including convertible debt. We cannot predict
the size of future issuances or sales of our common units, including those made pursuant to the continuous offering program sales agreement or in connection with future acquisitions or capital activities, or the effect, if any, that such issuances or sales may have on the market price of our common units. The issuance and sale of substantial amounts of common units, including issuance and sales pursuant to the continuous offering program sales agreement, or announcement that such issuance and sales may occur, could adversely affect the market price of our common units. In addition, we cannot assure you that we will be able to make future sales of our common units or other securities in any other offering at a price per unit that is equal to or greater than the price per unit paid by investors in this offering, and investors purchasing shares or other securities in the future could have rights that are superior to existing unitholders. The price per unit at which we sell additional common units or other securities convertible into or exchangeable for our common units in future transactions may be higher or lower than the price per unit in this offering, and could adversely impact the trading price of our common units.
Our management will have broad discretion with respect to the use of the proceeds resulting from the issuance of common units under the continuous offering program.
Our management will have broad discretion in the application of the net proceeds from continuous offering program and could spend such proceeds in ways that do not improve our results of operations or enhance the value of our common units. The failure by our management to apply these funds effectively could result in financial losses and cause the price of our common units to decline. Pending their use, we may invest the net proceeds from continuous offering program in a manner that does not produce income or that loses value.
Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price.
If at any time our general partner and its affiliates, including Navios Holdings, own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price not less than their then-current market price. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return on their investment. Unitholders may also incur a tax liability upon a sale of their units.
As of March 10, 2017, Navios Holdings directly owned 15,344,310 common units and 1,766,624 general partner units through our general partner (which Navios Holdings owns and controls), which together represent a 19.4% interest in us based on all outstanding common units and general partnership units.
Unitholders may not have limited liability if a court finds that unitholder action constitutes control of our business.
As a limited partner in a partnership organized under the laws of the Marshall Islands, unitholders could be held liable for our obligations to the same extent as a general partner if they participate in the “control” of our business. Our general partner generally has unlimited liability for the obligations of the partnership, such as its debts and environmental liabilities, except for those contractual obligations of the partnership that are expressly made without recourse to our general partner.
We can borrow money to pay distributions, which would reduce the amount of credit available to operate our business.
Our partnership agreement will allow us to make working capital borrowings to pay distributions. Accordingly, we can make distributions on all our units even though cash generated by our operations may not be sufficient to pay such distributions. Any working capital borrowings by us to make distributions will reduce the amount of working capital borrowings we can make for operating our business.
Increases in interest rates may cause the market price of our common units to decline.
An increase in interest rates may cause a corresponding decline in demand for equity investments in general and in particular for yield-based equity investments such as our common units. Any such increase in interest rates or reduction in demand for our common units resulting from other relatively more attractive investment opportunities may cause the trading price of our common units to decline. In addition, our interest expense will increase, since initially our debt will bear interest at a floating rate, subject to any interest rate swaps we may enter into the future.
Unitholders may have liability to repay distributions.
Under some circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under the Marshall Islands Act, we may not make a distribution to unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. Marshall Islands law provides that for a period of three years from the date of the impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Marshall Islands law will be liable to the limited partnership for the distribution amount. Assignees who become substituted limited partners are liable for the obligations of the assignor to make contributions to the partnership that are known to the assignee at the time it became a limited partner and for unknown obligations if the liabilities could be determined from the partnership agreement. Liabilities to partners on account of their partnership interest and liabilities that arenon-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.
We have been organized as a limited partnership under the laws of the Republic of the Marshall Islands, which does not have a well-developed body of partnership law; as a result, unitholders may have more difficulty in protecting their interests than would unitholders of a similarly organized limited partnership in the United States.
Our partnership affairs are governed by our partnership agreement and by the Marshall Islands Act. The provisions of the Marshall Islands Act resemble provisions of the limited partnership laws of a number of states in the United States, most notably Delaware. The Marshall Islands Act also provides that it is to be applied and construed to make it uniform with the Delaware Revised Uniform Partnership Act and, so long as it does not conflict with the Marshall Islands Act or decisions of the Marshall Islands courts, interpreted according to thenon-statutory law (or case law) of the State of Delaware. There have been, however, few, if any, court cases in the Marshall Islands interpreting the Marshall Islands Act, in contrast to Delaware, which has a fairly well-developed body of case law interpreting its limited partnership statute. Accordingly, we cannot predict whether Marshall Islands courts would reach the same conclusions as the courts in Delaware. For example, the rights of our unitholders and the fiduciary responsibilities of our general partner under Marshall Islands law are not as clearly established as under judicial precedent in existence in Delaware. As a result, unitholders may have more difficulty in protecting their interests in the face of actions by our officers or directors than would unitholders of a similarly organized limited partnership in the United States.
Because we are organized under the laws of the Marshall Islands and our business is operated primarily from our office in Monaco, it may be difficult to serve us with legal process or enforce judgments against us, our directors or our management.
We are organized under the laws of the Marshall Islands, and all of our assets are located outside of the United States. Our business is operated primarily from our office in Monaco. In addition, our general partner is a Marshall Islands limited liability company, and our directors and officers generally are or will benon-residents of the United States, and all or a substantial portion of the assets of thesenon-residents are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States if you believe that your rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Marshall Islands, Monaco and of other jurisdictions may prevent or restrict you from enforcing a judgment against our assets or the assets of our general partner or our directors or officers.
Tax RisksOther Legal Matters
In addition to the following risk factors, you should read the sectionsections entitled “Material U.S. Federal Income Tax Considerations” and “Non-United States Tax Considerations” for a more complete discussion of the expected material U.S. federal andnon-U.S. income tax considerations relating to us and the ownership and disposition of common units.
Navios Holdings and their affiliates may compete with us.
Navios Partners has entered into an omnibus agreement with Navios Holdings (the “Omnibus Agreement”) in connection with the closing of Navios Partners’ initial public offering “IPO” governing, among other things, Navios Holdings and its controlled affiliates (other than us, our general partner and our subsidiaries) generally agreed not to acquire or own Panamax or Capesize drybulk carriers under time charters of three or more years without the consent of an independent committee of Navios Holdings. The Omnibus Agreement, however, contains significant exceptions that allow Navios Holdings or any of its controlled affiliates to compete with us under specified circumstances which could harm our business. In addition, concurrently with the successful consummation of the initial business combination by Navios Acquisition, on May 28, 2010, because of the overlap between Navios Acquisition, Navios Holdings and us, with respect to possible acquisitions under the terms of the Omnibus Agreement, we entered into a business opportunity right of first refusal agreement which provides the types of business opportunities in the marine transportation and logistics industries, we, Navios Holdings and Navios Acquisition must share with the each other.
In connection with Navios Maritime Midstream Partners L.P. (“Navios Midstream”) initial public offering and effective November 18, 2014, Navios Partners entered into the Omnibus Agreement with Navios Midstream, Navios Acquisition and Navios Holdings (the “Navios Midstream Omnibus Agreement”) pursuant to which Navios Acquisition, Navios Holdings and Navios Partners have agreed not to acquire or own any very large crude carriers (“VLCCs”), crude oil tankers, refined petroleum product tankers, liquefied petroleum gas (“LPG”) tankers or chemical tankers under time charters of five or more years and also providing rights of first offer on certain tanker vessels.
In connection with the Navios Containers private placement and listing on the Norwegian over-the-counter market effective June 8, 2017, Navios Partners entered into an omnibus agreement with Navios Containers, Navios Holdings, Navios Acquisition and Navios Midstream (the “Navios Containers Omnibus Agreement”), pursuant to which Navios Partners, Navios Holdings, Navios Acquisition and Navios Midstream have granted to Navios Containers a right of first refusal over any container vessels to be sold or acquired in the future. The omnibus agreement contains significant exceptions that will allow Navios Partners, Navios Holdings, Navios Acquisition and Navios Midstream to compete with Navios Containers under specified circumstances.
We are a holding company and we depend on the ability of our subsidiaries to distribute funds to us in order to satisfy our financial obligations and to make distributions.
We are a holding company and our subsidiaries conduct all of our operations and own all of our operating assets, including our ships. We have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to pay our obligations and to make distributions depends entirely on our subsidiaries and their ability to distribute funds to us. The ability of a subsidiary to make these distributions could be affected by a claim or other action by a third party, including a creditor, or by the law of their respective jurisdiction of incorporation which regulates the payment of distributions. If we are unable to obtain funds from our subsidiaries, our Board of Directors may not exercise its discretion not to declare or make distributions.
We depend on the Managers to assist us in operating and expanding our business.
Pursuant to the Management Agreements between Navios Partners and the Manager, Navios Containers and the Manager, and Navios Acquisition and the Tankers Manager, the Managers provides to us significant commercial and technical management services (including the commercial and technical management of our vessels, vessel maintenance and crewing, purchasing and insurance and shipyard supervision). In addition, pursuant to the Administrative Services Agreement between us and the Manager, the Manager provides us administrative, financial and other support services. Our operational success and ability to execute our growth strategy will depend significantly upon the Managers' satisfactory performance of these services. Our business will be harmed if the Managers fails to perform these services satisfactorily, if the Managers cancel either of these agreements, or if the Managers stop providing these services to us.
Our ability to enter into new charters and expand our customer relationships will depend largely on the Managers and their reputation and relationships in the shipping industry. If the Managers suffers material damage to its reputation or relationships, it may harm our ability to:
If our ability to do any of the things described above is impaired, it could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions and repurchases of common units.
The loss of key members of our senior management team could disrupt the management of our business.
We believe that our success depends on the continued contributions of the members of our senior management team, including our Chairwoman and Chief Executive Officer. The loss of the services of our Chairwoman and Chief Executive Officer or one of our other executive officers or senior management members could impair our ability to identify and secure new charter contracts, to maintain good customer relations and to otherwise manage our business, which could have a material adverse effect on our financial performance and our ability to compete.
The Managers may be unable to attract and retain qualified, skilled employees or crew necessary to operate our vessels and business or may have to pay increased costs for its employees and crew and other vessel operating costs.
Our success will depend in part on the Managers' ability to attract, hire, train and retain highly skilled and qualified personnel. In crewing our vessels, we require technically skilled employees with specialized training who can perform physically demanding work. Competition to attract, hire, train and retain qualified crew members is intense, and crew manning costs continue to increase. If we are not able to increase our hire rates to compensate for any crew cost increases, our business, financial condition, results of operations and ability to make cash distributions to our unitholders may be adversely affected. Any inability we experience in the future to attract, hire, train and retain a sufficient number of qualified employees could impair our ability to manage, maintain and grow our business.
We may be subject to taxes, which may reduce our cash available for distribution to our unitholders.
We and our subsidiaries may be subject to tax in the jurisdictions in which we are organized or operate, reducing the amount of cash available for distribution. In computing our tax obligation in these jurisdictions, we are required to take various tax accounting and reporting positions on matters that are not entirely free from doubt and for which we have not received rulings from the governing authorities. We cannot assure you that upon review of these positions the applicable authorities will agree with our positions. A successful challenge by a tax authority could result in additional tax imposed on us or our subsidiaries, further reducing the cash available for distribution. In addition, changes in our operations or ownership could result in additional tax being imposed on us or our subsidiaries in jurisdictions in which operations are conducted.
In accordance with the currently applicable Greek law, foreign flagged vessels that are managed by Greek or foreign ship management companies having established an office in Greece on the basis of the applicable licensing regime are subject to dutiestax liability towards the Greek state which areis calculated on the basis of the relevant vessels’vessels' tonnage. A tax credit is recognized for tonnage tax (or similar tax) paid abroad, up to the amount of the tax due in Greece. The owner, the manager and the bareboat charterer or the financial lessee (where applicable) are liable to pay the tax due to the Greek state. The payment of said dutiestax exhausts the tax liability of the foreign ship owning company, the bareboat charterer, the financial lessee (as applicable) and the relevant manager against any tax, duty, charge or contribution payable on income from the exploitation of the foreign flagged vessel.vessel outside Greece.
U.S. tax authorities could treat us as a “passive foreign investment company,” which could have adverse U.S. federal income tax consequences to U.S. unitholders.
Anon-U.S. entity treated as a corporation for U.S. federal income tax purposes will be treated as a “passive foreign investment company,” or a PFIC,company” (“PFIC”), for U.S. federal income tax purposes if either (1) at least 75.0% of its gross income for any taxable year consists of certain types of “passive income,”income”, or (2) at least 50.0% of the average value of the entity’sentity's assets produce or are held for the production of those types of “passive income.”income”. Based on our current and projected methods of operations, and an opinion of counsel, we believe that we were not a PFIC for any taxable year, and we do not believe that we will be a PFIC for 2021 and subsequent taxable years. For purposes of these tests, “passive income” generally includes dividends, interest, gains from the sale or exchange of investment property, and rents and royalties other than rents and royalties that are received from unrelated parties in connection with the active conduct of a trade or business. For purposes of these tests, income derived from the performance of services does not constitute “passive income.”income”. U.S. unitholders of a PFIC are subject to a disadvantageous U.S. federal income tax regime with respect to the income derived by the PFIC, the distributions they receive from the PFIC, and the gain, if any, they derive from the sale or other disposition of their sharesunits in the PFIC.PFIC, as well as additional U.S. federal income tax filing obligations.
Based on our current and projected method of operation, and on opinion of counsel, we believe that we were not a PFIC for our 20162021 taxable year, and we expect that we will not become a PFIC with respect to any other taxable year. Our U.S. counsel, Thompson Hine LLP, is of the opinion that (1) the income we receive from time chartering activities and the assets we own that are engaged in generating such income should not be treated as passive income or assets, respectively, and (2) so long as our income from time charters exceeds 25.0% of our gross income from all sources for each taxable year after our initial taxable year and the fair market value of our vessels contracted under time charters exceeds 50.0% of the average fair market value of all of our assets for each taxable year after our initial taxable year, we should not be a PFIC for any taxable year. This opinion is based on representations and projections provided by us to our counsel regarding our assets, income and charters, and its validity is conditioned on the accuracy of such representations and projections. We expect that all of the vessels in our fleet will be engaged in time chartering activities and intend to treat our income from those activities asnon-passive income, and the vessels engaged in those activities asnon-passive assets, for PFIC purposes. However, we cannot assure you that the method of our operations, or the nature or composition of our income or assets, will not change in the future and that we will not become a PFIC. Moreover, although there is legal authority for our position, there is also contrary authority and no assurance can be given that the Internal Revenue Service, or the IRS, will accept thisour position.
We may have to pay tax on U.S.-source income, which would reduce our earnings.
Under the Code, 50.0% of the gross transportation income of a vessel- owningvessel-owning or chartering corporation that is attributable to transportation that either begins or ends, but that does not both begin and end, in the United States is characterized as U.S. Source International Transportation Income. U.S. Source International Transportation Income generally is subject to a 4.0% U.S. federal income tax without allowance for deduction or, if such U.S. Source International Transportation Income is effectively connected with the conduct of a trade or business in the United States, U.S. federal corporate income tax (the highest statutory rate presently is 35.0%)(presently imposed at a 21.0% rate) as well as a branch profits tax (presently imposed at a 30.0% rate on effectively connected earnings) applies, unless thenon-U.S. corporation qualifies for exemption from tax under Section 883 of the Code.
Based on an opinion of counsel, and certain assumptions and representations, we believe that we have qualified for this statutory tax exemption, and we will take this position for U.S. federal income tax return reporting purposes for our 20162021 taxable year. However, there are factual circumstances, including some that may be beyond our control that could cause us to lose the benefit of this tax exemption.exemption, including the delisting of our securities from quotation on the NYSE and thereby make us subject to U.S. federal income tax on our U.S. Source International Transportation Income. See “Risks Relating to Our Units-The New York Stock Exchange may delist our securities from trading on its exchange, which could limit your ability to trade our securities and subject us to additional trading restrictions”. Furthermore, our board of directors could determine that it is in our best interests to take an action that would result in this tax exemption not applying to us in the future. In addition, our conclusion that we qualify for this exemption, as well as the conclusions in this regard of our counsel, Thompson Hine LLP, is based upon legal authorities that do not expressly contemplate an organizational structure such as ours; specifically, although we have elected to be treated as a corporation for U.S. federal income tax purposes, we are organized as a limited partnership under Marshall Islands law. Therefore, we can give no assurances that the IRS will not take a different position regarding our qualification for this tax exemption.
If we were not entitled to the Section 883 exemption for any taxable year, we generally would be subject to a 4.0% U.S. federal gross income tax with respect to our U.S. Source International Transportation Income or, if such U.S. Source International Transportation Income were effectively connected with the conduct of a trade or business in the United States, U.S. federal corporate income tax as well as a branch profits tax for those years. Our failure to qualify for the Section 883 exemption could have a negative effect on our business and would result in decreased earnings available for distribution to our unitholders.
Actions taken by holders of our common units could result in our being treated as a “controlled foreign corporation,” which could have adverse U.S. federal income tax consequences to certain U.S. holders.
Although we believe that Navios Partners was not a controlled foreign corporation (a “CFC”) as of December 31, 2021, or at any time during 2021, tax rules enacted by the 2017 Tax Cuts and Jobs Act, including the imposition of so-called “downward attribution” for purposes of determining whether a non-U.S. corporation is a CFC, may result in Navios Partners being treated as a CFC for U.S. federal income tax purposes in the future. Through downward attribution, U.S. subsidiaries of Navios Holdings are treated as constructive owners of the equity interests of Navios Partners for purposes of determining whether Navios Partners is a CFC. If, in the future, U.S. holders (including U.S. subsidiaries of Navios Holdings, as discussed above) that each own 10.0% or more (by vote or value) of the equity of Navios Partners own in the aggregate more than 50% of the equity of Navios Partners (by vote or value), in each case, directly, indirectly or constructively, Navios Partners would become a CFC.
U.S. holders who at all times own less than 10% of our equity should not be affected. However, if we were to become a CFC, any U.S. holder owning 10% or more (by vote or value), directly, indirectly, or constructively (but not through downward attribution), of our equity could be subject to U.S. federal income tax in respect of a portion of our earnings. Any U.S. holder of Navios Partners that owns 10% or more (by vote or value), directly, indirectly or constructively, of the equity of Navios Partners should consult its own tax advisor regarding U.S. federal tax consequences that may result from Navios Partners being treated as a CFC (see “Material U.S. Federal Income Tax Considerations – U.S. Federal Income Taxation U.S. Holders - Controlled Foreign Corporation).
You may be subject to income tax in one or morenon-U.S. countries, including Greece, as a result of owning our common units if, under the laws of any such country, we are considered to be carrying on business there. Such laws may require you to file a tax return with and pay taxes to those countries.
We intend that our affairs and the business of each of our controlled affiliates will be conducted and operated in a manner that minimizes income taxes imposed upon us and these controlled affiliates or which may be imposed upon you as a result of owning our common units. However, because we are organized as a partnership, there is a risk in some jurisdictions that our activities and the activities of our subsidiaries may be attributed to our unitholders for tax purposes and, thus, that you will be subject to tax in one or morenon-U.S. countries, including Greece, as a result of owning our common units if, under the laws of any such country, we are considered to be carrying on business there. If you are subject to tax in any such country, you may be required to file a tax return with and to pay tax in that country based on your allocable share of our income. We may be required to reduce distributions to you on account of any withholding obligations imposed upon us by that country in respect of such allocation to you. The United States may not allow a tax credit for any foreign income taxes that you directly or indirectly incur.
We believe we can conduct our activities in such a manner that our unitholders should not be considered to be carrying on business in one or morenon-U.S. countries including Greece solely as a consequence of the acquisition, holding, disposition or redemption of our common units. However, the question of whether either we or any of our controlled affiliates will be treated as carrying on business in any particular country will be largely a question of fact to be determined based upon an analysis of contractual arrangements, including the management agreementManagement Agreements we entered into with the Managers and the administrative services agreementAdministrative Services Agreement we will enterentered into with the Manager, and the way we conduct business or operations, all of which may change over time. Furthermore, the laws of Greece or
any other country may change in a manner that causes that country’scountry's taxing authorities to determine that we are carrying on business in such country and are subject to its taxation laws. Any foreign taxes imposed on us or any subsidiaries will reduce our cash available for distribution.
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We have been organized as a limited partnership under the laws of the Republic of the Marshall Islands, which does not have a well-developed body of partnership law; as a result, unitholders may have more difficulty in protecting their interests than would unitholders of a similarly organized limited partnership in the United States.
Our partnership affairs are governed by our partnership agreement and by the Marshall Islands Act. The provisions of the Marshall Islands Act resemble provisions of the limited partnership laws of a number of states in the United States, most notably Delaware. The Marshall Islands Act also provides that it is to be applied and construed to make it uniform with Delaware law and, so long as it does not conflict with the Marshall Islands Act or decisions of the Marshall Islands courts, interpreted according to the non-statutory law (or case law) of the State of Delaware. There have been, however, few, if any, court cases in the Marshall Islands interpreting the Marshall Islands Act, in contrast to Delaware, which has a fairly well-developed body of case law interpreting its limited partnership statute. Accordingly, we cannot predict whether Marshall Islands courts would reach the same conclusions as the courts in Delaware. For example, the rights of our unitholders and the fiduciary responsibilities of our general partner under Marshall Islands law are not as clearly established as under judicial precedent in existence in Delaware. As a result, unitholders may have more difficulty in protecting their interests in the face of actions by our officers or directors than would unitholders of a similarly organized limited partnership in the United States.
Because we are organized under the laws of the Marshall Islands and our business is operated primarily from our office in Monaco, it may be difficult to serve us with legal process or enforce judgments against us, our directors or our management.
We are organized under the laws of the Marshall Islands, and all of our assets are located outside of the United States. Our business is operated primarily from our office in Monaco. In addition, our general partner is a Marshall Islands limited liability company, and our directors and officers generally are or will be non-residents of the United States, and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States if you believe that your rights have been infringed under securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Marshall Islands, the Monaco and other jurisdictions may prevent or restrict you from enforcing a judgment against our assets or the assets of our general partner or our directors or officers.
We rely on the master limited partnership structure and its appeal to investors for accessing debt and equity markets to finance our growth and repay or refinance our debt. The depressed trading price of our common units may affect our ability to access capital markets and, as a result, our ability to pay distributions or repay our debt.
We rely on the master limited partnership structure and its appeal to investors for accessing debt and equity markets to finance our growth and repay or refinance our debt.
We rely on our ability to raise capital in the equity and debt markets to grow our fleet and to refinance our debt. A protracted deterioration in the valuation of our common units would increase our cost of capital, make any equity issuance significantly dilutive and may affect our ability to access capital markets and, as a result, our capacity to pay distributions to our unitholders and refinance or repay our debt.
Our partnership agreement limits our general partner's and our directors' fiduciary duties to our unitholders and restricts the remedies available to unitholders for actions taken by our general partner or our directors.
Our partnership agreement contains provisions that reduce the standards to which our general partner and directors would otherwise be held by Marshall Islands law. For example, our partnership agreement:
In order to become a limited partner of our partnership, a common unitholder is required to agree to be bound by the provisions in the partnership agreement, including the provisions discussed above.
Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price.
If at any time our general partner and its affiliates, including Navios Holdings, own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price not less than their then-current market price. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return on their investment. Unitholders may also incur a tax liability upon a sale of their units.
As of April 1, 2022, Navios Holdings directly owned 3,183,199 common units, which represented a 10.3% ownership interest in Navios Parnters. As of April 1, 2022, our general partner owned all 622,555 outstanding general partner units, which represented a 2.0% ownership interest in us based on all outstanding common units and general partner units.
Our general partner may transfer its general partner interest to, and the control of our general partner may be transferred to a third party without unitholder consent.
Our general partner may transfer its general partner interest to a third party without the consent of the unitholders. In addition, our partnership agreement does not restrict the ability of the members of our general partner from transferring their respective membership interests in our general partner to a third party. A different general partner may make decisions or operate our business in a manner that is different, and significantly less skilled and beneficial to us, and that could have a material adverse effect on our business, results of operations and financial condition, as well as our cash flows, including cash available for distributions to our unitholders.
Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove our current management or our general partner, and even if our public unitholders are dissatisfied, they will need a qualified majority to remove our general partner
Our partnership agreement contains provisions that may have the effect of discouraging a person or group from attempting to remove our current management or our general partner.
Unitholders may not have limited liability if a court finds that unitholder action constitutes control of our business.
As a limited partner in a partnership organized under the laws of the Marshall Islands, unitholders could be held liable for our obligations to the same extent as a general partner if they participate in the “control” of our business. Our general partner generally has unlimited liability for the obligations of the partnership, such as its debts and environmental liabilities, except for those contractual obligations of the partnership that are expressly made without recourse to our general partner.
We can borrow money to pay distributions, which would reduce the amount of credit available to operate our business.
Our partnership agreement will allow us to make borrowings to make distributions. Accordingly, we can make distributions on all our units even though cash generated by our operations may not be sufficient to pay such distributions. Any borrowings by us to make distributions will reduce the amount of borrowings we can make for operating our business.
Our management will have broad discretion with respect to the use of the proceeds resulting from the issuance of common units whether under a continuous offering program or a secondary offering.
Our management will have broad discretion in the application of the net proceeds from continuous offering programs or secondary offerings, and could spend such proceeds in ways that do not improve our results of operations or enhance the value of our common units. The failure by our management to apply these funds effectively could result in financial losses and cause the price of our common units to decline. Pending their use, we may invest the net proceeds from continuous offering programs or secondary offerings in a manner that does not produce income or that loses value.
Our general partner and its affiliates, including Navios Holdings, own a significant interest in us and may have conflicts of interest and limited fiduciary and contractual duties, which may permit them to favor their own interests to the detriment of unitholders.
Navios Holdings is our main unitholder owning an approximate 10.5% of the total number of outstanding common units. In August 2019, Navios Holdings announced that it sold certain assets, including its ship management division and the general partnership interests in the Company to N Shipmanagement Acquisition Corp. and related entities, affiliated with the Company's Chairwoman and Chief Executive Officer. Our general partner owns all of our general partner units representing a 2.0% ownership interest in us based on all outstanding common units and general partner units. This concentration of ownership may delay, deter or prevent acts that would be favored by our other unitholders or deprive unitholders of an opportunity to receive a premium for their common units as part of a sale of our business, and it is possible that the interests of the controlling unitholders may in some cases conflict with our unitholders. The Manager owns 3.7% of the total number of outstanding common units. The interests of Navios Holdings and of our general partner and its affiliates, including the Manager, may be different from your interests. As a result of these conflicts, our general partner and its affiliates may favor their own interests over the interests of our unitholders. These conflicts include, among others, the following situations:
Although a majority of our directors will be elected by common unitholders, our general partner will likely have substantial influence on decisions made by our board of directors.
Our officers face conflicts of interest and conflicts in the allocation of their time to our business.
Certain of our executive officers and/or directors also serve as executive officers and/or directors of Navios Holdings. Our Chief Executive Officer is also the Chief Executive Officer of Navios Holdings. Navios Holdings conducts substantial businesses and activities of their own. If these separate activities are significantly greater than our activities, there will be material competition for the time and effort of our officers, who also provide services to Navios Holdings and their respective affiliates. Our officers are not required to work full-time on our affairs and, in the future, we may have additional officers that also provide services to Navios Holdings and their affiliates. As such these individuals have fiduciary duties to Navios Holdings which may cause them to pursue business strategies that disproportionately benefit Navios Holdings or which otherwise are not in our best interests or those of our unitholders. Conflicts of interest may arise between Navios Holdings, on the one hand, and us and our unitholders on the other hand. Certain our officers may spend a substantial portion of their monthly business time dedicated to the business activities of the Navios Holdings and their affiliates. However, the actual allocation of time could vary significantly from time to time depending on various circumstances and needs of the businesses, such as the relative levels of strategic activities of the businesses.
Fees and cost reimbursements, which the Managers determine for services provided to us, represent significant percentage of our revenues, are payable regardless of profitability and reduce our cash available for distributions.
A large portion of the management, staffing and administrative services that we require to operate our business are provided to us by the Managers. We pay the Managers, a commercial and technical management fee under the Management Agreements, as well as an administrative services fee under the Administrative Services Agreement.
Pursuant to the Management Agreements, the Managers provide commercial and technical management services to our vessels until January 1, 2025, when the Management Agreements are currently set to expire.
In addition, the Manager will provide us with administrative services, pursuant to the Administrative Services Agreement also expiring on January 1, 2025, and we will reimburse the Manager for all costs and expenses reasonably incurred by them in connection with the provision of those services. The exact amount of these future costs and expenses are unquantifiable at this time and they are payable regardless of our profitability.
If we desire to terminate either of these agreements before its scheduled expiration, we must pay a termination fee to the Managers as set forth in the Management Agreements. As a result, our ability to make short-term adjustments to manage our costs by terminating one or both these agreements may be limited which could cause our results of operations and ability to pay cash distributions and repurchases of common units to be materially and adversely affected.
For detailed information on the amount of vessel operating expenses owed under the Management Agreements, please see the section entitled, “Item 5. Operating and Financial Review and Prospects - A. Operating results – Vessel operating expenses”.
Item 4. Information on the Partnership
A. History and Development of the Partnership
Navios Partners is an international owner and operator of dry cargo and containertanker vessels, formed on August 7, 2007 under the laws of the Republic of the Marshall Islands.Islands as a limited partnership, under the Marshall Islands Limited Partnership Act.
Olympos Maritime Ltd. is Navios GP L.L.C.Partners' general partner (the “General Partner”), a wholly owned subsidiary of Navios Holdings, was also formed on that date to act as and currently owns all the general partner of Navios Partners and received aunits representing an approximately 2.0% general partnerownership interest in Navios Partners.Partners based on all outstanding units and general partner units.
Navios Partners is engaged in the seaborne transportation services of a wide range of liquid and dry cargo commodities including iron ore, oil, coal, grain and fertilizer and also containers, chartering its vessels generally under medium to long-term charters. The operations of Navios Partners are managed by the ManagerManagers from itstheir offices in Piraeus, Greece, Singapore and Monaco.
The principal executive offices of Navios Partners are located at c/o Navios Maritime Partners L.P., 7 Avenue de Grande Bretagne, Office 11B2, Monte Carlo, MC 98000 Monaco, and its telephone number is (011) + (377) 9798-2140.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The address of the Company’s internet site is https://www.navios-mlp.com. Information contained on this website does not constitute part of this report.
Navios Containers Merger
On March 31, 2021, Navios Partners completed the merger (the “NMCI Merger”) contemplated by the Agreement and Plan of Merger (the “NMCI Merger Agreement”), dated as of December 31, 2020, by and among Navios Partners, its direct wholly-owned subsidiary NMM Merger Sub LLC (“Merger Sub”), Navios Maritime Containers L.P. and Navios Maritime Containers GP LLC, Navios Containers’ general partner at the time. Pursuant to the initialNMCI Merger Agreement, Merger Sub merged with and into Navios Containers, with Navios Containers continuing as the surviving partnership. As a result of the NMCI Merger, Navios Containers became a wholly-owned subsidiary of Navios Partners. Pursuant to the terms of the NMCI Merger Agreement, each outstanding common unit of Navios Containers that was held by a unitholder other than Navios Partners, Navios Containers and their respective subsidiaries was converted into the right to receive 0.39 of a common unit of Navios Partners. Following the exercise of the optional second merger (“Second Merger”), Navios Containers merged with and into Navios Maritime Containers Sub LP, with Navios Maritime Containers Sub LP continuing as the surviving partnership, and Migen Shipmanagement Ltd, a wholly owned subsidiary of Navios Partners, became Navios Containers’ General Partner. Upon completion of the NMCI Merger on March 31, 2021, beginning from April 1, 2021, the results of operations of Navios Containers are included in Navios Partners’ Consolidated Statements of Operations.
Navios Acquisition Merger
On August 25, 2021 (date of obtaining control), Navios Partners purchased 44,117,647 newly issued shares of Navios Acquisition, thereby acquiring a controlling interest of 62.4% in Navios Acquisition, and the results of operations of Navios Acquisition are included in Navios Partners’ consolidated statements of operations commencing on August 26, 2021.
On October 15, 2021, Navios Partners completed the merger with Navios Acquisition (the “NNA Merger” and together with the NMCI Merger, the “Mergers”) and as a result thereof, Navios Acquisition became a wholly-owned subsidiary of Navios Partners. Each outstanding share of common stock of Navios Acquisition that was held by a stockholder other than Navios Partners was converted into the right to receive 0.1275 of a common unit of Navios Partners. As a result of the NNA Merger, 3,388,226 common units of Navios Partners were issued to former public offering (“IPO”) on November 16, 2007,stockholders of Navios Acquisition.
Financing Arrangements
On March 28, 2022, Navios Partners entered into the following agreements:
(a) the Management Agreement with the Manager pursuant to which the Manager provides Navios Partners commercial and technical management services;
(b) the Administrative Services Agreement with the Manager pursuant to which the Manager provides Navios Partners administrative services; and
(c) the Omnibus Agreement with Navios Holdings, governing, among other things, when Navios Partners and Navios Holdings may compete against each other as well as rights of first offer on certain drybulk carriers.
Term Loan B Refinancing
On March 6, 2017, Navios Partners announced the issuance of a new $405.0credit facility with a commercial bank for a total amount of up to $55.0 million Term Loan B facility. The Term Loan B facility bears an interest rate of LIBOR +500 basis points and has a three and a half year term. The Term Loan B facility is secured by first priority mortgages covering certain vessels owned by subsidiaries of Navios Partners, in addition to other collateral, and guaranteed by each subsidiary of Navios Partners.
Navios Partners intends to use the net proceeds of the Term Loan B facility to: (i)order to refinance the existing Term Loan B;indebtedness of three of its vessels and (ii) to pay feesfor general corporate purposes. The credit facility matures in March 2027 and expenses related tobears interest at daily cumulative or non-cumulative compounded RFR rate (as defined in the term loans. The issuanceloan agreement) plus 2.25% per annum. On March 31, 2022, the entire amount was drawn under this loan.
Please read “Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources – Credit Facilities – Financial Liabilities” for a full description of the new Term Loan B facility is subjectfinancing arrangements of the Company as of December 31, 2021.
Distributions
In January 2022, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended December 31, 2021 of $0.05 per unit. The distribution was paid on February 11, 2022 to signingall unitholders of definitive documentation.common units and general partner units of record as of February 9, 2022. The aggregate amount of the declared distribution was $1.5 million.
Equity Offerings and Issuances
2016On May 21, 2021, Navios Partners entered into a new Continuous Offering Program Sales Agreement (“$110.0m Sales Agreement”) for the issuance and sale from time to time through its agent common units having an aggregate offering price of up to $110.0 million. As of April 1, 2022, since the commencement of the $110.0m Sales Agreement, Navios Partners has issued 3,963,249 units and received net proceeds of $103.7 million. No additional sales will be made under this program. Pursuant to the issuance of the common units, Navios Partners issued 80,883 general partnership units to its General Partner in order to maintain its 2.0% ownership interest. The net proceeds from the issuance of the general partnership units were approximately $2.2 million.
On April 9, 2021, Navios Partners entered into a Continuous Offering Program Sales Agreement (“$75.0m Sales Agreement”) for the issuance and sale from time to time through its agent common units having an aggregate offering price of up to $75.0 million. As of April 1, 2022, since the commencement of the $75.0m Sales Agreement, Navios Partners has issued 2,437,624 units and received net proceeds of $73.1 million. No additional sales will be made under this program. Pursuant to the issuance of the common units, Navios Partners issued 49,747 general partnership units to its General Partner in order to maintain its 2.0% ownership interest. The net proceeds from the issuance of the general partnership units were approximately $1.5 million.
On November 18, 2016, Navios Partners entered into a Continuous Offering Program Sales Agreement pursuant to which Navios Partners may issuefor the issuance and sellsale from time to time through its agent common units representing limited partner interests having an aggregate offering price of up to $25.0 million. DuringAn amended Sales Agreement was entered into on August 3, 2020. As of April 1, 2022, since the year ended December 31, 2016,commencement of sales pursuant to the amended Sales Agreement, Navios Partners has issued 244,201 common1,286,857 units and received net proceeds of $0.4$23.9 million. No additional sales will be made under this program. Pursuant to the issuance of the common units, Navios Partners issued 4,98426,265 general partnership units to the General Partnerits general partner in order to maintain its 2.0% general partnerownership interest. The net proceeds from the issuance of the general partnership units were $0.01$0.5 million.
2015
On February 11, 2015,Pursuant to the terms of the NMCI Merger Agreement, each outstanding common unit of Navios Containers that was held by a unitholder other than Navios Partners, completed its public offeringNavios Containers and their respective subsidiaries was converted into the right to receive 0.39 of 4,000,000a common units at $13.09 per unit and raised gross proceeds of approximately $52.4 million to fund its fleet expansion. The net proceeds of this offering, including the underwriting discount and excluding offering costs of $0.2 million, were approximately $50.1 million. Pursuant to this offering, Navios Partners issued 81,633 general partnership units to its general partner. The net proceeds from the issuance of the general partnership units were $1.1 million. On the same date, Navios Partners completed the exercise of the option previously granted to the underwriters in connection with the offering and issued 600,000 additional common units at the public offering price less the underwriting discount.Partners. As a result of the exerciseNMCI Merger, 8,133,452 common units of the option, Navios Partners raised additional gross proceedswere issued to former public unitholders of $7.9 million and net proceeds, including the underwriting discount, of approximately $7.5 million and issued 12,245 additional general partnership unitsNavios Containers. Pursuant to its general partner. The net proceeds from the issuance of the general partnershipcommon units, were $0.2 million. In addition, Navios Partners completed a private placement of 1,120,547 common units and 22,868issued 165,989 general partner units, at $13.09 per unit to Navios Holdings, raising additional grossresulting in net proceeds of $15.0 million.$3.9 million (see Note 3 – Acquisition of Navios Containers and Navios Acquisition to our consolidated financial statements, included elsewhere in this Annual Report).
Pursuant to the terms of the NNA merger agreement, each outstanding common unit of Navios Holdings currently ownsContainers that was held by a 19.4% interest instockholder other than Navios Partners, which includeswas converted into the 2.0% interest throughright to receive 0.1275 of a common unit of Navios Partners’Partners. As a result of the NNA Merger, 3,388,226 common units of Navios Partners were issued to former public stockholders of Navios Acquisition. Pursuant to the issuance of the common units, Navios Partners issued 69,147 general partner whichunits, resulting in net proceeds of $1.9 million (see Note 3 – Acquisition of Navios Holdings ownsContainers and controls.Navios Acquisition to our consolidated financial statements, included elsewhere in this Annual Report).
Acquisitions and Sales of Vessels
•Acquisitions of Vessels
On December 30, 2016,In November 2021, Navios Partners acquiredagreed to purchase four 5,300 TEU newbuilding containerships (two plus two optional), from an unrelated third party, for a purchase price of $62.8 million each. The vessels are expected to be delivered into Navios Partners’ fleet during the first and the second half of 2024. Navios Beaufiks,Partners agreed to pay in total $25.1 million in four installments for each vessel and the remaining amount of $37.7 million plus extras for each vessel will be paid upon delivery of the vessel. The closing of the transaction of the two optional containerships is subject to completion of customary documentation.
On October 1, 2021, Navios Partners exercised its option to acquire two 5,300 TEU newbuilding containerships, from an unrelated third party, for a 2004 Japanese-builtpurchase price of $61.6 million each. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2024. Navios Partners agreed to pay in total $18.5 million in three installments for each vessel and the remaining amount of $43.1 million for each vessel plus extras will be paid upon delivery of the vessel. On November 15, 2021, the first installment of each vessel of $6.2 million, or $12.3 million accumulated for the two vessels, was paid.
On July 2, 2021, Navios Partners agreed to purchase four 5,300 TEU newbuilding containerships, from an unrelated third party, for a purchase price of $61.6 million each. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2023 and first half of 2024. Navios Partners agreed to pay in total $18.5 million in three installments for each vessel and the remaining amount of $43.1 million for each vessel plus extras will be paid upon delivery of the vessel. On August 13, 2021, the first installment of each vessel of $6.2 million, or $24.6 million accumulated for the four vessels, was paid.
On June 30, 2021, Navios Partners agreed to acquire a newbuilding Panamax vessel, from an unrelated third party, for a purchase price of $34.3 million. The vessel has approximately 81,000 dwt and is expected to be delivered in Navios Partners’ fleet during the first half of 2023. Navios Partners agreed to pay in total $34.3 million, of which $3.4 million was paid in July 2021 and the remaining amount of $30.9 million will be paid in 2022 and first half of 2023. In January 2022, Navios Partners declared its option to purchase the vessel. Pursuant to a novation agreement dated January 28, 2022, the Company agreed to novate the shipbuilding contract and to simultaneously enter into a bareboat charter agreement to bareboat charter-in the vessel, under a ten-year bareboat contract, from an unrelated third party.
In June 2021, Navios Partners agreed to bareboat charter-in, under a ten-year bareboat contract, from an unrelated third party, one newbuilding Capesize vessel, of 180,310approximately 180,000 dwt. Navios Partners has the option to acquire the vessel after the end of year four for the remaining period of the bareboat charter. Navios Partners agreed to pay in total $12.0 million, representing a deposit for the option to acquire the vessel after the end of the fourth year of which $6.0 million was paid in September 2021 and the remaining amount of $6.0 million will be paid upon the delivery of the vessel. The vessel is expected to be delivered by the second half of 2022. In September 2021, Navios Partners declared its option to purchase the vessel.
Pursuant to a novation agreement dated December 20, 2021, the Company agreed to novate the shipbuilding contract and to simultaneously enter into a bareboat charter agreement to bareboat charter-in a newbuilding Panamax vessel, under a ten-year bareboat contract, from an unrelated third party. The vessel has approximately 81,000 dwt and is expected to be delivered in Navios Partners’ fleet during the second half of 2022. Navios Partners agreed to pay in total $6.3 million, of which $3.2 million was paid in April 2021 and the remaining amount will be paid during the first quarter of 2022. In December 2021, Navios Partners declared its option to purchase the vessel.
On March 25, 2021, Navios Partners agreed to bareboat charter-in, under a 15-year bareboat contract, from an unrelated third party, one newbuilding Capesize vessel, of approximately 180,000 dwt. Navios Partners has the option to acquire the vessel after the end of year four for the remaining period of the bareboat charter. Navios Partners agreed to pay in total $3.5 million, representing a deposit for the option to acquire the vessel after the end of the fourth year of which $1.8 million was paid in August 2021 and the remaining amount will be paid upon the delivery of the vessel. The vessel is expected to be delivered by the first half of 2023.
On January 25, 2021, Navios Partners agreed to bareboat charter-in, under a 15-year bareboat contract each, from an unrelated third party, three newbuilding Capesize vessels of approximately 180,000 dwt each. Navios Partners has the options to acquire the vessels after the end of year four for the remaining period of the bareboat charters. Navios Partners agreed to pay in total $10.5 million, representing a deposit for the options to acquire the vessels after the end of the fourth year, of which $5.3 million was paid in August 2021 and the remaining amount will be paid upon the delivery of the vessels. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2022 and the first half of 2023.
On July 9, 2021, Navios Partners acquired the Navios Azimuth, a 2011-built Capesize vessel of 179,169 dwt, from its affiliate, Navios Holdings, for an acquisition cost of $15.3$30.0 million.
On April 22, 2015,June 30, 2021, Navios Partners acquired from an unrelated third party the MSC Cristina,Navios Ray, a 2011 South Korean-built container2012-built Capesize vessel of 13,100 TEU,179,515 dwt and the Navios Bonavis, a 2009-built Capesize vessel of 180,022 dwt, from its affiliate, Navios Holdings, for an aggregate purchase price of $58.0 million.
On June 4, 2021, Navios Partners acquired the Navios Koyo, a 2011-built Capesize vessel of 181,415 dwt, from its affiliate, Navios Holdings, for an acquisition cost of $147.8$28.6 million of which $14.8(including $0.1 million relates to vessel deposits paid and transferred during the year.capitalized expenses).
On October 28, 2014,March 30, 2021, Navios Partners acquired from an unrelated third party the YM Unity,Navios Avior, a 2006-built container2012 built Panamax vessel of 8,204 TEU,81,355 dwt, and the Navios Centaurus, a 2012 built Panamax vessel of 81,472 dwt, from its affiliate, Navios Holdings, for an acquisition cost of $59.1 million.$39.3 million (including $0.1 million capitalized expenses).
On August 29, 2014,May 10, 2021, Navios Partners acquired the Ete N, a 2012-built Containership of 2,782 TEU, the Fleur N, a 2012-built Containership of 2,782 TEU and the Spectrum N, a 2009-built Containership of 2,546 TEU from Navios Acquisition, for an unrelated third partyaggregate purchase price of $55.5 million.
Upon acquisition of the YMmajority of outstanding stock of Navios Acquisition and the completion of the NMCI Merger, the fleets of Navios Acquisition and Navios Containers were included in Navios Partners’ owned fleet.
Sales of Vessels
In February 2022, Navios Partners agreed to sell the Navios Utmost aand the Navios Unite, two 2006-built container vesselContainerships of 8,204 TEU for an acquisition cost of $59.1 million.
On January 18, 2014, Navios Partners acquired from an unrelated third party the Navios Sun, a 2005-built Panamax vessel of 76,619 dwt, for an acquisition cost of $16.2 million.
On January 7, 2014, Navios Partners acquired from an unrelated third party the Navios La Paix, a 2014-built Ultra-Handymax vessel of 61,485 dwt, for an acquisition cost of $28.5 million.
• Other
Navios Holdings has agreedeach, to sell to Navios Partners certain loans previously funded by Navios Holdings to Navios Europe Inc. for $27.0 million, subject to signing of definitive documentation. The consideration paid by Navios Partners to Navios Holdings will be: (i) $4.05 million in cash; and (ii) the issuance to Navios Holdings of approximately 13.1 million common units of Navios Partners. Navios Partners may require Navios Holdings, under certain conditions, to repurchase the loans after the third anniversary of the date of the sale based on the then outstanding balance of the loans.
Disposal of vessels
On January 9, 2017, Navios Partners entered into a Memorandum of Agreement with an unrelated third party for an aggregate sales price of $220.0 million. The sale is expected to be completed during the disposalsecond half of 2022 and the gain on sale of vessels is expected to be approximately $144.3 million.
On October 29, 2021, Navios Partners sold the Navios Apollon forAltair I, a net sale price2006-built Panamax vessel of $4.8 million. Delivery is expected by April 2017.
On January 12, 2017, Navios Partners completed the sale of the MSC Cristina. The vessel was sold74,475 dwt, to an unrelated third party for a net salesales price of $125.0$13.5 million.
On August 16, 2021, Navios Partners sold the Harmony N, a 2006-built Containership of 2,824 TEU, to an unrelated third party for a net sales price of $28.4 million.
On August 13, 2021, Navios Partners sold the Navios Azalea, a 2005-built Panamax vessel of 74,759 dwt, to an unrelated third party for a net sales price of $12.6 million.
On July 31, 2021, Navios Partners sold the Navios Dedication, a 2008-built Containership of 4,250 TEU, to an unrelated third party for a net sales price of $33.9 million.
On March 25, 2021, the Company sold the Joie N, a 2011-built Ultra-Handymax vessel of 56,557 dwt, to an unrelated third party, for a net sales price of $8.2 million.
On February 10, 2021, the Company sold the Castor N, a 2007-built Containership of 3,091 TEU to an unrelated third party for a net sales price of $8.9 million.
On January 28, 2021, the Company sold the Solar N, a 2006-built Containership of 3,398 TEU to an unrelated third party for a net sales price of $11.1 million.
On January 13, 2021, the Company sold the Esperanza N, a 2008-built Containership of 2,007 TEU to an unrelated third party for a net sales price of $4.6 million.
B. Business Overview
Introduction
We are an international owner and operator of drybulkdry cargo and containertanker vessels formed by Navios Holdings (NYSE: NM), a vertically integrated seaborne shipping company with over 60 years of operating history in the dry cargo shipping industry.. Our vessels are generallychartered-out under short-term, medium toand long-term time charters with an average remaining termcharter duration of approximately three1.8 years to a strong group of counterparties, including Yang Ming Marine Transport Corporation, Cargill International S.A., Exelon Corporation (formerly Constellation Energy Group)Singapore Marine Pte Ltd., Rio TintoHapag Lloyd, Zim, HMM, Cosco, Maersk, Chevron, Vitol, Aramco and Hyundai Merchant Marine Co., Ltd.Shell.
Our Fleet
Navios Partners controls 12Partners’ fleet consists of 26 Panamax vessels, nine24 Capesize vessels, threefour Ultra-Handymax vessels, 47 Containerships and seven container vessels. Our fleet45 Tankers, including three newbuilding Capesize bareboat charter-in vessels expected to be delivered by the second half of high quality dry cargo2022, two newbuilding Capesize bareboat charter-in vessels has an average ageexpected to be delivered by the first half of 10.0 years for drybulk and container vessels, which approximates the current industry average of about 8.8 years for drybulk vessels and 11.6 years for container vessels, respectively (both industry average as of December 31, 2016).2023, two newbuilding Panamax vessels are highly flexible vessels capableexpected to be delivered by the second half of carrying a wide range2022 and first half of dry cargo commodities, including iron ore, coal, grain2023, one newbuilding VLCC bareboat charter-in vessel expected to be delivered by the second half of 2022, ten newbuilding Containerships expected to be delivered by the second half of 2023 and fertilizerin 2024 and being accommodatedtwo Containerships agreed to be sold and expected to be delivered in most major discharge ports, while Capesize vessels are primarily dedicated to the carriagesecond half of iron ore and coal. Ultra-Handymax vessels are similar to Panamax vessels although with less carrying capacity and generally have self-loading and discharging gear on board to accommodate undeveloped ports. Container vessels are specifically constructed to transport containerized cargo. We may from time to time purchase additional vessels, including vessels from Navios Holdings.2022.
We generate revenues by charging our customers for the use of our vessels to transport their dry cargo commodities.commodities, containers, crude oil, refined petroleum products and/or bulk liquid chemicals. In general, the vessels in our fleet arechartered-out under time charters, which range in length from one to tentwelve years at inception. From time to time, we operate vessels in the spot market until the vessels have been chartered out under short-term, medium and long-term charters.
The following table provides summary information about our fleet as of March 10, 2017:Apri 1, 2022:
Owned Drybulk Vessels | Type | Built | Capacity | Charter-Out | Index(2) | Expiration Date(3) | |||
Navios La Paix | Ultra-Handymax | 2014 | 61,485 | — | 111% average BSI 58 10TC | April 2023 | |||
Navios Christine B | Ultra-Handymax | 2009 | 58,058 | $32,725 | No | June 2022 | |||
Navios Amaryllis | Ultra-Handymax | 2008 | 58,735 | — | — | Spot | |||
Serenitas N | Ultra-Handymax | 2011 | 56,644 | — | 99.0% average BSI 58 10TC | July 2023 | |||
Navios Hyperion | Panamax | 2004 | 75,707 | $23,275 | No | May 2022 | |||
Navios Alegria | Panamax | 2004 | 76,466 | — | 99.5% average BPI 4TC | May 2022 | |||
Navios Orbiter | Panamax | 2004 | 76,602 | $17,813 | No | May 2022 | |||
Navios Helios | Panamax | 2005 | 77,075 | — | 100.0% average BPI 4TC | October 2022 | |||
Navios Sun | Panamax | 2005 | 76,619 | — | 100.0% average BPI 4TC | January 2023 | |||
Navios Hope | Panamax | 2005 | 75,397 | — | 100% average BPI 4TC | March 2023 | |||
Navios Sagittarius(5) | Panamax | 2006 | 75,756 | $28,500 | No | August 2022 | |||
Navios Harmony | Panamax | 2006 | 82,790 | $28,500 | No | July 2022 | |||
Navios Prosperity I | Panamax | 2007 | 75,527 | $33,250 | No | April 2022 | |||
Navios Libertas | Panamax | 2007 | 75,511 | $16,625 | No | April 2022 | |||
Navios Symmetry | Panamax | 2006 | 74,381 | $11,804 | No | April 2022 | |||
Navios Apollon I | Panamax | 2005 | 87,052 | — | 105.0% average BPI 4TC | November 2022 | |||
Navios Sphera | Panamax | 2016 | 84,872 | — | 108.0% average BPI 82 | February 2023 | |||
Navios Camelia | Panamax | 2009 | 75,162 | $20,900 | No | May 2022 | |||
Navios Anthos | Panamax | 2004 | 75,798 | $19,855 | No | April 2022 | |||
Copernicus N | Panamax | 2010 | 93,062 | — | 108.0% average BPI 4TC | August 2022 | |||
Unity N | Panamax | 2011 | 79,642 | — | 100.0% average BPI 4TC | May 2022 | |||
Odysseus N | Panamax | 2011 | 79,642 | $28,500 | No | May 2022 | |||
Navios Victory | Panamax | 2014 | 77,095 | — | 112.0% average BPI 4TC | April 2022 | |||
$12,513 | No | June 2022 | |||||||
Navios Avior | Panamax | 2012 | 81,335 | $19,475 | No | April 2022 | |||
Navios Centaurus | Panamax | 2012 | 81,472 | $32,300 | No | April 2022 | |||
Navios Beaufiks(6) | Capesize | 2004 | 180,310 | $22,563 | No | September 2023 | |||
Navios Symphony | Capesize | 2010 | 178,132 | — | 97.0% average BCI 5TC | December 2022 | |||
Navios Fantastiks(7) | Capesize | 2005 | 180,265 | $21,650 | No | March 2023 | |||
Navios Aurora II | Capesize | 2009 | 169,031 | — | 95.25% average BCI 5TC | May 2022 | |||
Navios Pollux(7) | Capesize | 2009 | 180,727 | — | 100.0% of pool earnings | June 2022 | |||
Navios Sol(8) | Capesize | 2009 | 180,274 | $33,400 | No | September 2022 | |||
— | 110.0% average BCI 5TC | March 2023 | |||||||
Navios Fulvia | Capesize | 2010 | 179,263 | — | 100.0% average BCI 5TC | January 2023 | |||
Navios Buena Ventura | Capesize | 2010 | 179,259 | — | 100.5% average BCI 5TC | March 2023 | |||
Navios Melodia | Capesize | 2010 | 179,132 | $29,356 | Profit sharing 50.0% above $37,500/day based on Baltic Exchange Capesize TC Average | April 2022 | |||
Navios Luz | Capesize | 2010 | 179,144 | — | 102.0% average BCI 5TC | May 2023 | |||
Navios Ace(9) | Capesize | 2011 | 179,016 | — | 107.25% average BCI 5TC | February 2023 | |||
Navios Aster | Capesize | 2010 | 179,314 | $27,731 | No | February 2023 | |||
Navios Joy | Capesize | 2013 | 181,389 | Freight Voyage | No | August 2022 | |||
Navios Gem | Capesize | 2014 | 181,336 | $17,623 | No | April 2022 | |||
$28,500 | No | January 2023 | |||||||
Navios Mars | Capesize | 2016 | 181,259 | — | 126.0% average BCI 5TC | October 2023 | |||
Navios Koyo | Capesize | 2011 | 181,415 | — | 111.0% average BCI 5TC | March 2023 | |||
Navios Ray(10) | Capesize | 2012 | 179,515 | — | 102.0% average BCI 5TC | January 2023 | |||
Navios Bonavis(7) | Capesize | 2009 | 180,022 | — | 101.5% average BCI 5TC | March 2023 | |||
Navios Azimuth | Capesize | 2011 | 179,169 | — | 100.0% average BCI 5TC | January 2023 |
Owned Drybulk Vessels | Type | Built | Capacity (DWT) | Charter Expiration Date(2) | Charter-Out Rate(1) | |||||||||||||
Navios Apollon | Ultra-Handymax | 2000 | 52,073 | April 2017 | $ | 11,210 | ||||||||||||
Navios Soleil | Ultra-Handymax | 2009 | 57,337 | June 2017 | $ | 7,553 | ||||||||||||
Navios La Paix | Ultra-Handymax | 2014 | 61,485 | May 2017 | $ | 125% of pool earnings | ||||||||||||
Navios Gemini S | Panamax | 1994 | 68,636 | March 2017 | $ | 3,088 | ||||||||||||
Navios Libra II | Panamax | 1995 | 70,136 | March 2017 | $ | 10,395 | ||||||||||||
Navios Felicity | Panamax | 1997 | 73,867 | April 2017 | $ | 4,750 | ||||||||||||
Navios Galaxy I | Panamax | 2001 | 74,195 | February 2018 | $ | 21,938 | ||||||||||||
Navios Hyperion | Panamax | 2004 | 75,707 | May 2017 | $ | 7,600 | ||||||||||||
Navios Alegria | Panamax | 2004 | 76,466 | April 2017 | $ | 6,413 | ||||||||||||
Navios Orbiter | Panamax | 2004 | 76,602 | March 2017 | $ | 5,402 | ||||||||||||
June 2017 | $ | 7,327 | ||||||||||||||||
December 2018 | $ | Index | (3) | |||||||||||||||
Navios Helios | Panamax | 2005 | 77,075 | December 2017 | $ | 6,935 | ||||||||||||
Navios Sun | Panamax | 2005 | 76,619 | June 2017 | $ | 4,054 | ||||||||||||
January 2019 | $ | Index | (3) | |||||||||||||||
Navios Hope | Panamax | 2005 | 75,397 | June 2017 | $ | 4,054 | ||||||||||||
November 2018 | $ | Index | (3) | |||||||||||||||
Navios Sagittarius | Panamax | 2006 | 75,756 | November 2018 | $ | 26,125 | ||||||||||||
Navios Harmony | Panamax | 2006 | 82,790 | October 2017 | $ | 10,688 | ||||||||||||
Navios Fantastiks | Capesize | 2005 | 180,265 | January 2018 | $ | 4,675+Index | (4) | |||||||||||
Navios Aurora II | Capesize | 2009 | 169,031 | August 2017 | $ | Index | (5) | |||||||||||
Navios Pollux | Capesize | 2009 | 180,727 | May 2017 | $ | 100% of pool earnings | ||||||||||||
Navios Fulvia | Capesize | 2010 | 179,263 | April 2017 | $ | 12,980 | ||||||||||||
Navios Melodia | Capesize | 2010 | 179,132 | September 2022 | $ | 29,356 | (6) | |||||||||||
Navios Luz | Capesize | 2010 | 179,144 | January 2018 | $ | 5,250+Index | (7) | |||||||||||
Navios Buena Ventura | Capesize | 2010 | 179,259 | December 2017 | $ | Index | (8) | |||||||||||
Navios Joy | Capesize | 2013 | 181,389 | March 2018 | $ | 5,000+Index | (7) | |||||||||||
Navios Beaufiks | Capesize | 2004 | 180,310 | September 2017 | $ | Index | (5) | |||||||||||
Owned Container Vessels | Type | Built | TEU | Charter Expiration Date(2) | Charter-Out Rate(1) | |||||||||||||
Hyundai Hongkong | Container | 2006 | 6,800 | December 2019 | $ | 24,095 | ||||||||||||
December 2023 | $ | 30,119 | (9) | |||||||||||||||
Hyundai Singapore | Container | 2006 | 6,800 | December 2019 | $ | 24,095 | ||||||||||||
December 2023 | $ | 30,119 | (9) | |||||||||||||||
Hyundai Tokyo | Container | 2006 | 6,800 | December 2019 | $ | 24,095 | ||||||||||||
December 2023 | $ | 30,119 | (9) | |||||||||||||||
Hyundai Shanghai | Container | 2006 | 6,800 | December 2019 | $ | 24,095 | ||||||||||||
December 2023 | $ | 30,119 | (9) | |||||||||||||||
Hyundai Busan | Container | 2006 | 6,800 | December 2019 | $ | 24,095 | ||||||||||||
December 2023 | $ | 30,119 | (9) | |||||||||||||||
YM Utmost | Container | 2006 | 8,204 | August 2018 | $ | 34,266 | ||||||||||||
YM Unity | Container | 2006 | 8,204 | October 2018 | $ | 34,266 |
Owned Containerships | Type | Built | Capacity | Charter-Out | Index(2) | Expiration Date(3) |
Spectrum N | Containership | 2009 | 2,546 | $15,800 | No | May 2022 |
$36,538 | No | March 2025 | ||||
Protostar N | Containership | 2007 | 2,741 | $17,775 | No | July 2022 |
$46,556 | No | October 2025 | ||||
Fleur N | Containership | 2012 | 2,782 | $19,750 | No | March 2024 |
Ete N | Containership | 2012 | 2,782 | $19,750 | No | February 2024 |
Navios Summer(11) | Containership | 2006 | 3,450 | $16,960 | No | May 2022 |
$45,480 | No | May 2023 | ||||
$39,795 | No | May 2024 | ||||
$30,320 | No | May 2025 | ||||
$20,845 | No | May 2026 | ||||
$34,110 | No | September 2026 | ||||
Matson Oahu(11) | Containership | 2006 | 3,450 | $22,713 | No | May 2023 |
Navios Spring(11) | Containership | 2007 | 3,450 | $10,326 | No | April 2022 |
$58,500 | No | May 2025 | ||||
Navios Vermilion(11) | Containership | 2007 | 4,250 | $54,313 | No | December 2022 |
$45,425 | No | December 2023 | ||||
$23,972 | No | November 2024 | ||||
$41,722 | No | December 2024 | ||||
Navios Indigo(11) | Containership | 2007 | 4,250 | $22,713 | No | April 2022 |
$63,375 | No | April 2023 | ||||
$43,875 | No | April 2024 | ||||
$34,125 | No | April 2025 | ||||
$24,375 | No | April 2026 | ||||
$41,438 | No | August 2026 | ||||
Matson Lanai (ex Navios Amaranth)(11) | Containership | 2007 | 4,250 | $55,794 | No | July 2025 |
Navios Amarillo(11) | Containership | 2007 | 4,250 | $20,845 | No | January 2023 |
$92,381 | No | January 2024 | ||||
$63,956 | No | January 2025 | ||||
$28,425 | No | January 2026 | ||||
$9,475 | No | January 2028 | ||||
Navios Verde(11) | Containership | 2007 | 4,250 | $20,845 | No | June 2023 |
Navios Azure(11) | Containership | 2007 | 4,250 | $22,678 | No | October 2022 |
Owned Containerships | Type | Built | Capacity | Charter-Out | Index(2) | Expiration Date(3) |
Navios Domino(11) | Containership | 2008 | 4,250 | $24,934 | No | June 2023 |
Navios Delight(11) | Containership | 2008 | 4,250 | $45,425 | No | January 2024 |
Navios Destiny(11) | Containership | 2009 | 4,250 | $54,313 | No | November 2022 |
$45,425 | No | November 2023 | ||||
$23,972 | No | October 2024 | ||||
$41,722 | No | November 2024 | ||||
Navios Devotion(11) | Containership | 2009 | 4,250 | $63,375 | No | March 2023 |
$43,875 | No | March 2024 | ||||
$34,125 | No | March 2025 | ||||
$24,375 | No | March 2026 | ||||
$41,438 | No | July 2026 | ||||
Navios Lapis | Containership | 2009 | 4,250 | $31,353 | No | May 2023 |
Navios Tempo | Containership | 2009 | 4,250 | $44,438 | No | September 2025 |
Navios Dorado | Containership | 2010 | 4,250 | $21,676 | No | June 2023 |
Navios Felicitas | Containership | 2010 | 4,360 | $63,375 | No | January 2023 |
$43,875 | No | January 2024 | ||||
$34,125 | No | January 2025 | ||||
$24,375 | No | January 2026 | ||||
$41,438 | No | May 2026 | ||||
Bahamas | Containership | 2010 | 4,360 | $22,219 | No | December 2022 |
$60,000 | No | May 2025 | ||||
Bermuda | Containership | 2010 | 4,360 | $61,114 | No | March 2023 |
$42,164 | No | March 2024 | ||||
$32,689 | No | March 2025 | ||||
$23,214 | No | March 2026 | ||||
$39,795 | No | July 2026 | ||||
Navios Miami | Containership | 2009 | 4,563 | $54,313 | No | November 2022 |
$45,425 | No | November 2023 | ||||
$23,972 | No | October 2024 | ||||
$41,722 | No | November 2024 | ||||
Navios Magnolia | Containership | 2008 | 4,730 | $54,313 | No | November 2022 |
$45,425 | No | November 2023 | ||||
$23,972 | No | October 2024 | ||||
$41,722 | No | November 2024 | ||||
Navios Jasmine | Containership | 2008 | 4,730 | $21,825 | No | December 2022 |
$60,000 | No | April 2025 | ||||
Navios Chrysalis | Containership | 2008 | 4,730 | $30,083 | No | July 2023 |
Navios Nerine | Containership | 2008 | 4,730 | $54,313 | No | October 2022 |
$45,425 | No | October 2023 | ||||
$23,972 | No | September 2024 | ||||
$41,722 | No | October 2024 | ||||
Hyundai Hongkong(4) | Containership | 2006 | 6,800 | $30,119 | No | December 2023 |
$21,083 | No | December 2028 | ||||
Hyundai Singapore(4) | Containership | 2006 | 6,800 | $30,119 | No | December 2023 |
$21,083 | No | December 2028 | ||||
Hyundai Tokyo(4) | Containership | 2006 | 6,800 | $30,119 | No | December 2023 |
$21,083 | No | December 2028 | ||||
Hyundai Shanghai(4) | Containership | 2006 | 6,800 | $30,119 | No | December 2023 |
$21,083 | No | December 2028 | ||||
Hyundai Busan(4) | Containership | 2006 | 6,800 | $30,119 | No | December 2023 |
$21,083 | No | December 2028 | ||||
Navios Utmost(12)(35) | Containership | 2006 | 8,204 | $21,656 | No | September 2022 |
Navios Unite(12)(35) | Containership | 2006 | 8,204 | $27,840 | No | September 2022 |
Navios Unison(13) | Containership | 2010 | 10,000 | $26,276 | No | June 2026 |
Navios Constellation(13) | Containership | 2011 | 10,000 | $26,276 | No | June 2026 |
Owned Tanker Vessels | Type | Built | Capacity | Charter-Out | Profit Sharing Arrangements | Expiration Date(3) |
Nave Cosmos(14) | Chemical Tanker | 2010 | 25,130 | Floating Rate | No | June 2022 |
Nave Polaris(14) | Chemical Tanker | 2011 | 25,145 | Floating Rate | No | June 2022 |
Perseus N(15)(37) | MR1 Product Tanker | 2009 | 36,264 | $11,356 | No | May 2022 |
Star N | MR1 Product Tanker | 2009 | 37,836 | $11,603 | No | June 2022 |
Hector N | MR1 Product Tanker | 2008 | 38,402 | $12,591 | No | June 2022 |
Nave Dorado(17) | MR2 Product Tanker | 2005 | 47,999 | $6,419 | Yes | July 2022 |
Nave Aquila | MR2 Product Tanker | 2012 | 49,991 | $12,838 | No | April 2022 |
$15,208 | No | September 2022 | ||||
Nave Atria(18) | MR2 Product Tanker | 2012 | 49,992 | $13,948 | No | May 2023 |
Nave Capella(20)(13) | MR2 Product Tanker | 2013 | 49,995 | $12,898 | No | July 2022 |
Nave Alderamin(20)(13) | MR2 Product Tanker | 2013 | 49,998 | $12,898 | No | May 2022 |
Nave Pyxis(19)(36) | MR2 Product Tanker | 2014 | 49,998 | $14,293 | No | July 2022 |
Nave Bellatrix | MR2 Product Tanker | 2013 | 49,999 | $10,665 | No | April 2022 |
$13,084 | No | June 2022 | ||||
Nave Orion | MR2 Product Tanker | 2013 | 49,999 | $12,898 | No | June 2022 |
Nave Titan(16)(13) | MR2 Product Tanker | 2013 | 49,999 | $12,657 | No | August 2022 |
Nave Luminosity | MR2 Product Tanker | 2014 | 49,999 | $14,813 | No | November 2022 |
Nave Jupiter(22) | MR2 Product Tanker | 2014 | 49,999 | $15,504 | No | August 2022 |
Nave Velocity(23)(13) | MR2 Product Tanker | 2015 | 49,999 | $15,553 | No | October 2024 |
Nave Sextans(13) | MR2 Product Tanker | 2015 | 49,999 | $13,764 | No | May 2022 |
Nave Orbit(24)(37) | MR2 Product Tanker | 2009 | 50,470 | $14,418 | No | March 2023 |
Nave Equator(6) | MR2 Product Tanker | 2009 | 50,542 | $14,500 | No | May 2022 |
$13,500 | No | October 2022 | ||||
Bougainville(36) | MR2 Product Tanker | 2013 | 50,626 | $13,578 | No | August 2022 |
Nave Equinox(25)(37) | MR2 Product Tanker | 2007 | 50,922 | $12,591 | No | September 2022 |
Nave Pulsar(6) | MR2 Product Tanker | 2007 | 50,922 | $10,683 | No | April 2022 |
Aurora N(27) | LR1 Product Tanker | 2008 | 63,495 | Floating Rate | No | June 2022 |
Lumen N(27) | LR1 Product Tanker | 2008 | 63,599 | Floating Rate | No | June 2022 |
Nave Cetus(28)(13) | LR1 Product Tanker | 2012 | 74,581 | $14,138 | No | December 2022 |
Nave Ariadne(5)(27) | LR1 Product Tanker | 2007 | 74,671 | Floating Rate | No | June 2022 |
Nave Cielo(5) | LR1 Product Tanker | 2007 | 74,671 | $12,994 | No | May 2022 |
Nave Rigel(28) | LR1 Product Tanker | 2013 | 74,673 | $14,138 | No | December 2022 |
Nave Atropos(36) | LR1 Product Tanker | 2013 | 74,695 | $14,813 | No | September 2022 |
Nave Cassiopeia(13)(29) | LR1 Product Tanker | 2012 | 74,711 | Floating Rate | No | May 2022 |
Nave Andromeda(13)(29) | LR1 Product Tanker | 2011 | 75,000 | Floating Rate | No | May 2022 |
Nave Estella(13)(30) | LR1 Product Tanker | 2012 | 75,000 | $13,716 | No | June 2022 |
Nave Constellation(34) | VLCC | 2010 | 296,988 | Floating Rate | Yes | December 2022 |
Nave Universe(31) | VLCC | 2011 | 297,066 | $17,775 | Yes | April 2022 |
Nave Galactic(31) | VLCC | 2009 | 297,168 | $17,775 | Yes | June 2022 |
Nave Spherical(32) | VLCC | 2009 | 297,188 | Floating Rate | No | January 2023 |
Nave Quasar(33) | VLCC | 2010 | 297,376 | $16,788 | Yes | February 2023 |
Nave Photon(34) | VLCC | 2008 | 297,395 | Floating Rate | Yes | December 2022 |
Nave Buena Suerte(21) | VLCC | 2011 | 297,491 | $47,906 | Yes | June 2025 |
Nave Synergy | VLCC | 2010 | 299,973 | $32,588 | No | April 2022 |
Bareboat Chartered-in | Type | Built | Capacity | Charter-Out | Index(2) | Expiration Date(3) |
Navios Libra | Panamax | 2019 | 82,011 | $29,099 | — | June 2022 |
— | 109.75% average BPI 82 | June 2024 | ||||
Navios Amitie | Panamax | 2021 | 82,002 | $33,177 | — | June 2022 |
— | 110.0% average BPI 82 | January 2024 | ||||
Navios Star | Panamax | 2021 | 81,994 | — | 110.0% average BPI 82 | February 2024 |
Nave Electron(21) | VLCC | 2021 | 313,239 | $47,906 | Yes | July 2026 |
Baghdad(26) | VLCC | 2020 | 313,433 | $27,816 | No | September 2030 |
Erbil(26) | VLCC | 2021 | 313,486 | $27,816 | No | February 2031 |
Bareboat Chartered-in vessels to be delivered | Type | Delivery Date | Capacity | Charter-Out | Index(2) | Expiration Date(3) |
TBN I | Capesize | H2 2022 | 180,000 | — | — | — |
TBN II | Capesize | H2 2022 | 180,000 | — | — | — |
TBN III | Capesize | H2 2022 | 180,000 | — | — | — |
TBN VII | Capesize | H1 2023 | 180,000 | — | — | — |
TBN V | Capesize | H1 2023 | 180,000 | — | — | — |
TBN XIV(38) | VLCC | H2 2022 | 310,000 | Floating Rate | Yes | May 2024 |
Drybulk Vessels - Panamax to be Delivered | Type | Delivery Date | Capacity | Charter-Out | Index(2) | Expiration Date(3) |
TBN IV | Panamax | H2 2022 | 81,000 | — | — | — |
TBN VI | Panamax | H1 2023 | 81,000 | — | — | — |
Owned Containerships to be Delivered | Type | Delivery Date | Capacity | Charter-Out | Index(2) | Expiration Date(3) |
TBN VIII | Containership | H2 2023 | 5,300 | $42,900 | No | September 2024 |
$39,000 | No | September 2025 | ||||
$37,050 | No | September 2026 | ||||
$35,100 | No | September 2027 | ||||
$31,200 | No | September 2028 | ||||
$37,050 | No | November 2028 | ||||
TBN IX | Containership | H2 2023 | 5,300 | $42,900 | No | December 2024 |
$39,000 | No | December 2025 | ||||
$37,050 | No | December 2026 | ||||
$35,100 | No | December 2027 | ||||
$31,200 | No | December 2028 | ||||
$37,050 | No | February 2029 | ||||
TBN X | Containership | H1 2024 | 5,300 | $42,900 | No | June 2025 |
$39,000 | No | June 2026 | ||||
$37,050 | No | June 2027 | ||||
$35,100 | No | June 2028 | ||||
$31,200 | No | June 2029 | ||||
$37,050 | No | August 2029 | ||||
TBN XI | Containership | H1 2024 | 5,300 | $42,900 | No | June 2025 |
$39,000 | No | June 2026 | ||||
$37,050 | No | June 2027 | ||||
$35,100 | No | June 2028 | ||||
$31,200 | No | June 2029 | ||||
$37,050 | No | August 2029 | ||||
TBN XII | Containership | H2 2024 | 5,300 | $42,900 | No | September 2025 |
$39,000 | No | September 2026 | ||||
$37,050 | No | September 2027 | ||||
$35,100 | No | September 2028 | ||||
$31,200 | No | September 2029 | ||||
$37,050 | No | November 2029 |
Owned Containerships to be Delivered | Type | Delivery Date | Capacity | Charter-Out | Index(2) | Expiration Date(3) |
TBN XIII | Containership | H2 2024 | 5,300 | $42,900 | No | November 2025 |
$39,000 | No | November 2026 | ||||
$37,050 | No | November 2027 | ||||
$35,100 | No | November 2028 | ||||
$31,200 | No | November 2029 | ||||
$37,050 | No | January 2030 | ||||
TBN XV | Containership | H1 2024 | 5,300 | $42,900 | No | January 2025 |
$39,000 | No | January 2026 | ||||
$37,050 | No | January 2027 | ||||
$35,100 | No | January 2028 | ||||
$31,200 | No | January 2029 | ||||
$37,050 | No | March 2029 | ||||
TBN XVI | Containership | H1 2024 | 5,300 | $42,900 | No | May 2025 |
$39,000 | No | May 2026 | ||||
$37,050 | No | May 2027 | ||||
$35,100 | No | May 2028 | ||||
$31,200 | No | May 2029 | ||||
$37,050 | No | July 2029 | ||||
TBN XVII | Containership | H2 2024 | 5,300 | $37,500 | No | April 2030 |
TBN XVIII | Containership | H2 2024 | 5,300 | $37,500 | No | April 2030 |
(1) | Dailycharter-out rate per day, net of |
Estimated dates assuming the midpoint or company’s best estimate of the redelivery period by charterers. |
Includes five optional years (owners’ option) starting 2023. |
The vessel is subject to a sale and leaseback transaction for a period of up to three years, at which time we have an obligation to purchase the vessel. |
The vessel is subject to a sale and leaseback transaction for a period of up to five years, at which time we have an obligation to purchase the vessel. |
The vessel is subject to a sale and leaseback transaction for a period of up to six years, at which time we have an obligation to purchase the vessel. |
The vessel is subject to a sale and leaseback transaction for a period of up to ten years, at which time we have an obligation to purchase the |
(9) | The vessel is subject to a sale and leaseback transaction for a period of up to 11 years, at which time we have an obligation to purchase the vessel. |
(10) | The vessel is subject to a sale and leaseback transaction for a period of up to nine years, at which time we have an obligation to purchase the vessel. |
(11) | The vessel is subject to a sale and leaseback transaction for a period of up to five years, at which time we have an obligation to purchase the vessel. |
(12) | The vessel is subject to a sale and leaseback transaction for a period of up to five years, at which time we have an obligation to purchase the vessel. |
(13) | The vessel is subject to a sale and leaseback transaction for a period of up to seven years, at which time we have an obligation to purchase the vessel. |
(14) | Rate based on |
(15) | Charterer’s option to |
(16) | Charterer’s option to extend the charter for up to six months at $13,716 net per day. |
(17) | Profit sharing arrangement of 100% above $6,419 and 25% above $8,888. |
(18) | Charterer’s option to extend the charter for up to 18 months at $14,887 net per day. |
(19) | Charterer’s option to extend the charter for up to six months at $15,881 net per day. |
(20) | Charterer’s option to extend the charter for up to six months at $13,956 net per day. |
(21) | Profit sharing arrangement of 35% above $54,388, 40% above $59,388 and 50% above $69,388. |
(22) | Charterer’s option to extend the charter for an optional year |
(23) | Charterer’s option to extend the charter for one year at $16,540 net per day plus one year at $17,528 net per day. |
(24) | Charterer’s option to extend the charter for up to 18 months at $15,306 net per day. |
(25) | The premium for when the vessel is trading on ice or follow ice breaker is $1,481 per day. |
(26) | Charterer’s option to extend the bareboat charter for five years at $29,751 net per day. |
(27) | Rate based on Penfield pool earnings. |
(28) | Charterer’s option to extend the charter for three months at $16,088 net per day. |
(29) | Rate based on LR8 pool earnings. |
(30) | Charterer’s option to extend the charter for six months at $15,400 net per day. |
(31) | Contract provides adjusted BITR TD3C-TCE index with a floor of $17,775, 100% to Navios up to collar $38,759 and 50% thereafter. Charterer’s option to extend for six months at same terms. |
(32) | Contract provides 100% of BITR TD3C-TCE index plus $4,875 premium. Charterer’s option to extend for one year at TD3C-TCE index plus $1,463 premium. |
(33) | Contract provides 100% of BITR TD3C-TCE index up to $37,031 and 50% thereafter with $16,788 floor. |
(34) | Contract provides 100% of BITR TD3C-TCE index up to $17,775 and 50% thereafter with a floor at $2,963 and collar at $29,625 |
(35) | Vessel agreed to be sold. |
(36) | The vessel is subject to a sale and leaseback transaction for a period of up to eight years, at which time we have an obligation to purchase the vessel. |
(37) | The vessel is subject to a sale and leaseback transaction for a period of up to four years, at which time we have an obligation to purchase the vessel. |
(38) | Bareboat charter based on adjusted TD3C-WS with a floor of $22,572 and collar of $29,700. |
Our Competitive Strengths
We believe that our future prospects for success are enhanced by the following aspects of our business:
• Stable cash flows. Our acquisitions of Navios Containers and Navios Acquisition built us scale through a larger, diversified asset base that has an increased earnings capacity. The combinations also enhance our credit profile by increasing cash flow to support our growth and deleveraging initiatives. We opportunistically seek to fix our vessels longer term during market highs and for shorter periods during market low to avail of any market upturn. In addition, we believe that the potential opportunity to purchase additional vessels from Navios Holdings, other affiliates and through the secondary market provides us a pipeline for revenue growth. We believe that our Management Agreements, which have been extended until January 1, 2025, will continue to provide us with predictable expenses and our simplified capital and organizational structure post Mergers will reduce our administrative costs.
• Strength through Diversification. Our diversified platform provides stable entity-level returns for unitholders despite uneven sector performance
An optimized charter strategy that leads to consistent profitability - Our container fleet is enjoying historically high charter rates. Operating in this backdrop, we have opted to fix our container fleet on long-term charters with almost 100% of our available containership days fixed for 2022. This reduces market and residual risk for these vessels. We manage the credit risk of the long-term charters independently to ensure we are not simply trading one risk for another. In our dry bulk fleet, we benefit from a market where rates are recovering to their historical 20-year averages. We have fixed only 35.0% of our available drybulk fleet days for 2022 and have opted to keep 65.0% of our 2022 available days exposed to market rates to capture any available upside. Our chartering strategy also allows us to fix our drybulk fleet on long-term charters when rates do improve. Within tankers, current charter rates are significantly below their 20-year average levels. We have 54.9% of our 2022 available tanker days fixed, including favorable legacy charters.
Capturing cyclical opportunity that allows for optimal capital allocation - We allocate our capital efficiently. For example, we have made a $1.0 billion investment in 18 newbuilding vessels that will deliver to our fleet through 2024. Of these acquisitions, we used the strength of the container market to acquire ten newbuilding containerships. We hedged our financial investment by entering into long-term, creditworthy charters for these vessels. We also engaged in the routine and continuous management of our fleet age profile in the dry bulk and tanker space. During 2021, seven newbuilding drybulk vessels were acquired at prices below their long-term averages. In addition, in 2020 we exercised an option to acquire one newbuilding VLCC at a price below its long-term average. We also look to opportunistically sell vessels when we can avail of a good return to reallocate capital. For example, we recently capitalized on the strength in containership values by selling two 16-year-old vessels for $220 million.
Countering sectors specific volatility leads to balance sheet strength. Our diversified asset portfolio provides balance sheet stability from the vagaries of specific sectors. While containership values are at their historical highs, dry bulk and tanker vessel values are significantly below their all-time highs. This variation in asset values balances out through our diversified fleet, leaving us with a significant equity value.
• Strong relationship with our Managers. We believe our relationship with our Managers provides us with numerous benefits that are key to our long-term growth and success. Our Managers’ commercial expertise, reputation within the shipping industry and its network of strong relationships with many of the world’s dry cargo raw material producers, agricultural traders and exporters, industrial end-users, shipyards and shipping companies. We benefit from the Managers’ expertise in technical management, which offers efficient operations and maintenance for our vessels at fixed rates. The Managers’ expertise in fleet management is reflected in their history of low number of off-hire days and in their clean record of no material incidents resulting in pollution or loss of life.
• Operating visibility through contracted revenues. We believe our existing employment coverage provides us with predictable, contracted revenues and operating visibility. As of April 1, 2022, we had contracts covering 60.1% of available days in 2022.
• Diversified fleet. Our diversified fleet, which includes Capesize, Panamax, and Ultra Handymax drybulk ships, VLCC, product and chemical tankers and Feeder, baby Panamax to Neo Panamax containerships allows us to serve our customers’ transportation needs for dry and liquid commodities and finished goods. Capesize vessels transport mainly iron ore and coal, to industrial users principally in China. Panamax and Ultra Handymax vessels carry coal and grain and other bulk commodities worldwide. VLCC tankers transport crude oil and operate on primarily long–haul trades from the Arabian Gulf or the Atlantic basin to the Far East, North America and Europe. Product tankers transport a large number of different refined oil products, such as naphtha, gasoline, kerosene, jetfuel and gasoil, and principally operate on short– to medium–haul routes. Chemical tankers transport primarily organic and inorganic chemicals, vegetable oils and animal fats. Feeder containerships operate worldwide on short haul trips moving containers from smaller ports to transshipment hubs where the containers are placed on larger containerships for long haul trips from the Far East to Europe or North America. Baby panamaxes engage in intra ocean trade in the Far East and Indian Subcontinent as well as long haul trades to North America, South America and Africa. Neo Panamax containerships serve long haul routes from the Far East to North America and Europe. We believe that our fleet of vessels servicing the drybulk, tanker and container transportation sectors provides us with a more balanced exposure to the commodities we transport and a diversified platform for revenue generation.
• High-quality, flexible fleet. Following the Mergers, our fleet consists of 26 Panamax vessels, 24 Capesize vessels, four Ultra-Handymax vessels, 47 Containerships and 45 Tankers, including three newbuilding Capesize bareboat charter-in vessels expected to be delivered by the second half of 2022, two newbuilding Capesize bareboat charter-in vessels expected to be delivered by the first half of 2023, two newbuilding Panamax vessels expected to be delivered by the second half of 2022 and first half of 2023, one newbuilding VLCC bareboat charter-in vessel expected to be delivered by the second half of 2022, ten newbuilding Containerships expected to be delivered by the second half of 2023 and in 2024 and two Containerships agreed to be sold and expected to be delivered in the second half of 2022. Our fleet has an average age of 9.7 years as of April 1, 2022, basis fully delivered fleet, (average age of 9.9 years for drybulk fleet, 10.8 years for containerships fleet and 9.0 years for the tanker fleet), compared to a current industry average age of about 11.1 years for the drybulk fleet, 13.8 years for the containerships fleet and 11.8 years for the tanker fleet (all industry averages as of March 2022). Our large asset base provides us a significant buffer of collateral value.
Contents |
Business Strategies
Our primary business objective is to increase quarterly distributions per unit over time by executingstrategies are the following strategies:
following:
• | Strategically manage sector exposure. We operate a fleet of dry bulk, tanker and containership vessels, which we believe provides us with diverse opportunities with a range of producers and consumers. As we grow and renew our fleet, we expect to adjust our relative emphasis among the dry bulk, tanker and containership sectors according to our view of the relative opportunities present in each sector. We believe that having a mixed fleet provides the flexibility to adapt to changing market conditions and will allow us to capitalize on sector–specific opportunities through varying economic cycles. |
• | Pursue stable cash flows through long-term charters for our |
• |
• Continue to grow and diversify our fleet of owned and chartered-in vessels. We seek to make strategic acquisitions in drybulk, tanker and containerships sectors as well as other shipping-related sectors to expand our fleet in order to capitalize on the demand for container, drybulk and tanker vessels. We recently expanded our fleet by 45 vessels through the NNA Merger. We have the right to purchase certain additional drybulk vessels currently owned or chartered-in by Navios Holdings when those vessels are fixed under long-term charters for a period of three or more years. In addition, we may seek to expand and diversify our fleet through the open market purchase of owned and chartered-in drybulk, tanker or container vessels with or without charters.
• Capitalize on our relationship with Navios Holdings and the Managers and expand our charters with recognized charterers. We believe that we can use our relationship with Navios Holdings and the Managers and their established relationships in the marine transportation industry to obtain favorable long-term time charters and attract new customers. We will continue to increase the number of vessels we charter to our existing charterers, as well as enter into charter agreements with new customers, in order to develop a portfolio that is diverse from a customer, geographic and maturity perspective.
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• Provide superior customer service by maintaining high standards of performance, reliability and safety. Our customers seek transportation partners that have a reputation for high standards of performance, reliability and safety. We intend to use the Managers’ operational expertise and customer relationships to further expand a sustainable competitive advantage with consistent delivery of superior customer service.
• Benefit from our Managers’ risk management practices and corporate managerial Support. Risk management requires the balancing of a number of factors in a cyclical and potentially volatile environment. In part, this requires a view of the overall health of the market, as well as an understanding of capital costs and returns. The Managers actively engage in assessing financial and other risks associated with fluctuating market rates, fuel prices, credit risks, interest rates and foreign exchange rates. The Managers closely monitor credit exposure to charterers and other counterparties and have established policies designed to ensure that contracts are entered into with counterparties that have appropriate credit history. We believe that Navios Partners benefits from these established policies
• Sustain a competitive cost structure. Pursuant to our Management Agreements with the Managers, the Managers coordinate and oversee the commercial, technical and administrative management of our fleet. We believe that the Managers are able to do so at rates competitive with those that would be available to us through independent vessel management companies. For example, pursuant to our Management Agreements with the Managers, vessel operating expenses of our vessels are fixed through December 2025. We believe this provides us with cost visibility.
Our Customers
We provide or will provide seaborne shipping services under long-term time charters with customers that we believe are creditworthy. For the year ended December 31, 2016, Navios Partners’ customers representing 10% or more2021, Singapore Marine represented approximately 14.5% of total revenues were Hyundai Merchant Marine Co. Ltd., Yang Ming Marine Transport Corporation and Mediterranean Shipping Co. S.A. which accounted for 29.6%, 13.0% and 11.6%, respectively, ofour total revenues. For the year ended December 31, 2015, Navios Partners’ customers representing 10% or more of total revenues were Hyundai Merchant2020 HMM, Singapore Marine Co.and Cargill represented approximately 23.4%, Ltd., Navios Corporation and Yang Ming Marine Transport Corporation, which accounted for 24.0%, 17.4%19.5% and 11.4%, respectively, of our total revenues. For the year ended December 31, 2014, Navios Partners’ customers representing 10% or more of total revenues were Hyundai Merchant Marine Co.2019, HMM, Swissmarine and Cargill represented approximately 25.9%, Ltd12.3% and Navios Corporation, which accounted for 24.4% and 11.0%10.9%, respectively, of our total revenues. No other customers accounted for 10% or more of total revenues for any of the years presented.
Although we believe that if any one of our charters were terminated, we could recharter the related vessel at the prevailing market rate relatively quickly, the permanent loss of a significant customer or a substantial decline in the amount of services requested by a significant customer could harm our business, financial condition and results of operations if we were unable to recharter our vessel on a favorable basis due to then-current market conditions, or otherwise.
Competition
The drybulk shipping market is extensive, diversified, competitive and highly fragmented, divided among approximately 1,8762,299 independent drybulk carrier owners. The world’sworld's active drybulk fleet consists of
approximately 11,00012,766 vessels, aggregating approximately 800 million950million dwt as of January 31, 2017.March 1, 2022. As a general principle, the smaller the cargo carrying capacity of a drybulk carrier, the more fragmented is its market, both with regard to charterers and vessel owner/operators. Even among the larger drybulk owners and operators, whose vessels are mainly in the larger sizes, only fourten companies are known to have fleets of 100 vessels or more after the merger of the two largest Chinese shipping companies, China Ocean Shipping and China Shipping Group intomore: China COSCO Shipping. The other three are the largest Japanese shipping companies, Mitsui O.S.K. Lines, Kawasaki Kisen andShipping, Nippon Yusen Kaisha.Kaisha, Wisdom Marine, Starbulk Carriers, China Development Bank, Pacific Basin Shipping, China Merchants, Fredriksen Group, Oldendorff Carriers and K. Lines. There are about 4540 owners known to have fleets of between 3037 and 10097 vessels. However, vessel ownership is not the only determining factor of fleet control. Many owners of bulk carriers charter their vessels out for extended periods, not just to end users (owners of cargo), but also to other owner/operators and to tonnage pools. Such operators may, at any given time, control a fleet many times the size of their owned tonnage.
Navios Holdings is one such operator; others include Cargill, Pacific Basin Shipping, Bocimar, Zodiac Maritime, Louis Dreyfus/Cetragpa, Cobelfret, Torvald Klaveness, Swiss Marine and SwissSingapore Marine.
The container shipping market is extensive, diversified, competitive and fragmented, divided among approximately 624674 liner operators and independent owners. The world’sworld's active containership fleet consists of approximately 5,1005.606 vessels, aggregating approximately 19.924.8 million TEU as of January 31, 2017.March 1, 2022. As a general principle, the smaller the cargo carrying capacity of a containership, the more fragmented is its market, both with regard to charterers and vessel owner/operators. Even among the larger liner companies and containership owners and operators, whose vessels are mainly in the larger sizes, only eighteleven companies are known to control fleets of 10091 vessels or more: AP Moller, Mediterranean Shipping Co. (MSC), AP Moller, China COSCO Shipping, CMA CGM, Pacific InternationalAtlas Corp (former Seaspan), Evergreen, Wan Hai Lines, Evergreen, SeaspanHapag Lloyd, SITC, PIL and Peter Dohle.Imabari Shipbuilding. There are about 4039 owners known to control fleets of between 2431 and 7880 vessels. However, vessel ownership is not the only determining factor of fleet control. Liner companies, who control the movement of containers on land and at sea, own vessels directly and charter in vessels on short and long-term charters. Many owners/managers of containerships charter their vessels out for extended periods but do not control the movement of any containers, the so called tonnage providers. Liner companies may, at any given time, control a fleet many times the size of their owned tonnage. AP Moller and MSC are such liner operators; whereas Peter Dohle, Seaspan and others including Navios Maritime Partners are tonnage providers.
The tanker shipping market is extensive, diversified, competitive and fragmented, divided among approximately 3,574 oil companies, operators and independent owners. The world's active tanker fleet over 10,000 DWT consists of approximately 7,260 vessels, aggregating approximately 654 million DWT as of March 1, 2022. As a general principle, the smaller the cargo carrying capacity of a tanker, the more fragmented is its market, both with regard to charterers and vessel owner/operators. Even among the larger oil companies, tanker owners and operators, whose vessels are mainly in the larger sizes, only six companies are known to control fleets of 100 vessels or more: China COSCO Shipping, Mitsui OSK Lines, China Merchants, Scorpio Group, SCF Group and BW Group. There are about 44 owners known to control fleets of between 32 and 91 vessels. However, vessel ownership is not the only determining factor of fleet control. Oil companies, who control the movement of crude oil and petroleum products on land and at sea, own vessels directly and charter in vessels on short and long-term charters. Many owners/managers of tankers charter their vessels out for extended periods but do not control the movement of any crude or products. Oil companies or operating companies may, at any given time, control a fleet many times the size of their owned tonnage. Saudi Aramco, Exxon and Chevron are such oil companies; whereas Vitol, Trafigura and others are operators trading crude oil and product cargoes worldwide.
It is likely that we will face substantial competition for long-term charter business from a number of experienced companies. Many of these competitors will have significantly greater financial resources than we do. It is also likely that we will face increased numbers of competitors entering into our transportation sectors, including in the container, tanker and drybulk sectors. Many of these competitors have strong reputations and extensive resources and experience. Increased competition may cause greater price competition, especially for long-term charters.
Time Charters
A time charter is a contract for the use of a vessel for a fixed period of time at a specified daily rate. Under a time charter, the vessel owner provides crewing and other services related to the vessel’svessel's operation, the cost of which is included in the daily rate and the customer is responsible for substantially all of the vessel voyage costs. All of the vessels in our fleet are hired out under time charters, and we intend to continue to hire out our vessels under time charters. The following discussion describes the material terms common to all of our time charters.
Basic Hire Rate
“Basic hire rate” refers to the basic payment from the customer for the use of the vessel. The hire rate is generally payable semi-monthly, in advance, in U.S. dollars as specified in the charter.
Expenses
The charterer generally pays the voyage expenses, which include all expenses relating to particular voyages, including any bunker fuel expenses, port fees, cargo loading and unloading expenses, canal tolls, agency fees and commissions.
Off-hire
When the vessel is“off-hire, “off-hire,” the charterer generally is not required to pay the basic hire rate, and we are responsible for all costs. ProlongedA prolonged off-hire may lead to vessel substitution or termination of the time charter. A vessel generally will be deemedoff-hire if there is a loss of time due to, among other things:
Under some of our charters, the charterer is permitted to terminate the time charter if the vessel isoff-hire for an extended period, which is generally defined as a period of 90 or more consecutiveoff-hire days. Under some circumstances, an event of force majeure may also permit the charterer to terminate the time charter or suspend payment of charter hire.
Termination
We are generally entitled to suspend performance under the time charters covering our vessels if the customer defaults in its payment obligations. Under some of our time charters, either party may terminate the charter in the event of war in specified countries or in locations that would significantly disrupt the free trade of the vessel. Some of our time charters covering our vessels require us to return to the charterer, upon the loss of the vessel, all advances paid by the charterer but not earned by us.
Classification, Inspection and Maintenance
Every sea going vessel must be “classed” by a classification society. The classification society certifies that the vessel is “in class,” signifying that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel’svessel's country of registry and the international conventions of which that country is a member. In addition, where surveys are required by international conventions and corresponding laws and ordinances of a flag state, the classification society will undertake them on application or by official order, acting on behalf of the authorities concerned.
The classification society also undertakes, on request, other surveys and checks that are required by regulations and requirements of the flag state. These surveys are subject to agreements made in each individual case or to the regulations of the country concerned. For maintenance of the class, regular and extraordinary surveys of hull, machinery (including the electrical plant) and any special equipment classed are required to be performed as follows:
• | Annual Surveys: For seagoing ships, annual surveys are conducted for the hull and the machinery (including the electrical plant) and, where applicable, for special equipment classed, at intervals of 12 months from the date of commencement of the class period indicated in the certificate. |
• | Intermediate Surveys: Extended annual surveys are referred to as intermediate surveys and typically are conducted two and a half years after commissioning and each class renewal. Intermediate surveys may be carried out on the occasion of the second or third annual survey. |
• | Class Renewal Surveys: Class renewal surveys, also known as special surveys, are carried out for the |
survey if the vessel experiences excessive wear and tear. In lieu of the special survey every four or five years, depending on whether a grace period was granted, a ship owner has the option of arranging with the classification society for the |
Management of Ship Operations, Administration and Safety
Navios Holdings provides, through its wholly-owned subsidiary, Navios ShipManagement Inc., referred to as the Manager herein, expertise in various functions critical to our operations. Pursuant to the Management AgreementAgreements with the Managers and the Administrative Services Agreement with the Manager, we have access to human resources, financial and other administrative functions, including:
Technical management services are also provided, including:
For more information on the management agreement we have with the ManagerManagement Agreements and the Administrative Services Agreement, we have with the Manager, please read “Item 7. —– Major Unitholders and Related Party Transactions”.
Crewing
The Manager crews itsManagers crew our vessels primarily with Filipino, Ukrainian, Polish, Russian, Indian, Georgian, Romanian and Sri LankanBulgarian officers and Filipino, Georgian, Romanian, Ethiopian, Indian and Ukrainian seamen. For these nationalities, officers and seamen are referred to the ManagerManagers by local crewing agencies. The Manager isManagers are also responsible for travel and payroll of the crew. The crewing agencies handle each seaman’sseaman's training. The Manager requiresManagers require that all of its seamen have the qualifications and licenses required to comply with international regulations and shipping conventions.
Risk of Loss and Liability Insurance
General
The operation of any cargo vessel includes risks such as mechanical failure, physical damage, collision, property loss, cargo loss or damage, business interruption due to political circumstances in foreign countries, hostilities, and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. The OPA (as defined below), which imposes virtually unlimited liability upon owners, operators and demise charterers of any vessel trading in the United States exclusive economic zone for certain oil pollution accidents in the United States, has made liability insurance more expensive for ship owners and operators trading in the U.S. market. While we believe that our present insurance coverage is adequate, not all risks can be insured, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.
Hull and Machinery and War Risk Insurances
We have marine hull and machinery and war risk insurance, which include coverage of the risk of actual or constructive total loss, for all of our owned vessels. Each of the owned vessels is covered up to at least fair market value, with a deductible range of $0.1$0.5 million per Handymaxfor dry bulk vessels, $0.6 million for containers and Panamax vessels and $0.2$0.3 to $0.6 million per Capesize vesselsfor tankers for the hull and machinery insurance. We have also extended our war risk insurance to include war loss of hire for any loss of time to the vessel, including for physical repairs, caused by a warlike incident and piracy seizure for up to 270 days of detention / loss of time. There are no deductibles for
The deductible under the war risk insurance is $0.03 million for all claims relating to loss caused by piracy or by violent theft by persons from outside an entered ship, whereas the war loss of hire cover.covers a 14 day deductible that applies for loss of time in consequence of damage to the vessel , but no days for loss of time related to piracy, terrorism, barratry and violent theft.
We have arranged, as necessary, increased value insurance for our vessels. With the increased value insurance, in case of total loss of the vessel, we will be able to recover the sum insured under the increased value policy in addition to the sum insured under the hull and machinery policy. Increased value insurance also covers excess liabilities that are not recoverable in full by the hull and machinery policies by reason of underinsurance. We do not expect to maintain loss of hire insurance for our vessels. Loss of hire insurance covers business interruptions that result in the loss of use of a vessel.
Protection and Indemnity Insurance
Protection and indemnity insurance is expected to be provided by mutual protection and indemnity associations, or P&I Associations, who indemnify members in respect of discharging their tortious, contractual or statutory third-party legal liabilities arising from the operation of an entered ship. Such liabilities include but are not limited to third-party liability and other related expenses from injury or death of crew, passengers and other third parties, loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal. Protection and Indemnity insurance does not automatically cover liabilities that arise from illegal activity by an officer or a crewmember, although coverage may be provided at the discretion of the carrier. Protection and indemnity insurance is a form of mutual indemnity insurance, extended by protection and indemnity mutual associations and always provided in accordance with the applicable associations’associations' rules and members’members' agreed terms and conditions.
Navios Partners’Partners' fleet is currently entered for protection and indemnity insurance with International Group associations where, in line with all International Group Clubs, coverage for oil pollution is limited to $1.0 billion per event. The 13 P&I Associations that comprise the International Group insure approximately 95% of the world’sworld's commercial tonnage and have entered into a pooling agreement to collectively reinsure each association’sassociation's liabilities. Each vessel that Navios Partners acquires will be entered with P&I Associations of the International Group. Under the International Group reinsurance program for the current policy year, each P&I club in the International Group is responsible for the first $10.0 million of every claim. In every claim the amount in excess of $10.0 million and up to $80.0$100.0 million is shared by the clubs under the pooling agreement. Any claim in excess of $80.0$100.0 million is reinsured by the International Group in the international reinsurance market under the General Excess of Loss Reinsurance Contract. This policy currently provides an additional $2.0 billion of coverage fornon-oil pollution claims. Further to this, an additional reinsurance layer has been placed by the International Group for claims up to $1.0 billion in excess of $2.08$2.1 billion, i.e. $3.08$3.1 billion in total. For passengers and crew claims, the overall limit is $3.0 billion for any one event on any one vessel with asub-limit of $2.0 billion for passengers. With the exception of pollution, passenger or crew claims, should any other P&I claim exceed Group reinsurance limits, the provisions of all International Group Club’sClub's overspill claim rules will operate and members of any International Group Club will be liable for additional contributions in accordance with such rules. To date, there has never been an overspill claim, or one even nearing this level.
As a member of the P&I Associations, which is a member of the International Group, Navios Partners will be subject to calls payable to the associations based on the individual fleet record, the associations’associations' overall claim records as well as the claim records of all other members of the individual associations, and members of the pool of P&I Associations comprising the International Group. The P&I Associations’Associations' policy year commences on February 20th. Calls are levied by means of Estimated Total Premiums (“ETP”) and the amount of the final
installment of the ETP varies according to the actual total premium ultimately required by the club for a particular policy year. Members have a liability to pay supplementary calls which might be levied by the board of directors of the club if the ETP is insufficient to cover amounts paid out by the club.
Should a member leave or entry cease with any of the associations, at the Club’sClub's Managers discretion, they may be also be liable to pay release calls or provide adequate security for the same amount. Such calls are levied in respect of potential outstanding Club/Member liabilities on open policy years and include but are not limited to liabilities for deferred calls and supplementary calls.
Uninsured Risks
Not all risks are insured and not all risks are insurable. The principal insurable risks which nonetheless remain uninsured across our fleet are “loss of hire” and “strikes,” except in cases of loss of hire due to war or a piracy event.event or due to presence or suspected presence of contraband on board. Specifically, Navios Partners does not insure these risks because the costs are regarded as disproportionate. These insurances provide, subject to a deductible, a limited indemnity for hire that would not be receivable by the shipownership owner for reasons set forth in the policy. Should a vessel on time charter, where the vessel is paid a fixed hire day by day, suffer a serious mechanical breakdown, the daily hire will no longer be payable by the charterer. The purpose of the loss of hire insurance is to secure the loss of hire during such periods. In the case of strikes insurance, if a vessel is being paid a fixed sum to perform a voyage and the ship becomes strike bound at a loading or discharging port, the insurance covers the loss of earnings during such periods.
However, in some cases when a vessel is transiting high risk war and/or piracy areas, we arrange war loss of hire insurance to cover up to 270 days of detention/loss of time. When our charterers engage in legally permitted trading in locations which may still be subject to sanctions or boycott, such as Iran or Syria, our insurers may be contractually or by operation of law prohibited from honoring our insurance contract for such trading, which could result in reduced insurance coverage for losses incurred by the related vessels. Furthermore, our insurers and we may be prohibited from posting or otherwise be unable to post security in respect of any incident in such locations, resulting in the loss of use of the relevant vessel and negative publicity for our Company which could negatively impact our business, results of operations, cash flows and share price.
There are no deductibles for the war loss of hire cover in case of piracy and contraband cover.
Even if our insurance coverage is adequate to cover our losses, if we suffer a loss of a vessel, we may not be able to obtain a timely replacement for any lost vessel. Furthermore, in the future, we may not be able to obtain adequate insurance coverage at reasonable rates for our fleet. For example, more stringent environmental regulations have led to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. We may also be subject to calls, or premiums, in amounts based not only on our own claim records but also on the claim records of all other members of the protection and indemnity associations through which we receive indemnity insurance coverage. A catastrophic oil spill or marine disaster could exceed our insurance coverage, which could have a material adverse effect on our business, results of operations and financial condition. Any uninsured or underinsured loss could harm our business and financial condition. In addition, the insurance may be voidable by the insurers as a result of certain actions, such as vessels failing to maintain required certification.
Credit Risk Insurance
As of March 25, 2014, the Company terminated the amended credit default insurance policy. In connection with the termination, Navios Partners received compensation of $31.0 million (which was received in April 2014). From the total compensation, $1.2 million was recorded immediately in the Statements of Operations within the caption of “Revenue”, which represents reimbursements for insurance claims submitted for the period prior to the date of the termination and the remaining amount of $29.8 million was recorded immediately in the Statements of Operations within the caption of “Other income”. The Company has no future requirement to repay any of the lump sum cash payment back to the insurance company or provide any further services.
In August 2015, the Seoul Central District Court approved the second rehabilitation proceedings of Samsun Logix. One of our vessels chartered to Samsun Logix was redelivered in August 2015 and has been rechartered. The rehabilitation claim was sold to an unrelated third party. Navios Partners has no outstanding receivable from Samsun Logix.
On November 15, 2012 (as amended and supplemented in March 2014)2014, December 2017 and July 2019), Navios Holdings and Navios Partners entered into an agreement (the “Navios Holdings Guarantee”) by whichwhereby Navios Holdings willwould provide supplemental credit default insurance with a maximum cash payment of $20.0 million. During the year endedIn October 2020, Navios Holdings paid an amount of $5.0 million to Navios Partners. In April 2021, Navios Holdings paid an amount of $5.0 million to Navios Partners. As of December 31, 20162021 and 2015,2020, the Company submitted claims for charterers’ defaultoutstanding claim receivable amounted to $0 and $5.0 million, respectively. The guarantee claim receivable is presented under this agreement to Navios Holdings for a total amountthe caption “Amounts due from related parties-short term” in the Consolidated Balance Sheets as of $9.2 million and $3.6 million, respectively, net of applicable deductions, of which $9.6 million and $3.8 million was recorded as “Other income” for the year ended December 31, 2016 and 2015, respectively.
In January 2011, Korea Line Corporation (“KLC”) which is the charterer of the Navios Melodia filed for receivership. The charter contract was affirmed and was performed by KLC on its original terms, following an interim suspension period until April 2016 during which Navios Partners traded the vessel directly. On April 1, 2016, the vessel was delivered to KLC and the charter contract was resumed.2020.
Regulation
Sources of applicable rulesApplicable Maritime Laws and standardsStandards
Shipping is one of the world’sworld's most heavily regulated industries, and, in addition,as it is subject to manyboth governmental regulation and industry standards. GovernmentThe governmental regulation significantly affects the ownershipto which we are subject includes local and operation of vessels. Thesenational laws and regulations,
consist mainly of rules and standards as well as international regulations established by international conventions, but theythe International Maritime Organization (“IMO”), the United Nations agency governing the maritime sector. We also includeare subject to regulation by ship classification societies and industry associations, which often have independent standards. In the United States and, increasingly, in Europe, the national, state, and local laws and regulations in force in jurisdictions where vessels may operate or are registered, and which are commonlybe more stringent than international rulesconventions, as well as industry standards. Violations of these laws, regulations, treaties and standards. Thisother requirements could result in sanctions by regulators, including possible fines, penalties, delays, and detention. Compliance with these categories of regulation also impact the vetting process – non-compliances can result in vetting failures.
The primary areas of maritime laws and standards to which we are subject include environment, safety, and security, as provided in detail below.
International Conventions and Standards
The IMO is the case particularly inUnited Nations agency with jurisdiction over maritime safety and the United States and, increasingly, in Europe.
A varietyprevention of governmental and private entities subject vessels to both scheduled and unscheduled inspections. These entities include local port authorities (the U.S. Coast Guard, harbor masters or equivalent entities), classification societies, flag state administration (country vessel of registry), and charterers, particularly terminal operators. Certain of these entities require vessel owners to obtain permits, licenses, and certificates for the operation of their vessels. Failure to maintain necessary permits or approvals could require a vessel owner to incur substantial costs or temporarily suspend operation of one or more of its vessels.
Heightened levels of environmental and quality concerns among insurance underwriters, regulators, and charterers continue to lead to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for vessels that conform to stricter environmental standards. Vessel owners are required to maintain operating standards for all vessels that will emphasize operational safety, quality maintenance, continuous training of officers and crews and compliance with U.S. and international regulations.
pollution by ships. The International Maritime Organization, or IMO has adopted a number of international conventions concerned with preventing, reducing, or managing pollution from ships; and ship safety and with preventing, reducing or controlling pollution from ships. These fall into two main categories, consisting firstlysecurity. The most significant of those concerned generally with ship safety standards, and secondly of those specifically concerned with measures to prevent pollution.
Ship safety regulation
In the former category the primary international instrument is the Safety of Life at Sea Convention of 1974, as amended, or SOLAS, together with the regulations and codes of practice that form part of its regime. Much of SOLAS is not directly concerned with preventing pollution, but some of its safety provisionsthese are intended to prevent pollution as well as promote safety of life and preservation of property. These regulations have been and continue to be regularly amended as new and higher safety standards are introduced with which we are required to comply.described below.
· | MARPOL |
An amendment of SOLAS introduced the International Safety Management (ISM) Code, which has been effective since July 1998. Under the ISM Code the party with operational control of a vessel is required to develop an extensive safety management system that includes, among other things, the adoption of a safety and environmental protection policy setting forth instructions and procedures for operating its vessels safely and describing procedures for responding to emergencies. The ISM Code requires that vessel operators obtain a safety management certificate for each vessel they operate. This certificate evidences compliance by a vessel’s management with code requirements for a safety management system. No vessel can obtain a certificate unless its manager has been awarded a document of compliance, issued by the flag state for the vessel, under the ISM Code. Noncompliance with the ISM Code and other IMO regulations, such as the mandatory ship energy efficiency management plan (“SEEMP”) which is akin to a safety management plan and came into effect on 1 January 2013, may subject a ship owner to increased liability, may lead to decreases in available insurance coverage for affected vessels, and may result in the denial of access to, or detention in, some ports. For example, the United States Coast Guard and European Union authorities have indicated that vessels not in compliance with the ISM Code will be prohibited from trading in ports in the United States and European Union.
Another amendment of SOLAS, made after the terrorist attacks in the United States on September 11, 2001, introduced special measures to enhance maritime security, including the International Ship and Port Facilities Security Code (ISPS Code).
Our owned fleet maintains ISM and ISPS certifications for safety and security of operations. Each vessel’s certificate must be periodically renewed and compliance must be periodically verified. In addition, the Manager voluntarily implements and maintains certifications pursuant to the International Organization for Standardization, or ISO, for its office and ships covering both quality of services and environmental protection (ISO 9001 and ISO 14001, respectively).
International regulations to prevent pollution from ships
In the second main category of international regulation, the primary instrument is the International Convention for the Prevention of Pollution from Ships or “MARPOL” is the primary international convention governing vessel pollution prevention and response. MARPOL which imposes environmental standards on the shipping industry set out in AnnexesI-VI of MARPOL. Theseincludes six annexes concerning operational pollution by oil, noxious liquid substances (“NLS”), harmful substances, sewage, garbage and air emissions. More specifically, these annexes contain regulations for the prevention of pollution by oil (Annex I), by noxious liquid substances in bulk (Annex II), by harmful substances in packaged forms within the scope of the International Maritime Dangerous Goods Code (Annex III), by sewage (Annex IV), by garbage (Annex V), and by air emissions, including sulfur oxides (“SOx”), nitrogen oxides (“NOx”), and particulate matter (Annex VI). The annexes also contain recordkeeping and inspection requirements. Fines and penalties imposed by the Port State or the vessel’s flag State may apply for MARPOL violations, particularly for improper discharges into the air or water.
These regulations have been and continue to be regularly amended as new and more stringent standards of pollution prevention are introduced with which weUnder MARPOL Annex I, our ships are required to comply.have an International Oil Pollution Prevention (“IOPP”) Certificate and a Shipboard Oil Pollution Emergency Plan; under Annex IV, an International Sewage Pollution Prevention Certificate; under Annex V, a Garbage Management Plan; and under Annex VI, an International Air Pollution Prevention Certificate issued by their flag States, among other requirements, some of which must be approved by their flag States. Additionally, Annex II separates NLS into three categories (X, Y, and Z), depending upon the seriousness of the hazard presented, and Annex III contains requirements for safe handling of packaged substances that represent a serious risk to the environment, as well as guidelines for identification of harmful substances. For example, any relevant documents, such as the ship’s manifest, must identify the substances carried, if any, aboard our vessels. Certain jurisdictions in which we trade have not adopted all of the MARPOL annexes, but have established various national, regional, or local laws and regulations that apply to these areas.
Of note, the emissions standards for sulfur oxides (“SOx”) under MARPOL Annex VI together withwere recently amended. As of January 1, 2020, the NOx Technical Code established thereunder, sets limits on sulfur oxide and nitrogen oxide emissionsstandard was lowered to 0.5% worldwide (down from ship exhausts and prohibits deliberate emissionsthe previous level of ozone depleting substances, such as chlorofluorocarbons. It3.5%). Current regulations also includes a global cap on the sulfur content of fuel oil and allowsallow for special emissions control areas (“ECAs”) to be established with more stringent controls on emissions. Originally adopted in September 1997, Annex VI came into force in May 2005 and was amended in October 2008 (as was the NOx Technical Code) to provide for progressively more stringent limits on such emissions from 2010 onwards.
The revised Annex VI provides, in particular, for a reduction of the global0.1% sulfur, cap. After considering the issue for many years, the IMO announced on October 27, 2016 that it was proceeding with a requirement for 0.5% m/m sulfur content in marine fuel (down from current levels of 3.5%) outside the ECAs starting on January 1, 2020. Under Annex VI, the 2020 date was subject to review as to the availability of the required fuel oil. Annex VI required the fuel availability review to be completed by 2018 but was ultimately completed in 2016. Therefore, by 2020, ships will be required to remove sulfur from emissions through the use of emission control equipment, or purchase marine fuel with 0.5% sulfur content, which may see increased demand and higher prices due to supply constraints. Installing pollution control equipment or using lower sulfur fuel could result in significantly increased costs to our company. Similarly Annex VI requires Tier III standards for NOx emissions to be applied to ships constructed and engines installed in ships operating in NOx ECAs from January 1, 2016. We anticipate incurring costs to comply with these more stringent standards by implementing measures such as fuel switching, vessel modification adding distillate fuel storage capacity, or addition of exhaust gas cleaning scrubbers, and may require installation and operation of further control equipment at significantly increased cost.
The revised Annex VI further allows for designation, in response to proposals from member parties, of Emission Control Areas (ECAs) that impose accelerated and/or more stringent requirements for control of sulfur oxide, particulate matter, and nitrogen oxide emissions. Thus, the 0.5% sulfur content requirement applies outside the ECAs. Depending on the type of vessel, transitioning to the use of low sulfur fuel as a means of compliance may have required fuel system modification and tank cleaning. Another means of compliance is the installation of pollution control equipment (exhaust gas cleaning systems or scrubbers), allowing the vessel to use the existing, less expensive, high sulfur content fuel.
Thus far, ECAs have been formally adopted for the Baltic Sea area (limits SOx emissions only)only subject to the 2017 amendments described below); the North Sea area including the English Channel (limiting SOx emissions only) andonly subject to the 2017 amendments described below); the North American ECA, (which came into effect from August 1, 2012 limitingincluding most of the U.S. and Canadia coast (limiting SOx, Nitrogen Oxides (“NOx”) and particulate matter emissions); and the U.S. Caribbean ECA, including Puertor Rico and the U.S. Virgin Islands (limiting SOx, NOx and particulate matter emissions)particulates). In October 2016, theThe IMO approvedadopted in 2017 the designation of the North Sea and Baltic Sea as ECAs for NOx under Annex VI as well, which is scheduled for adoption in 2017 and would taketook effect in January 2021. The United States Caribbean Sea ECA entered into force on January 1, 2013 and has been effective since January 1, 2014, limiting SOx, NOx and particulate matter emissions. For the currently-designated ECAs, much lower sulfur limits on fuel oil content are being phased in (0.1% from January 1, 2015).
At its 66th Session, the IMO’s Marine Environment Protection Committee (the “MEPC”) adopted amendments (effective September 2015) to Annex VI, regulation 13, regarding NOx and the date for the implementation of the “Tier III” standards within ECAs. These amendments provide, inter alia, that such standards, applicable on
January 1, 2016, apply to marine diesel engines installed on ships which operate in the North American ECA or the U.S. Caribbean Sea ECA and to installed marine diesel engines which operate in other ECAs which might be designated in the future for Tier III NOx control. At MEPC 69, Annex VI was also amended to require recordkeeping requirements to demonstrate compliance with the NOX Tier III ECA.
At its 64th session (2012), the MEPC indicated that 2015 was the target year for member states to identify market-based measures for international shipping. At its 66th session (2014), the MEPC continued its work on developing technical and operational measures relating to energy-efficiency measures for ships, following the entry into force of the mandatory efficiency measures on January 1, 2013. It adopted the 2014 Guidelines on the Method of Calculation of the Attained EEDI, applicable to new ships. It further adopted amendments to MARPOL Annex VI concerning the extension of the scope of application of the EEDI to Liquified Natural Gas (“LNG”) carriers,ro-ro cargo ships (vehicle carriers),ro-ro cargo ships,ro-ro passenger ships and cruise passengers ships with nonconventional propulsion. At its 67th session (2014), the MEPC adopted the 2014 Guidelines on survey and certification of the EEDI, updating the previous version to reference ships fitted with dual-fuel engines using LNG and liquid fuel oil. The MEPC also adopted amendments to the 2013 Interim Guidelines for determining minimum propulsion power to maintain the maneuverability of ships in adverse conditions, to make the guidelines applicable to phase 1 (starting January 1, 2015) of the EEDI requirements. At its 68th session (2015), the MEPC amended the 2014 Guidelines on EEDI survey and certification as well as the method of calculating of EEDI2021 for new ships, the latter of which was again amended at the 70th session (2016). At its 70th session, the MEPC adopted mandatory requirements for ships of 5,000 gross tonnage or greater to collect fuel consumption data for each type of fuel used, and report the data to the flag State after the end of each calendar year.
The revised Annex I to the MARPOL Convention entered into force in January 2007. It incorporates various amendments to the MARPOL Convention and imposes construction requirements for oil tankers deliveredvessels constructed on or after January 1, 2010. On August 1, 2007,2021 or existing vessels that replace an engine with non-identical engines, or install an additional engine.
Despite Annex VI’s extensive regulations, some jurisdictions have taken unilateral approaches to air emissions regulation. For example, the U.S. state of California adopted the California Ocean-Going Vessel Fuel Regulation, 12A (an amendmentwhich contains more stringent low sulfur fuel requirements within California-regulated waters, requiring marine gas oil, extending out to Annex I) came into force imposing performance24 nautical miles, which thus prohibiting the use of exhaust gas cleaning systems.
China has also established local emissions control areas: the Pearl River Delta, the Yangtze River Delta, and Bohai Bay. While the Chinese areas are currently consistent with international standards for accidental oilin terms of requiring a 0.5% sulfur content, certain Chinese local emissions control areas, such as inland waterways, coastal emission control areas and Hainan waters, have a 0.1% sulfur limit in force. Similarly, South Korea has established Port Air Quality Control Zones which cap the sulfur content of fuel outflow and requiring oil fuel tanks to be located inside the double-hull in all ships with an aggregate oil fuel capacity of 600 cubic meters and above, and which are delivered on or after August 1, 2010, including ships for which the building contract is entered into on or after August 1, 2007 or, in the absence of a contract, for which keel is laid on or after February 1, 2008. We intend that all of our newbuild tanker vessels, if any, will comply with Regulation 12A.
Greenhouse gas emissions
In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change entered into force. Pursuant to the Kyoto Protocol, adopting countries are required to implement national programs to reduce emissions of certain gases, generally referred to as greenhouse gases, which are suspected of contributing to global warming. Currently, the greenhouse gas emissions from international shipping do not come under the Kyoto Protocol.
In December 2011, UN climate change talks took place in Durban and concluded with an agreement referred to as the Durban Platform for Enhanced Action. In preparation for the Durban Conference, the International Chamber of Shipping (“ICS”) produced a briefing document, confirming the shipping industry’s commitment to cut shipping emissions by 20% by 2020, with significant further reductions thereafter. The ICS called on the participants in the Durban Conference to give the IMO a clear mandate to deliver emissions reductions through market-based measures, for example a shipping industry environmental compensation fund. Notwithstanding the ICS’s request for global regulation of the shipping industry, the Durban Conference did not result in any proposals specifically addressing the shipping industry’s role in climate change.
Although regulation of greenhouse gas emissions in the shipping industry was discussed during the 2015 UN Climate Change Conference in Paris (the “Paris Conference”), the agreement reached among the 195 nations did not expressly reference the shipping industry. Following the Paris Conference, the IMO announced it would
continue its efforts on this issue at the MEPC, and at its 70th session, the MEPC approved a Roadmap for developing a comprehensive GHG emissions reduction strategy for ships, which includes the goal of adopting an initial strategy and emission reduction commitments in 2018. The Roadmap also provides for additional studies and further intersessional work, to be continued at the 71st session in 2017, with a goal of adopting a revised strategy in 2023 to include short-,mid- and long-term reduction measures and schedules for implementation.
The EU announced in April 2007 that it planned to expand the European Union emissions trading scheme by adding vessels, and a proposal from the European Commission was expected if no global regime for reduction of seaborne emissions had been agreed by the end of 2011. As of January 31, 2013, the Commission stopped short of proposing that emissions from ships be included in the EU’s emissions-trading scheme (“ETS”)0.1%. However, on October 1, 2012, it announced that it would propose measures to monitor, verify and report on greenhouse gas emissions from the shipping sector.
On June 28, 2013, the EC adopted a communication setting out a strategy for progressively including greenhouse gas emissions from maritime transport in the EU’s policy for reducing its overall GHG emissions. The first step proposed by the EC was an EU regulation (as defined below) to anEU-wide system for the monitoring, reporting and verification of carbon dioxide emissions from large ships starting in 2018. EU Regulation 2015/757 was adopted on April 29, 2015 andThis provision took effect on JulySeptember 1, 2015, with monitoring, reporting2020. South Korea’s Ministry of Oceans and verification requirements beginning onFisheries designated South Korea’s port areas in in Busan, Ulsan, Yeosu, Gwangyang, Incheon and Pyeongtaek-Dangjin as emission control areas and as of January 1, 2018. This Regulation2022, the 0.1 % sulfur limit extends to all vessels from the moment of entering until the moment of exiting the Korean emission control area. In the EU, since 2010, all vessels must changeover to 0.1% sulfur fuel oil when ‘at berth’ in EU and European Economic Area (“EEA”) ports due to EU Directive 2005/33/EC.
In addition, certain jurisdictions may be seenhave not adopted all of the MARPOL annexes, and some may have established various national, regional, or local laws and regulations that apply to these areas.
· | Ballast Water |
The IMO, as indicativewell as jurisdictions worldwide acting outside the scope of an intentionthe IMO, have implemented requirements relating to maintain pressure on the international negotiating process. The EC also adopted an Implementing Regulation, which entered into force in November 2016, setting templates for monitoring plans, emissions reports and compliance documents pursuant to Regulation 2015/757.
Other international regulationsmanagement of ballast water to prevent pollution
In addition to MARPOL, other more specialized international instruments have been adopted to prevent different typesthe harmful effects of pollution or environmental harm from ships. In February 2004, the IMO adopted anforeign invasive species. The IMO's International Convention for the Control and Management of Ships’ Ballast Water and Sediments or the BWM Convention. The BWM Convention’s implementing regulations call for a phased introduction of mandatory ballast water exchange requirements, to be replaced in time with mandatory concentration limits, as well as other obligations including recordkeeping requirements and implementation of a Ballast Water and Sediments Management Plan.
The BWM Convention stipulates that it will enter into force twelve months after it has been adopted by at least 30 states, the combined merchant fleets of which represent at least 35% of the gross tonnage of the world’s merchant shipping. With Finland’s accession to the Agreement on September 8, 2016, the 35% threshold was reached, and the BWM convention will enter(the “BWM Convention”) entered into force on September 8, 2017. Thereafter, on October 19, 2016, Panama also acceded to the BWM convention, adding its 18.02% of world gross tonnage. As of February 7, 2017, the BWM Convention had 54 contracting states for 53.30% of world gross tonnage. The BWM Convention requires ships to manage ballast water in a manner that removes, renders harmless, or avoids the uptake or discharge of aquatic organisms and pathogens within ballast water and sediment. Recently updatedAs of March 18, 2022, the BWM Convention had 88 contracting states, representing 91.20% of world gross tonnage.
As amended, the BWM Convention requires, among other things, ballast water exchange until ballast water treatment systems are required, the maintenance of certain records, and the implementation of a Ballast Water and SedimentSediments Management Plan. It also requires the installation of ballast water management systems for existing ships by certain deadlines.
Ships constructed prior to September 8, 2017 must install ballast water management systems by the first renewal survey after September 8, 2017 and must comply with IMO discharge standards by the due date for their IOPP Certificate renewal survey under MARPOL Annex I. Ships constructed after September 8, 2017 are required to comply with the BWM Convention upon delivery. All ships must meet the IMO ballast water discharge standard by September 8, 2024, regardless of construction date. Updated guidance for Ballast Water and Sediments Management Plan guidance includes more robust testing and performance specifications. The entry ofUnited States is not party to the BWM Convention, but has similar, though not identical, requirements. Ships operating in U.S. waters must comply with U.S. ballast water regulations. The next MEPC session in 2022 is expected to produce proposed amendments to the BWM Convention.
· | Pollution Liability Regimes |
Several international conventions impose and revised guidance will likely resultlimit pollution liability from vessels. An owner of a tank vessel carrying a cargo of “persistent oil,” as defined by the International Convention for Civil Liability for Oil Pollution Damage (the “CLC”), is subject to strict liability for any pollution damage caused in additional compliance costs.
European regulations
European regulations ina contracting State by an escape or discharge from cargo or bunker tanks. There is a financial limit on this liability, which is calculated by reference to the maritime sector are in general based on international law. However, since theErika incident in 1999, the European Community has become increasingly active in the field of regulation of maritime safety and protectiontonnage of the environment. It has beenship. The right to limit liability may be lost if the driving force behindspill is caused by the ship owner’s intentional or reckless conduct. Liability may also be incurred under the CLC for a number of amendments of MARPOL (including, for example, changes to acceleratebunker spill from the time-table for thephase-out of single hull tankers, and to prohibit the carriage in such tankers of heavy grades of oil), and if dissatisfied either with the extent of such amendments or with the time-table for their introductionvessel even when it has been prepared to legislate on a unilateral basis. It should be noted, for instance, that the EU has its own regime as far as ship emissions are concerned and whilst it does in some respects reflect the IMO regime, this is not alwayscarrying such cargo if the case. As far as sulfur dioxide
The CLC applies in over 100 jurisdictions around the world. Some countries have ratified an earlier version of the CLC, the “1969 Convention” while others have not ratified any version of the CLC. Further, it is possible that courts in certain States may interpret the CLC to provide fewer protections, which can increase our liability in certain areas of the globe.
emissions are concerned,For vessel operations not covered by the CLC, including all non-tank vessels in our fleet, international liability for example,oil pollution may be governed by the EU regulation has not just caught up with the IMO limitsInternational Convention on Civil Liability for sulfurBunker Oil Pollution Damage (the “Bunker Convention”) in ECAs, but it continuesaddition to have certain elements that exceed IMO regulations (e.g., as of January 1, 2015, EU Member States must ensure that ships in the Baltic, the North Seamlocal and the English Channel are using gas oils with a sulfur content of no more than 0.10%).national environmental laws.
In some instances where it has done so, international regulations have subsequently been amended to the same level of stringency as that introduced in Europe, but the risk is well established that EU regulations may from time to time impose burdens and costs on shipowners and operators which are additional to those involved in complying with international rules and standards. In December 2016, the EU signed into law the National Emissions Ceiling (“NEC”) Directive, whichThe Bunker Convention entered into force in 2008 and imposes strict liability on December 31, 2016.shipowners for pollution damage and response costs incurred in contracting States caused by discharges, or threatened discharges, of bunker oil from all classes of ships not covered by theCLC. The NEC must be implemented by individual members states through particular lawsBunker Convention also requires registered owners of ships over a certain tonnage to maintain insurance to cover their liability for pollution damage in each state by June 30, 2018. The NEC aimsan amount equal to set stricter emissionsthe limits of liability under the applicable national or international limitation regime, including liability limits calculated in accordance with the Convention on SO2, ammonia,non-methane volatile organic compounds, NOx and fine particulate (PM2.5) by setting new upper limitsLimitation of Liability for emissionsMaritime Claims 1976, as amended (the “1976 Convention”). As of these pollutants, starting in 2020. WhileMarch 18, 2022, the NEC is not specifically directed toward the shipping industry, the EU specifically mentions the shipping industry in its announcementBunker Convention had 102 contracting States, representing 95.08% of the NEC asgross tonnage of the world's merchant fleet.
The 1976 Convention is the most widely applicable international regime limiting maritime pollution liability. Rights to limit liability under the 1976 Convention are forfeited where a contributor to emissions of PM2.5, SO2 and NOx. Implementation of new laws by member states to reduce emissions may ultimately result in increased costs to us to comply with the more stringent standards.
In some areas of regulation the EU has introduced new laws without attempting to procure a corresponding amendment of international law. Notably, it adopted in 2005 a directive on ship-source pollution, imposing criminal sanctions for pollution not only where thisspill is caused by intenta ship owner’s intentional or recklessness (which would be an offense under MARPOL), but also where it is caused by “serious negligence.reckless conduct. Certain jurisdictions have ratified the IMO’s Protocol of 1996 to the 1976 Convention, referred to herein as the “Protocol of 1996.” The directive couldProtocol of 1996 provides for substantially higher liability limits in those jurisdictions than the limits set forth in the 1976 Convention.
Finally, some jurisdictions are not parties to either the 1976 Convention or the Protocol of 1996, and, therefore, a ship owner’s rights to limit liability for maritime pollution in such jurisdictions may be uncertain or subject to national and local law.
· | International Safety Regulations |
Our vessels also must operate in compliance with the requirements set forth in the International Convention for the Safety of Life at Sea, as amended, (“SOLAS”), including the International Safety Management Code (the “ISM Code”), which is contained in Chapter IX of SOLAS.
SOLAS was enacted primarily to promote the safety of life and preservation of property. SOLAS, and the regulations and codes of practice thereunder, is regularly amended to introduce heightened shipboard safety requirements into the industry. The ISM Code requires ship operators to develop and maintain an extensive Safety Management System (“SMS”) that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe vessel operation and describing procedures for dealing with emergencies. The ISM Code also requires vessel operators to obtain a Document of Compliance (“DOC”) demonstrating that the company complies with the SMS and a Safety Management Certificate (“SMC”) for each vessel verifying compliance with the approved SMS by each vessel's flag State. No vessel can obtain an SMC unless its manager has been awarded a Document of Compliance, issued by the flag State for the vessel, under the ISM Code.
Non-compliance with the ISM Code and regulations contained in other IMO conventions may subject a shipowner to increased liability, lead to decreases in available insurance coverage for affected vessels, or result in criminal liability being incurredthe denial of access to, or detention in, circumstances where it would not be incurred under international law. Experience has shown that incertain ports, which can cause delays. For example, the emotive atmosphere often associated with pollution incidents, retributive attitudes towards ship interests have found expression in negligence being alleged by prosecutors and found by courts. Moreover, there is skepticism that the notion of “serious negligence” is likely to prove any narrower in practice than ordinary negligence. Criminal liability for a pollution incident could not only result in us incurring substantial penalties or fines but may also, in some jurisdictions, facilitate civil liability claims for greater compensation than would otherwise have been payable.
United States environmental regulationsCoast Guard and laws governing civil liability for pollution
Environmental legislationEU authorities have indicated that vessels not in compliance with the ISM Code may be prohibited from trading in ports in the United States merits particular mention as itand the EU. Each company's DOC and each vessel's SMC must be periodically renewed, and compliance must be periodically verified.
· | Vessel Security - ISPS Code |
In 2002, following the September 11 terrorist attacks, SOLAS was amended to impose detailed security obligations on vessels and port authorities, most of which are contained in the ISPS Code, which is Chapter XI-2 of SOLAS. Vessels demonstrate compliance with the ISPS Code by having an International Ship Security Certificate issued by their flag State.
Among the various requirements are:
§ | On-board installation of automatic information systems to enhance vessel-to-vessel and vessel-to-shore communications; |
§ | On-board installation of ship security alert systems; |
§ | Development of Ship Security Plans; |
§ | Appointment of a Ship Security Officer and a Company Security Officer; and |
§ | Compliance with flag State's security certification requirements. |
Applicable U.S. Laws
· | The Act to Prevention Pollution from Ships |
The Act to Prevent Pollution from Ships (“APPS”) and corresponding U.S. Coast Guard regulations implement several MARPOL annexes in many respects more onerous than international laws, representing a high-water markthe United States. Violations of regulation with which shipownersMARPOL, APPS, or the implementing regulations can result in liability for civil and/or criminal penalties. Numerous vessel owners and operators, must comply,as well as individual ship officers and shoreside technical personnel have been criminally prosecuted for APPS violations, which may result in significant fines and imprisonment for ship officers.
· | Clean Water Act, National Invasive Species Act, Vessel General Permit, and Vessel Incidental Discharge Act. |
The Clean Water Act (“CWA”) prohibits the discharge of oil or hazardous substances in U.S. navigable waters and imposes penalties for unauthorized discharges. The CWA also imposes substantial liability likelyfor the costs of removal, remediation and damages.
The United States is not a party to the BWM Convention discussed above. Instead, ballast water operations are governed by the National Invasive Species Act (“NISA”) and U.S. Coast Guard regulations mandating ballast water management practices for all vessels equipped with ballast water tanks entering U.S. waters, as well as the Vessel General Permit issued by the U.S. Environmental Protection Agency (“EPA”) under the CWA. In addition, through the CWA certification provisions that allow U.S. states to place additional conditions on EPA's Vessel General Permit, a number of states have implemented a variety of stricter ballast water requirements including. The past year has seen a marked increase in enforcement actions by EPA for alleged violations of the Vessel General Permit.
Depending on a vessel’s compliance date for installation of a U.S. Coast Guard type-approved ballast water management system, these requirements may be incurredmet by performing mid-ocean ballast exchange, by retaining ballast water onboard the vessel, or by using another ballast water management method authorized by the U.S. Coast Guard. In the near future, ballast exchange will no longer be permissible. These U.S. Coast Guard regulations and EPA’s Vessel General Permit, however, will ultimately be replaced with the new regulatory regime being developed under the Vessel Incidental Discharge Act (“VIDA”) signed into law on December 4, 2018, which is expected to contain similar, though possibly more stringent, requirements. VIDA requires that the new standards be at least as stringent as those currently imposed by the 2013 VGP.
VIDA establishes a new framework for regulation of discharges incidental to the normal operation of commercial vessels into navigable waters of the United States, including management of ballast water. VIDA required the EPA to implement a final rule setting forth standards for incidental discharges, including ballast water, by December 4, 2020 and the U.S. Coast Guard to issue a final rule implementing the EPA’s standards by December 4, 2022. The EPA narrowly missed the statutory deadline of December 4, 2020 and its standards for discharges were formally published in late 2020. As such, final implementation of VIDA remains essentially on track, which includes the U.S. Coast Guard’s implementation of EPA’s final rule on standards. Implementation of VIDA is expected to create more uniformity in state and federal regulation of incidental vessel discharges and thus is expected to result in a simplification of the current patch-work of federal, state, and local ballast water regulations in the eventUnited States. The 2013 VGP will remain in effect until the full implementation ofnon-compliance VIDA.
The EPA’s proposed rule under VIDA establishes both general and specific discharge standards. Although VIDA pre-empts sate and local laws, states will have the ability to petition for stricter discharge standards and will have inspection and enforcement authority for the federal standards. The general discharge standards are preventative in nature and apply to all incidental discharges. They are organized into three categories: (1) general operation and maintenance; (2) biofouling management; and (3) oil management. These general standards mandate overall minimization of discharges and prescribe best management practices toward achieving this goal. No training or an incident causing pollution.education requirements are included, as these will be set by the U.S. Coast Guard in its rulemaking once EPA’s standards are finalized. EPA’s proposal covers 20 incidental discharges from vessels, down from 27 covered by the 2013 VGP. Importantly, EPA did not significantly reduce the number of discharges covered, rather combined several discharges into one, taking a more systematic approach to managing the discharges. Two years after the EPA publishes its final standard, the U.S. Coast Guard is required to finalize corresponding implementation, compliance and enforcement regulations for those standards, including any requirements governing the design, construction, testing, approval, installation and use of devices necessary to achieve the EPA standards.
U.S. federal legislation, including notably the Oil Pollution Act of 1990, or OPA, establishes an extensive
· | Oil Pollution Act of 1990 and State Law Regarding Oil Pollution Liability |
The United States has a comprehensive regulatory and liability regime for the protection and cleanup of the environment from oil spills from all vessels, including cargo or bunker oil spills from tankers. tank vessels. This regime is set forth in the Oil Pollution Act of 1990, or “OPA.”
OPA affects allapplies to owners and operators whose vessels trade in the United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States’ territorial sea and its 200 nautical mile exclusive economic zone.U.S. waters. Under OPA, vessel owners, operators and bareboat charterers are “responsible parties” and are jointly, severally and strictly liable (unlessfor all containment and clean-up costs, as well as damages, arising from discharges or substantial threats of discharges, of oil from their vessels unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment andclean-up costs and other damages arising from discharges or substantial threatswar, which is determined after-the-fact. As such, responsible parties must respond to a spill immediately irrespective of discharges, of oil from their vessels. In addition to potential liability under OPA as the relevant federal legislation, vessel owners may in some instances incur liability on an even more stringent basis under state law in the particular state where the spillage occurred.fault.
Title VII of the Coast Guard and Maritime Transportation Act of 2004, or the CGMTA, amended OPA to require the owner or operator of anynon-tank vessel of 400 gross tons or more, that carries oil of any kind as a fuel for main propulsion, including bunkers, to prepare and submit a response plan for each vessel on or before August 8, 2005. The implementing regulations took effect on October 30, 2013. The vessel response plans must include detailed information on actions to be taken by vessel personnel to prevent or mitigate any discharge or substantial threat of such a discharge of ore from the vessel due to operational activities or casualties.
OPA liability limits are periodically adjusted for inflation, and the U.S. Coast Guard issued a final rule on November 19, 2015August 13, 2019 to reflect increases in the Consumer Price Index.Index, which resulted in higher liability limits. With this adjustment, OPA currently limits liability of the responsible party for single-hull tanknon-tank vessels over 3,000 gross tons to the greater of $3,500$1,200 per gross ton or $25.846 million (this amount$997,100, whichever is reduced to $7.05 million if the vessel is less than 3,000 gross tons).greater. For double hull tank vessels, overother than edible oil tank vessels and oil spill response vessels, the limits of liability depends upon the size of the vessel. The liability amounts are listed as follows: for a tank vessel greater than 3,000 gross tons, other than a single-hull tank vessel, liability is limited to $2,200the greater of $2,300 per gross ton or $18.8 million (or $4.7 million$19,943,400; and for a tank vessel less than or equal to 3,000 gross tons), whichever is greater.tons, other than a single-hull tank vessel, the greater of $2,300 per gross ton or $4,985,900. Under the OPA, these liability limits do not apply if an incident was directly caused by violation of applicable United StatesU.S. federal safety, construction or operating regulations or by a responsible party’sparty's gross negligence or willful misconduct, or if the responsible party fails or refuses to report the incident or to cooperate and assist in connection with oil removal activities.
In response to the Deepwater Horizon incident in the Gulf of Mexico, in 2010 the U.S. Congress proposed, but did not formally adopt, legislation to amend OPA to mandate stronger safety standards and increased liability and financial responsibility for offshore drilling operations. While Congressional activity on this topic is expected to continue to focus on offshore facilities rather than on vessels generally, it cannot be known with certainty what form any such new legislative initiatives may take.
In addition, the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, which applies to the discharge of hazardous substances (other than oil) whether on land or at sea, contains a similar liability regime and provides for cleanup, removal and natural resource damages. Liability under CERCLA is limited to the greater of $300 per gross ton or $0.5 million for vessels not carrying hazardous substances as cargo or residue, unless the incident is caused by gross negligence, willful misconduct, or a violation of certain regulations, in which case liability is unlimited.
Similarly, in response to the Deepwater Horizon incident, the European Union has issued “Directive 2013/30/EU of the European Parliament and of the Council of June 12, 2013 on safety of offshore oil and gas operations.” The objective of this Directive is to reduce as far as possible the occurrence of major accidents relating to offshore oil and gas operations and to limit their consequences, thus increasing the protection of the marine environment and coastal economies against pollution, establishing minimum conditions for safe offshore exploration and exploitation of oil and gas and limiting possible disruptions to Union indigenous energy production, and to improve the response mechanisms in case of an accident. Member states must implement the Directive by July 19, 2015. As far as the environment is concerned, the UK has various new or amended regulations such as: the Offshore Petroleum Activities (Offshore Safety Directive) (Environmental Functions) Regulations 2015 (OSDEF), the 2015 amendments to the Merchant Shipping (Oil Pollution Preparedness, Response and Cooperation Convention) Regulations 1998 (OPRC 1998) and other environmental Directive requirements, specifically the Environmental Management System. The Offshore Petroleum Licensing (Offshore Safety Directive) Regulations 2015 will implement the licensing Directive requirements.
We currently maintain, for each of our owned vessels, insurance coverage against pollution liability risks in the amount of $1.0 billion per incident. The insured risks include penalties and fines as well as civil liabilities and expenses resulting from accidental pollution. However, this insurance coverage is subject to exclusions, deductibles and other terms and conditions. If any liabilities or expenses fall within an exclusion from coverage, or if damages from a catastrophic incident exceed the $1.0 billion limitation of coverage per incident, our cash flow, profitability and financial position could be adversely impacted.
Under OPA, an owner or operator of a fleet of vessels is required only to demonstrate evidence of financial responsibility in an amount sufficient to cover the vessel in the fleet having the greatest maximum liability under OPA. Under the self-insurance provisions, the shipowner or operator must have a net worth and working capital, measured in assets located in the United States against liabilities located anywhere in the world, that exceeds the applicable amountThe Certificate of financial responsibility. We have complied withFinancial Responsibility (“COFR”) program was created by the U.S. Coast Guard regulationsto ensure that vessels carrying oil as cargo or fuel in the U.S. waters have the financial ability to pay for removal costs and damages resulting from an oil spill or threat of a spill up to their liability limits, which are based on the gross tonnage of our vessels. These limits are subject to annual increases. It is possible for our liability limits to be exceeded as discussed above, which could expose us to unlimited liability.
A COFR is issued in the name of the company/person financially responsible in the event of a spill or threat of a spill and this is usually the owning company or operator of the vessel. Once they have shown the capability to pay clean-up and damage costs up to the liability limits required by providingOPA, and a certificate of responsibility from third party entities that are acceptableguaranty is issued and then provided to the U.S. Coast Guard, evidencing sufficient self-insurance.
The guarantor used throughout the Navios fleet is SIGCO/The Shipowners Insurance and Guaranty Company. SIGCO issues the guaranty noted above and confirms that if the responsible party does not respond to an oil spill or threat of a spill, the guarantor will be called upon to provide the funds to do so. This would be a rare occurrence because any guaranty issued by SIGCO is contingent on protection and indemnity cover.
The COFR is renewed on a three-year basis whereas the COFR guaranty is renewed annually. The U.S. Coast Guard’s regulations concerning certificatesGuard checks that a vessel has a valid COFR prior to or upon entering the U.S. waters. Some states have COFR requirements in addition to the federal requirement under OPA, which may be more stringent than the requirement under OPA.
Trading in the U.S. without a valid COFR may result in the vessel being detained and/or fined or prevented from entering U.S. ports until the COFR is in place, or possible seizure by, and forfeiture to, the United States We have provided satisfactory evidence of financial responsibility provide, in accordance with OPA, that claimants may bring suit directly against an insurer or guarantor that furnishes certificates of financial responsibility. In the event that such insurer or guarantor is sued directly, it is prohibited from asserting any contractual defense that it may have had against the responsible party and is limited to asserting those defenses available to the responsible party and the defense that the incident was caused by the willful misconduct of the responsible party. Certain organizations, which had typically provided certificates of financial responsibility underpre-OPA laws, including the major protection and indemnity organizations, have declined to furnish evidence of insurance for vessel owners and operators if they are subject to direct actions or required to waive insurance policy defenses. This requirement may have the effect of limiting the availability of the type of coverage required by theU.S. Coast Guard and could increase our costs of obtaining this insurance as well as the costsfor all of our competitors that also require such coverage.vessels and all have valid COFRs.
In addition to potential liability under OPA, specifically permits individual states tomay impose their own and more stringent liability regimes with regard to oil pollution incidents occurring within their boundaries, and some states’boundaries. Some states' environmental laws impose unlimited liability for oil spills. Inspills and contain more stringent financial responsibility and contingency planning requirements.
· | Comprehensive Environmental Response, Compensation and Liability Act |
The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) contains a liability regime and provides for cleanup, removal and natural resource damages for the release of hazardous substances (other than oil) whether on land or at sea. Under U.S. law, certain petroleum products which may be carried by our fleet are not considered “oil” and thus are hazardous substances regulated by CERCLA. Thus, in some cases, statesCERCLA could be applicable to potential cargo spills from our vessels rather than OPA.
Under CERCLA, the owner or operator of a vessel from which have enacted such legislation have not yet issued implementing regulations defining vessels owners’ responsibilities under these laws.
The United States Clean Water Act (“CWA”) prohibits the dischargethere is a release or threatened release of oil ora hazardous substances in U.S. navigable waterssubstance is liable for certain removal costs, other remedial action, damages due to injury of natural resources, and imposes strict liability in the form of penalties for unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under CERCLA. The EPA regulates the discharge of ballast water and other substances incidentalany required health assessment for releases that expose individuals to hazardous substances. Liability for any vessel that carries any hazardous substance as cargo or residue is limited to the normal operationgreater of vessels in U.S. waters using a Vessel General Permit (VGP) system pursuant to$300 per gross ton or $5 million. For any other vessel, the CWA, in order to combatlimitation is the riskgreater of harmful organisms that can travel in ballast water carried from foreign ports and to minimize the risk of water pollution through numerous specified effluent streams incidental to the normal operation of vessels. Compliance with the conditions of the VGP is required for commercial vessels 79 feet in length$300 per gross ton or longer (other than commercial fishing vessels.) On March 28, 2013 the EPA adopted the 2013 VGP which took effect on December 19, 2013. The 2013 VGP is valid for five years. This new 2013 VGP imposes a numeric standard to control the release ofnon-indigenous invasive species in ballast water discharges. On October 5, 2015, the U.S. Court of Appeals for the Second Circuit found the EPA was arbitrary and capricious in issuing the ballast water provisions of the VCP, finding EPA failed to adequately explain why stricter technology-based effluent standards should not be applied. The court instructed EPA to reconsider these issues but held the 2013 VCP remains in effect until EPA addresses the issues. If EPA establishes more stringent numeric standards for ballast water discharges, we may incur costs to modify our vessels to comply with new standards. In addition, through the CWA certification provisions that allow U.S. states to place additional conditions on use of the VGP within state waters, a number of states have proposed or implemented a variety of stricter ballast water requirements including, in some states, specific treatment standards.
Compliance with new U.S. federal and state requirements could require the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, and/or otherwise restrict our vessels from entering U.S. waters. Coast Guard regulations require commercial ships operating in U.S. waters to manage ballast water by meeting certain requirements, which include using a U.S. type-approved Ballast Water Management System (“BWMS”), temporarily using a foreign-type BWMS that has been accepted by the Coast Guard, using ballast water obtained from a U.S. Public Water System, discharge ballast water into a shore-side facility or not discharge ballast water within 12 nautical miles. Vessel owners/operators may request an extension to the compliance deadline by showing that, despite all efforts, it cannot comply with one of the approved systems or compliance methods. There are numerous foreign-approved Ballast Water Treatment Systems (“BWTS”) in the Coast Guard’s list of approved Alternate Management Systems. Importantly, on December 2, 2016, the Marine Safety Center issued the first Coast Guard type approved Ballast Water Management System (“BWMS”), called the Optimarin Ballast System (there are currently type-approved BWTS from three manufacturers). With this issuance, it may become more difficult to receive compliance extensions and thus could result in significant costs to install an approved BWTS; however, existing extensions will continue to be honored through the stated extension date.$500,000. Failure to comply with U.S. ballast water regulations, including installation of BWTS by September 8, 2017, couldthese requirements may result in civilpenalties of up to $58,328 per day.
These liability limits do not apply if the release resulted from willful misconduct or criminal finesgross negligence within the privity or penalties.
Further, any person who is liable for a release or threat of release, and who fails to provide removal or remedial action ordered by the EPA is subject to punitive damages in an amount equal to three times the costs incurred by the federal Superfund trust fund as a result of such failure to act.
· | Clean Air Act and Emissions Regulations |
The Federal Clean Air Act (“CAA”) requires the EPA to promulgatedevelop standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to CAA vapor control and recovery standards (“VCS”) for cleaning fuel tanks and conducting other operations in regulated port areas, and to CAA emissions standards forso-called “Category 3” marine diesel engines operating in U.S. waters. In April 2010, EPA adopted regulations implementing the provision of MARPOL Annex VI regarding emissions from Category 3 marine diesel engines. Under these regulations, both U.S. and foreign-flagged ships must comply with the applicable engine and fuel standards of Annex VI, including the stricter North America ECA standards which took effect in August 2012, when they enter U.S. ports or operate in most internal U.S. waters including the Great Lakes. Annex VI requirements are discussed in greater detail above under “International regulations to prevent pollution from ships.” We may incur costs to install control equipment on our vessels to comply with the new standards.areas.
Also, under the CAA, since 1990 the U.S. Coast Guard has regulated the safety of VCSs that are required under EPA and state rules. Our vessels operating in regulated port areas have installed VCSs that are compliant with EPA, state and U.S. Coast Guard requirements. On July 16, 2013, theThe U.S. Coast Guard has adopted regulations that made its VCS requirements more compatible with new EPA and Statestate regulations, reflected changes in VCS technology, and codified existing U.S. Coast Guard guidelines. We intend
· | State Laws |
In the United States, there is always a possibility that state law could be more stringent than federal law. Such is the case with certain state laws concerning marine environmental protection. A few examples include:
§ | California adopted more stringent low sulfur fuel requirements within California-regulated waters, requiring marine gas oil, thereby prohibiting exhaust gas cleaning systems. |
§ | California adopted regulatory amendments that implement the federal ballast water discharge standards for vessels arriving at California ports, establish operational monitoring and recordkeeping requirements for vessels that use a ballast water treatment system to meet ballast water discharge performance standards, and authorize California State Lands Commission staff to collect ballast water and sediment samples for research purposes and compliance assessments. These changes became effective on January 1, 2022. |
§ | California also requires the use of shore power or equivalent emissions reductions strategies for vessels at all California ports. |
§ | Vessel owners may in some instances incur liability on an even more stringent basis under state law in the particular state where the spillage occurred. For example, many U.S. states have unlimited liability and more stringent requirements for financial responsibility and contingency planning. |
§ | Most states do not have comprehensive laws relating specifically to the discharge of hazardous substances from vessels into state waters as they do for oil discharges, but many states have general water pollution prevention laws that apply to hazardous substances and other materials and others have broadly written hazardous substance cleanup laws based on CERCLA that would provide a cause of action for discharges of hazardous substances from vessels. |
· | Ship Safety and Security Laws |
With respect to comply with all applicable state and U.S. federal regulationsship safety, the requirements contained in the ports where our vessels call.
International laws governing civil liability for oil pollution damage
We operate a fleet of dry cargo vessels that are subject to national and international laws governing pollution from such vessels. Several international conventions impose and limit pollution liability from vessels. An owner of a tanker vessel carrying a cargo of “persistent oil” as defined by the International Convention for Civil Liability for Oil Pollution Damage (the “CLC”) is subject under the convention to strict liability for any pollution damage caused in a contracting state by an escape or discharge from cargo or bunker tanks. This liability is subject to a financial limit calculated by reference to the tonnage of the ship,SOLAS and the right to limit liability may be lost if the spill is caused by the shipowner’s intentional or reckless conduct. Liability may also be incurred under the CLC for a bunker spill from the vessel even when she is not carrying such cargo, but is in ballast.ISM Code generally have been implemented into U.S. law and are largely captured within U.S. Coast Guard regulations.
When a tanker is carrying clean oil products that do not constitute “persistent oil” that would be covered under the CLC, liability for any pollution damage will generally fall outside the CLC and will depend on other international conventions or domestic laws in the jurisdiction where the spillage occurs. The same principle applies to any pollution from the vessel in a jurisdiction which is not a party to the CLC. The CLC applies in over 100 jurisdictions around the world, but it does not applyShip security in the United States where the corresponding liability laws such as the OPA discussed above, are particularly stringent.
In 2001, the IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, which imposes strict liability on shipowners for pollution damage in jurisdictional waters of ratifying states caused by discharges of “bunker oil.” The Bunker Convention defines “bunker oil” as “any hydrocarbon mineral oil, including lubricating oil, used or intended to be used for the operation or propulsion of the ship, and any residues of such oil.” The Bunker Convention also requires registered owners of ships over a certain size to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended, or the 1976 Convention). The Bunker Convention entered into force on November 21, 2008, and as of February 7, 2017 had 83 contracting states. In other jurisdictions liability for spills or releases of oil from ships’ bunkers continues to be determinedis governed primarily by the national or other domestic laws in the jurisdiction where the events or damages occur.
Outside the United States, national laws generally provide for the owner to bear strict liability for pollution, subject to a right to limit liability under applicable national or international regimes for limitation of liability. The most widely applicable international regime limiting maritime pollution liability is the 1976 Convention. Rights
to limit liability under the 1976 Convention are forfeited where a spill is caused by a shipowners’ intentional or reckless conduct. Some states have ratified the 1996 LLMC Protocol to the 1976 Convention, which provides for liability limits substantially higher than those set forth in the 1976 Convention to apply in such states. Finally, some jurisdictions are not a party to either the 1976 Convention or the 1996 LLMC Protocol, and, therefore, shipowners’ rights to limit liability for maritime pollution in such jurisdictions may be uncertain.
Security Regulations
Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. On November 25, 2002, the MaritimeMarine Transportation Security Act of 2002 or(“MTSA”). MTSA came into effect. To implement certain portions of the MTSA, in July 2003, thewas implemented by U.S. Coast Guard issued regulations requiring the implementation ofthat imposed certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States. Similarly, in December 2002, amendments to
Because the International Convention for the Safety of Life at Sea, or SOLAS, created a new chapter of the convention dealing specifically with maritime security. The new chapter went into effect in July 2004, and imposes various detailed security obligations on vessels and port authorities, most of which are contained in the newly created ISPS Code. Among the various requirements are:
Furthermore, additional security measures could be required in the future which could have a significant financial impact on us. The U.S. Coast GuardMTSA regulations were intended to be aligned with international maritime security standards contained in the ISPS Code, the regulations exemptnon-U.S. non-U.S.-flag vessels from MTSA vessel security measures, provided such vessels have on board a valid International Ship Security Certificate or ISSC,(“ISSC”) that attests to the vessel’svessel's compliance with SOLAS security requirements and the ISPS Code. We
Applicable EU Laws
European regulations in the maritime sector are in general based on international law. However, since the Erika incident in 1999 and subsequent court decisions, the European Community has become increasingly active in the field of regulation of maritime safety and protection of the environment. It has been the driving force behind a number of amendments to MARPOL (including, for example, changes to accelerate the time-table for the phase-out of single hull tankers, and to prohibit the carriage in such tankers of heavy grades of oil), and if dissatisfied either with the extent of such amendments or with the time-table for their introduction it has been prepared to legislate on a unilateral basis.
In some instances, EU regulations may impose burdens and costs on shipowners and operators beyond the requirements under international rules and standards.
· | Liability for Pollution and Interaction between MARPOL and EU Law |
The EU has implemented certain EU-specific pollution laws, most notably a 2005 directive on ship-source pollution. This directive imposes imposing criminal sanctions for pollution caused by intent or recklessness (which would be an offense under MARPOL), as well as by “serious negligence.” The directive could therefore result in criminal liability being incurred in a European port state in circumstances where it may not be incurred in other jurisdictions.
· | Regulation of Emissions and Emissions Trading System |
The EU has a ship emissions regime. This regime primarily mirrors the IMO regime, but is more stringent than IMO regulations in some respects.
In December 2016, the EU signed into law the National Emissions Ceiling (“NEC”) Directive, which entered into force on December 31, 2016. The NEC required implementation by individual members States through particular laws in each State by June 30, 2018. The NEC aims to set stricter emissions limits on SO2, ammonia, non-methane volatile organic compounds, NOx and fine particulate (PM2.5) by setting new upper limits for emissions of these pollutants. While the NEC is not specifically directed toward the shipping industry, the EU specifically mentions the shipping industry in its announcement of the NEC as a contributor to emissions of PM2.5, SO2 and NOx.
In February 2017, EU member States met to consider independently regulating the shipping industry under the Emissions Trading System (“ETS”), which requires certain businesses to report on carbon emissions and provides for a credit trading system for carbon allowances. On February 15, 2017, European Parliament voted in favor of a bill to include maritime shipping in the ETS by 2023 if the IMO has not promulgated a comparable system by 2021. In November 2017, the Council of Ministers, EU's main decision-making body, agreed that Europe should act on shipping emissions from 2023 if the IMO fails to deliver effective global measures.
On 14 July 2021, the European Commission adopted a series of legislative proposals depicting how it intends to achieve climate neutrality in the EU by 2050, including the intermediate target of an at least 55% net reduction in greenhouse gas emissions by 2030. The package proposes to revise several pieces of EU climate legislation, including the EU ETS, Effort Sharing Regulation, transport and land use legislation, setting out in real terms the ways in which the Commission intends to reach EU climate targets under the European Green Deal. If implemented, the proposed legislation would require shipping companies to monitor, report, and verify their emissions, as well as purchase and surrender allowances (i.e., carbon credits).
· | Ship Recycling and Waste Shipment Regulations |
On December 31, 2018, EU-flagged vessels became subject to Regulation (EU) No. 1257/2013 of the European Parliament and of the Council of 20 November 2013 on ship recycling (the “EU Ship Recycling Regulation” or “ESRR”) and exempt from Regulation (EC) No. 1013/2006 of the European Parliament and of the Council of 14 June 2006 on shipments of waste (the “European Waste Shipment Regulation” or “EWSR”), which had previously governed their disposal and recycling. The EWSR continues to be applicable to Non-European Union Member State-flagged (“non-EU-flagged”) vessels. Commission Implementing Decision (EU) 2021/1211 of July 22, 2021 amending Implementing Decision (EU) 2016/2323 established the European List of ship recycling facilities pursuant to Regulation (EU) No 1257/2013 of the European Parliament which details additional approved EU and non-EU facilities.
As of December 31, 2020, the ESRR will implementbe applicable for vessels of 500 GT and above flying the various security measures addressedflag of an EU/EEA member state, or third party-flagged vessels calling at EU ports. Those vessels will be required to carry an Inventory Hazardous Materials certificate onboard.
Under the ESRR, commercial EU-flagged vessels of 500 gross tonnage and above may be recycled only at shipyards included on the European List of Authorised Ship Recycling Facilities (the “European List”). The European List presently includes eight facilities in Turkey, and one facility in the United States, among other European locations, but no facilities in the major ship recycling countries in Asia. The combined capacity of the European List facilities may prove insufficient to absorb the total recycling volume of EU-flagged vessels. This circumstance, taken in tandem with the possible decrease in cash sales, may result in longer wait times for divestment of recyclable vessels as well as downward pressure on the purchase prices offered by European List shipyards. Furthermore, facilities located in the MTSA, SOLASmajor ship recycling countries generally offer significantly higher vessel purchase prices, and as such, the ISPS Coderequirement that we utilize only European List shipyards may negatively impact revenue from the residual values of our vessels.
In addition, the EWSR requires that non-EU-flagged ships departing from European Union ports be recycled only in Organisation for Economic Cooperation and take measures forDevelopment (OECD) member countries. In March 2018, the Rotterdam District Court ruled that the sale of four recyclable vessels by third-party Dutch shipowner Seatrade to cash buyers, who then reflagged and resold the vessels to attainnon-OECD country recycling yards, were effectively indirect sales to non-OECD country yards, in violation of the EWSR. If European Union Member State courts widely adopt this analysis, it may negatively impact revenue from the residual values of our vessels and we may be subject to a heightened risk of non-compliance, due diligence obligations and costs in instances in which we sell older ships to cash buyers.
Maritime Decarbonization: Energy Efficiency and Greenhouse Gas Reduction
IMO’s Initial Strategy and Recent Developments
The IMO has an initial strategy and mandatory measures for an international greenhouse gas (“GHG”) reduction regime for a global industry sector, and recent activity indicates continued interest and regulation in this area in the coming years.
On April 13, 2018, the IMO’s Marine Environment Protection Committee (“MEPC”) 72 adopted resolution MEPC.304(72) on Initial IMO Strategy on reduction of GHG emissions from ships. The initial strategy aims to reduce GHG emissions from shipping by 40% by 2030 when compared to 2008 levels. No international regulations have been implemented to achieve such a reduction.
The IMO’s initial strategy targeted both reducing gross output and efficiency. In order to reduce emissions and increase shipboard efficiency, the IMO is coordinating ways to measure these approaches. This will be done in two ways. First, the technical aspects and design of vessels will be regulated by the new Energy Efficiency Existing Ships Index (“EEXI”) for existing ships. EEXI regulations exist for an “Attained EEXI” to be calculated for each ship, and a “Required EEXI” for specified ship types. Second, the operational aspect will be accomplished by way of the new Carbon Intensity Indicators (“CII”) index, which categorizes every ship’s operational efficiency based upon Data Collection Service information. Aspects of a vessel’s CII will need to be documented under the existing framework of the Ship Energy Efficiency Management Plan (“SEEMP”). On or before January 1, 2023, ships of 5,000 GT and above will need to revise their SEEMP.
In June 2021, MEPC 76 developed various short-term (2018–2023), medium-term (2023–2030), and long-term (2030–2050) measures. It approved a three-phase work plan aimed at supporting the Initial IMO Strategy on Reduction of GHG from Ships and its program of follow-up actions: Phase I – Collation and initial consideration of proposals for measures (Time period: Spring 2021 to Spring 2022); Phase II – Assessment and selection of measures to further develop (Time period: Spring 2022 to Spring 2023); and Phase III – Development of measures to be finalized with agreed target dates (Timeline: Target date(s) to be agreed in conjunction with the IMO Strategy on reduction of GHG emissions from ships).
With certain amendments to MARPOL Annex VI expected to enter into force on November 1, 2022, and requirements for EEXI and CII certification coming into effect from January 1, 2023, the first annual reporting will be completed in 2023, with the first rating given in 2024. A review clause requires the IMO to review the effectiveness of the implementation of the CII and EEXI requirements, by January 1, 2026, at the latest, and, if necessary, develop and adopt further amendments.
During the IMO MEPC 77 meeting held November 22–26, 2021, several proposals were advanced, including a two-dollar-per-ton bunker fee to pay for low-carbon propulsion research and an increase in the IMO’s decarbonization strategy of reducing emissions by 100 percent, instead of 50 percent, by 2050. However, neither proposal was adopted. MEPC 77 also addressed the need for correction factors for certain ship types and operation profiles to be developed, as well as the plan for previously developed SEEMP guidelines to be adopted at MEPC 78 in 2022. Member States pledged to continue discussing decarbonization efforts in 2022 and 2023. At MEPC 77, the MEPC agreed to initiate the revision of the Initial IMO Strategy on Reduction of GHG emissions from ships, recognizing the need to strengthen the ambition during the revision process in view of the urgency for all sectors to accelerate their efforts to reduce GHG emissions. A final draft Revised IMO GHG Strategy would be considered by MEPC 80 (scheduled to meet in spring 2023), with a view to adoption.
The next MEPC meeting, MEPC 78, has been tentatively scheduled to take place from 6 to 10 June 2022 and MEPC 79 from 12 to 16 December 2022.
Green House Gas (GHG) Regulations
In February 2005, the Kyoto Protocol to the United Nations Framework Convention on Climate Change (the “UNFCCC”) entered into force. Pursuant to the Kyoto Protocol, adopting countries are required to implement national programs to reduce emissions of certain greenhouse gases, generally referred to as GHGs, which are suspected of contributing to global warming. Currently, GHG emissions from international shipping do not come under the Kyoto Protocol. As a result, the IMO has developed and intends to continue developing limits on GHG emissions before 2023. The IMO is also considering its position on market-based measures through an expert working group.
Among the numerous proposals being considered by the working group are the following: a port State levy based on the amount of fuel consumed by the vessel on its voyage to the port in question; and a global emissions trading scheme which would allocate emissions allowances and set an emissions cap, among others. The IMO’s goal is to reduce total annual GHG emissions by at least 50% by 2050 compared to 2008, while at the same time, pursuing efforts towards phasing them out entirely.
Additionally, jurisdictions throughout the world have examined means of regulating GHGs:
Some attention has been paid to GHGs in Europe. On June 28, 2013, the European Commission (“EC”) adopted a communication setting out a strategy for progressively including GHG emissions from maritime transport in the EU’s policy for reducing its overall GHG emissions. The first step proposed by the EC was an EU Regulation to an EU-wide system for the monitoring, reporting and verification of carbon dioxide emissions from large ships starting in 2018. The Regulation was adopted on April 29, 2015 and took effect on July 1, 2015, with monitoring, reporting and verification requirements beginning on January 1, 2018. The EC also adopted an Implementing Regulation, which entered into force in November 2016, setting templates for monitoring plans, emissions reports, and compliance documents pursuant to Regulation 2015/757.
In the United States, there are varying approaches on whether to add additional regulations on GHG emissions and reducing GHGs by at least 50 percent below 2030 is a key priority of U.S. President’s Administration. In January 2020, the Transportation and Infrastructure Committee of the U.S. House of Representatives (the “House”) held a hearing on “Decarbonizing the Maritime Industry,” which highlighted alleged health impacts of GHG, the IMO’s goal of decarbonization, and what next steps can be taken in reducing emissions from vessels. There also have been several bills introduced in the U.S. Congress regarding the reduction of emissions by ships. To date, none of these bills have been passed or signed into law. For example, on March 2, 2021, the CLEAN Future Act was introduced in the House Committee on Energy and Commerce. The bill would establish an interim goal to reduce all GHG emissions to at least 50% below 2005 levels by 2030, as well as a national goal to achieve net-zero greenhouse gas emissions by 2050. The bill also includes sections on reducing port emissions. On April 15, 2021, a bill entitled Expanding the Maritime Environmental and Technical Assistance Program was introduced into the U.S. Senate. This bill would authorize appropriations to support the maritime environmental and technical assistance program of the U.S. Maritime Administration, including activities related to technologies that support port and vessel air emissions reductions and to support zero emissions technologies. Additionally, the bill would require the activities used to inform the policy decisions of the United States related to domestic regulations and to the United States position on matters before the IMO. Additionally, on June 8, 2021, House Natural Resources Committee Chair Raúl Grijalva (D-AZ) introduced the Ocean-Based Climate Solutions Act (“OBCSA”) aimed at addressing the ocean impacts of climate change. Notably, OBSCA contains monitoring, reporting, and verification requirements of GHG emissions for all vessels over 5,000 gross tons. Among other things, Section 1201 of the bill would require a vessel to measure and monitor on a per-voyage basis and report on an annual basis: total GHG emitted by the vessel inside the EEZ; average GHG per transport work; and average GHG emissions per distance. Acceptable GHG monitoring and measuring methods in the bill include bunker delivery note and periodic stocktakes of fuel tanks, bunker fuel tank monitoring on board, flowmeters for applicable combustion processes, and direct CO2 emissions measurements. We are monitoring the status of this proposed legislation and its potential impacts on our business.
Economic Sanctions and Compliance
We constantly monitor developments in the U.S., the EU and other jurisdictions that maintain economic sanctions against Iran, Russian entities, Venezuela, other countries, and other sanctions targets, including developments in implementation and enforcement of such sanctions programs. Expansion of sanctions programs, embargoes and other restrictions in the future (including additional designations of countries and persons subject to sanctions), or modifications in how existing sanctions are interpreted or enforced, could prevent our vessels from calling in ports in sanctioned countries or could limit their cargoes.
Iran Sanctions
Prior to January 2016, the scope of sanctions imposed against Iran, the government of Iran and persons engaging in certain activities or doing certain business with and relating to Iran was expanded by a number of jurisdictions, including the U.S., the EU and Canada. In 2010, the U.S. enacted the Comprehensive Iran Sanctions Accountability and Divestment Act (“CISADA”), which expanded the scope of the former Iran Sanctions Act. The scope of U.S. sanctions against Iran were expanded subsequent to CISADA by, among other U.S. laws, the National Defense Authorization Act of 2012 (the “2012 NDAA”), the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”), and the Iran Freedom and Counter-Proliferation Act of 2012 (“IFCA”).The foregoing laws, among other things, expanded the application of prohibitions to non-U.S. companies such as our company and to transactions with no U.S. nexus, and introduced limits on the ability of non-U.S. companies and other non-U.S. persons to do business or trade with Iran when such activities relate to specific activities such as investment in Iran, the supply or export of refined petroleum or refined petroleum products and certain other goods to Iran, the supply and delivery of goods to Iran which could enhance Iran’s petroleum or energy sectors, and the transportation of crude oil from Iran to countries which do not enjoy Iran crude oil sanctions waivers (Navios Acquisition’s tankers called in Iran but did not engage in the prohibited activities specifically identified by these sanctions).
U.S. economic sanctions on Iran fall into two general categories: “Primary” sanctions, which prohibit U.S. persons or U.S. companies and their foreign branches, U.S. citizens, foreign owned or controlled subsidiaries, U.S. permanent residents, persons within the territory of the U.S. from engaging in all direct and indirect trade and other transactions with Iran without U.S. government authorization, and U.S. “secondary” sanctions, which are mainly nuclear-related sanctions. While most of the U.S. nuclear-related sanctions with respect to Iran (including, inter alia, under CISADA, ITRA, and IFCA) and the EU sanctions on Iran were initially lifted on January 16, 2016 through the implementation of the Joint Comprehensive Plan of Action (the “JCPOA”) entered into between the permanent members of the United Nations Security Council (China, France, Russia, the U.K. and the U.S.) and Germany, there are still certain limitations under that sanctions framework in place with which we need to comply. The primary sanctions with which U.S. persons or transactions with a U.S. nexus must comply are still in force and have not been lifted or relaxed. However, the following sanctions which were lifted under the JCPOA were reimposed (“snapped back”) on May 8, 2018 as a result of the U.S. withdrawal from the JCPOA.
Following a 180-day wind-down period ending on November 4, 2018, the U.S. government re-imposed the following sanctions that were lifted pursuant to the JCPOA, including sanctions on associated services related to the activities below:
In two Executive Orders issued in 2019, U.S. secondary sanctions against Iran were expanded to include the Iron, Steel, Aluminum, and Copper Sectors of Iran. The new, additional sanctions, which are pursuant to an Executive Order issued on January 10, 2020, may be imposed against any individual owning, operating, trading with, or assisting sectors of the Iranian economy including construction, manufacturing, textiles, and mining. As a result, under U.S. sanctions laws, trade with Iran in almost all industry sectors is now off limits for U.S. as well as non-U.S. persons, except for trade in medicine/medical items and food and agricultural commodities.
The new sanctions imposed in 2020 also authorize the imposition of sanctions on a foreign financial institution upon a determination that the foreign financial institution has, on or after January 10, 2020, knowingly conducted or facilitated any significant financial transaction: i) for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with a prohibited sector of the Iranian economy, or (ii) for or on behalf of any person whose property and interests in property are blocked.
U.S. Iran sanctions also prohibit U.S. as well as non-U.S. persons from engaging in significant transactions with any individual or entity that the U.S. Government has designated as an Iran sanctions target, e.g., SDNs.
EU sanctions remain in place in relation to the export of arms and military goods listed in the EU common military list, missiles-related goods and items that might be used for internal repression. The main nuclear-related EU sanctions which remain in place include restrictions on:
The above EU sanctions activities can only be engaged if prior authorization (granted on a case-by-case basis) is obtained. The remaining restrictions apply to the sale, supply, transfer or export, directly or indirectly to any Iranian person/for use in Iran, as well as the provision of technical assistance, financing or financial assistance in relation to the restricted activity. Certain individuals and entities remain sanctioned and the prohibition to make available, directly or indirectly, economic resources or assets to or for the benefit of sanctioned parties remains. “Economic resources” is widely defined and it remains prohibited to provide vessels for a fixture from which a sanctioned party (or parties related to a sanctioned party) directly or indirectly benefits. It is therefore still necessary to carry out due diligence on the parties and cargoes involved in fixtures involving Iran.
Russia Sanctions
As a result of the crisis in Ukraine and the annexation of Crimea by Russia in 2014, both the U.S. and the EU implemented sanctions in 2014 against Crimea and certain Russian individuals and entities. These sanctions which are still in force have been greatly expanded and fortified due to Russia’s invasion of Ukraine in February 2022.
The 2014 Sanctions
EU Sanctions - 2014
The EU has imposed travel bans and asset freezes on certain Russian persons and entities pursuant to which it is prohibited to make available, directly or indirectly, economic resources or assets to or for the benefit of the sanctioned parties. Certain Russian ports including Kerch Commercial Seaport; Sevastopol Commercial Seaport and Port Feodosia are subject to the above restrictions. Other entities are subject to sectoral sanctions, which limit the provision of equity financing and loans to the listed entities.
In addition, various restrictions on trade have been implemented which, amongst others, include a prohibition on the import into the EU of goods originating in Crimea or Sevastopol as well as restrictions on trade in certain dual-use and military items and restrictions in relation to various items of technology associated with the oil industry for use in deep water exploration and production, Arctic oil exploration and production or shale oil projects in Russia. As such, it is important to carry out due diligence on the parties and cargoes involved in fixtures relating to Russia.
US Sanctions - 2014
The U.S. has imposed sanctions against certain designated Russian entities and individuals (“U.S. Russian Sanctions Targets”). These sanctions block the property and all interests in property of the U.S. Russian Sanctions Targets. This effectively prohibits U.S. persons from engaging in any economic or commercial transactions with the U.S. Russian Sanctions Targets unless the same are authorized by the U.S. Treasury Department. Similar to EU sanctions, U.S. sanctions also entail restrictions on certain exports from the U.S. to Russia and the imposition of Sectoral Sanctions, which restrict the provision of equity and debt financing to designated Russian entities. While the prohibitions of these sanctions are not directly applicable to us, we have compliance measures in place to guard against transactions with U.S. Russian Sanctions Targets, which may involve the U.S. or U.S. persons and thus implicate prohibitions. The U.S. also maintains prohibitions on trade with Crimea.
With respect to Russia, the U.S. has also taken a number of steps toward implementing aspects of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), a major piece of sanctions legislation.
Under CAATSA, the U.S. may impose secondary sanctions relating to Russia’s energy export pipelines and investments in special Russian crude oil projects. CAATSA has a provision that requires the U.S. President to sanction persons who knowingly engage in significant transactions with parties affiliated with Russia’s defense and intelligence sectors.
The February and March 2022 Sanctions
In response to Russia’s threats against, and subsequent invasion of Ukraine, beginning in February 2022, the United States, the EU, the United Kingdom, Canada and other nations have imposed expanded economic sanctions against certain Russian individuals, e ntities and business sectors. Among other things, these sanctions suspend the use of SWIFT for certain credit markets, forbid Russian aircraft from flying over NATO and other airspace, and prohibit the export of sensitive, high-technology items to Russia.
EU Sanctions - 2022
Since February 2022, the EU has widened sanctions on those linked to Russia and in particular the Government of Russia with the introduction of a number of EU Regulations. These restrictions include:
US Sanctions 2022
Covered Regions
The sanctions imposed by the United States in February and March 2022 prohibit the following:
On February 21, 2022, United States President issued executive order No. 14065 (the “Executive Order”), which prohibits all dealings in property within the United States, or under control of any United States person (wherever located), of the following:
The Executive Order also bans the entry into the United States of the foregoing persons.
The main additional sanctions that the United States has imposed are as follows:
• | Designated politicians, officials and oligarchs, including Russian President : freezing of assets, prohibition of transactions with designated persons, travel ban against certain persons. Also includes members of the State Duma of the Federal Assembly of the Russian Federation. |
Other Measures
UK Sanctions - 2022
As an EU member-state, the UK participated in the EU sanctions against Russia. Following the UK’s departure from the EU, the UK enacted a number of then-existing EU sanctions as the law in the UK. The UK may also impose additional sanctions on that apply to UK persons and those within UK jurisdiction.
The UK sanctions adopted in February 2022 include restrictions on the following:
Venezuela-Related Sanctions
The U.S. sanctions with respect to Venezuela prohibit various financial and other transactions and activities, dealings with designated Venezuelan government officials and entities, curtail the provision of financing to Petroleos de Venezuela, S.A. (“PdVSA”) and other government entities, and they also prohibit U.S. persons from purchasing oil from PdVSA. Additionally, U.S. (blocking) sanctions may be imposed on any (non-U.S.) person that has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, or any blocked entity such as PdVSA.
EU sanctions against Venezuela are primarily governed by EU Council Regulation 2017/2063 of 13 November 2017 concerning restrictive measures in view of the situation in Venezuela. This includes financial sanctions and restrictions on listed persons and an, arms embargo, and related prohibitions and restrictions including restrictions related to internal repression.
U.S. Executive Orders
The following Executive Orders govern the U.S. sanctions with respect to Venezuela:
Other U.S. Economic Sanctions Targets
In addition to Iran and certain Russian entities and individuals, as indicated above, the U.S. maintains comprehensive economic sanctions against Syria, Cuba, North Korea, and sanctions against entities and individuals (such as entities and individuals in the foregoing targeted countries, designated terrorists, narcotics traffickers) whose names appear on the List of SDNs and Blocked Persons maintained by the U.S. Treasury Department (collectively, the “Sanctions Targets”). We are subject to the prohibitions of these sanctions to the extent that any transaction or activity we engage in involves Sanctions Targets and a U.S. person or otherwise has a nexus to the U.S.
Other EU Economic Sanctions Targets
The EU also maintains sanctions against Syria, North Korea, Belarus and certain other countries and against individuals listed by the EU. These restrictions apply to our operations and as such, to the extent that these countries may be involved in any business it is important to carry out checks to ensure compliance with all applicable security requirements within the prescribed time periods. Although management does not believe these additional requirements will have a material financial impactrelevant restrictions and to carry out due diligence checks on our operations, there can be no assurance that there will not be an interruption in operations to bring vessels into compliance with the applicable requirementscounterparties and any such interruption could cause a decrease in charter revenues. Furthermore, additional security measures could be required in the future which could have a significant financial impact on us.cargoes.
Taxation of the Partnership
United States Taxation
The following is a discussion of the material U.S. federal income tax considerations applicable to us. This discussion is based upon provisions of the Code, final and temporary regulations thereunder (“Treasury Regulations”), and administrative rulings and court decisions, all as in effect currently and during our year ended December 31, 20162021 and all of which are subject to change, possibly with retroactive effect. Changes in these authorities may cause the tax consequences to vary substantially from the consequences described below. The following discussion is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income tax considerations applicable to us.
Election to be Treated as a Corporation: We have elected to be treated as a corporation for U.S. federal income tax purposes. As such, we are subject to U.S. federal income tax on our income to the extent it is from U.S. sources or otherwise is effectively connected with the conduct of a trade or business in the Unites States as discussed below.
Taxation of Operating Income: Substantially all of our gross income is attributable to the transportation of drybulk and related products.international shipping. For this purpose, gross income attributable to transportation (“Transportation Income”) includes income derived from, or in connection with, the use, the hiring for use, or the leasing for use (if any) of a vessel to transport cargo, or the performance of services directly related to the use of any vessel to transport cargo, and thus includes both time charter income and bareboat charter income (if any).
Transportation Income that is attributable to transportation that either begins or ends, but that does not both begin and end in the United States (“U.S. Source International Transportation Income”) is considered to be 50.0% derived from sources within the United States. Transportation Income attributable to transportation that both begins and ends in the United States (“U.S. Source Domestic Transportation Income”) is considered to be 100.0% derived from sources within the United States. Transportation Income attributable to transportation exclusively betweennon-U.S. destinations is considered to be 100.0% derived from sources outside the United States. Transportation Income derived from sources outside the United States generally is not subject to U.S. federal income tax.
We believe that we did not earn any U.S. Source Domestic Transportation Income for our fiscal year ended December 31, 20162021 and expect that we will not earn any such income for future years. However, certain of our activities gave rise to U.S. Source International Transportation Income, and future expansion of our operations could result in an increase in the amount of U.S. Source International Transportation Income, which generally would be subject to U.S. federal income taxation, unless the exemption from U.S. federal income taxation under Section 883 of the Code (the “Section 883 Exemption”) applied.
The Section 883 Exemption: In general, the Section 883 Exemption provides that if anon-U.S. corporation satisfies the requirements of Section 883 of the Code and the Treasury Regulations thereunder (the “Section 883 Regulations”), it will not be subject to the net basis and branch profit taxes or the 4.0% gross basis tax described below on its U.S. Source International Transportation Income. The Section 883 Exemption applies only to U.S. Source International Transportation Income and does not apply to U.S. Source Domestic Transportation Income. We qualify for the Section 883 Exemption if, among other matters, we meet the following three requirements:
We are organized under the laws of the Republic of the Marshall Islands. The U.S. Treasury Department has recognized the Republic of the Marshall Islands as a jurisdiction that grants an Equivalent Exemption with respect to the type of income we have earned and are expected to earn. Consequently, our U.S. Source International Transportation Income (including for this purpose, any such income earned by our subsidiaries, that have elected to be disregarded as entities separate from us for U.S. federal income tax purposes) will be exempt from U.S. federal income taxation provided we meet the Publicly Traded Test or the Qualified Shareholder Stock Ownership Test and we satisfy certain substantiation, reporting and other requirements.
In order to meet the “Publicly Traded Test”, the equity interests in thenon-U.S. corporation at issue must be “primarily traded” and “regularly traded” on an established securities market either in the United States or in a jurisdiction outside the United States that grants an Equivalent Exemption. The Section 883 Regulations generally provide, in pertinent part, that a class of equity interests in anon-U.S. corporation will be considered to be “primarily traded” on an established securities market in a given country if the number of units of such class that are traded during any taxable year on all established securities markets in that country exceeds the number of units in such class that are traded during that year on established securities markets in any other single country.
Equity interests in anon-U.S. corporation will be considered to be “regularly traded” on an established securities market under the Section 883 Regulations provided one or more classes of such equity interests representing more than 50.0% of the aggregate vote and value of all of the outstanding equity interests in thenon-U.S. corporation satisfy certain listing and trading volume requirements. These listing and trading volume requirements are satisfied with respect to a class of equity interests listed on an established securities market provided trades in such class are effected, other than in de minimis quantities, on such market on at least 60 days during the taxable year and the aggregate number of units in such class that are traded on such market or markets during the taxable year are at least 10% of the average number of units outstanding in that class during the taxable year (with special rules for short taxable years). In addition, a class of equity interests traded on an established securities market in the United States will be considered to satisfy the listing and trading volume requirements if the equity interests in such class are “regularly quoted by dealers making a market” in such class (within the meaning of the Section 883 Regulations). Notwithstanding these rules, a class of equity that would otherwise be treated as “regularly traded” on an established securities market will not be so treated if, for more than half of the number of days during the taxable year, one or more “5.0% unitholders” (i.e., unitholders owning, actually or constructively, at least 5.0% of the vote and value of that class) own in the aggregate 50.0% or more of the vote and value of that class (the “Closely Held Block Exception”), unless the corporation can establish that a sufficient proportion of such 5.0% unitholders are Qualified Shareholders (as defined below) so as to preclude other persons who are 5.0% unitholders from owning 50.0% or more of the value of that class for more than half the days during the taxable year.
Because substantially all of our common units are and have been traded on the NYSE, which is considered to be an established securities market, our common units are and have been “primarily traded” on an established securities market for purposes of the Publicly Traded Test.
Further, although the matter is not free from doubt, based upon our expected cash flow and distributions on our outstanding equity interests, we believe that our common units represented more than 50.0% of the total value of all of our outstanding equity interests, and we believe that we satisfied the trading volume requirements described previously for our fiscal year ended December 31, 2016.2021. We believe that we did not lose eligibility for the Section 883 Exemption as a result of the Closely Held Block Exception for such year, and consequently, we believe we satisfied the Publicly Traded Test for our fiscal year ended December 31, 2016.2021.
While there can be no assurance that we will continue to satisfy the requirements for the Publicly Traded Test in the future, and our board of directors could determine that it is in our best interests to take an action that would result in our not being able to satisfy the Publicly Traded Test, we presently expect, subject to the possibility that our common units may be delisted by a qualifying exchange, to continue to satisfy the requirements for the Publicly Traded Test and the Section 883 Exemption for future years. Please see below for a discussion of the consequences in the event we do not satisfy the Publicly Traded Test or otherwise fail to qualify for the Section 883 Exemption.
Please also see the risk factor entitled “Item 3. D. Risk Factors-Risks Relating to Our Units-The New York Stock Exchange may delist our securities from trading on its exchange, which could limit your ability to trade our securities and subject us to additional trading restrictions”.
The Net Basis Tax and Branch Profits Tax: If we earn U.S. Source International Transportation Income and the Section 883 Exemption does not apply, the U.S. source portion of such income may be treated as effectively connected with the conduct of a trade or business in the United States (“Effectively Connected Income”) if we have a fixed place of business in the United States and substantially all of our U.S. Source International Transportation Income is attributable to regularly scheduled transportation or, in the case of bareboat charter income (if any), is attributable to a fixed place of business in the United States.
We believe that, for our fiscal year ended December 31, 2016,2021, none of our U.S. Source International Transportation Income was attributable to regularly scheduled transportation or received pursuant to bareboat charters. As a result, we believe that none of our U.S. Source International Transportation Income for such year would be treated as Effectively Connected Income even in the event we did not qualify for the Section 883 Exemption. However, there is no assurance that we will not earn income pursuant to regularly scheduled transportation or bareboat charters attributable to a fixed place of business in the United States in the future,
which would result in such income being treated as Effectively Connected Income. In addition, any U.S. Source Domestic Transportation Income may be treated as Effectively Connected Income. Any income we earn that is treated as Effectively Connected Income would be subject to U.S. federal corporate income tax (the highest statutory rate is currently 35.0%)(presently imposed at a 21.0% rate) as well as 30.0% branch profits tax imposed under Section 884 of the Code. In addition, a 30.0% branch interest tax could be imposed on certain interest paid or deemed paid by us.
On the sale of a vessel that has produced Effectively Connected Income, we could be subject to the net basis corporate income tax as well as branch profits tax with respect to the gain recognized up to the amount of certain prior deductions for depreciation that reduced Effectively Connected Income. Otherwise, we would not be subject to U.S. federal income tax with respect to gain realized on the sale of a vessel, provided the gain is not attributable to an office or other fixed place of business maintained by us in the United States under U.S. federal income tax principles.
The 4.0% Gross Basis Tax: If the Section 883 Exemption does not apply and the net basis tax does not apply, we would be subject to a 4.0% U.S. federal income tax on the U.S. source portion of our gross U.S. Source International Transportation Income, without benefit of deductions.
Marshall Islands Taxation
Based on the opinion of Reeder and Simpson, P.C., our counsel as to matters of the law of the Republic of the Marshall Islands, because we, our operating subsidiary and our controlled affiliates do not, and do not expect to, conduct business or operations in the Republic of the Marshall Islands, neither we nor our controlled affiliates will be subject to income, capital gains, profits or other taxation under current Marshall Islands law. As a result, distributions by our operating subsidiary and our controlled affiliates to us will not be subject to Marshall Islands taxation.
Other Tax Jurisdictions
Certain of Navios Partners’Partners' subsidiaries are incorporated in countries which impose taxes, such as Malta, however such taxes are immaterial to Navios Partners’Partners' operations.
In accordance with the currently applicable Greek law, foreign flagged vessels that are managed by Greek or foreign ship management companies having established an office in Greece on the basis of the applicable licensing regime are subject to dutiestax liability towards the Greek state which areis calculated on the basis of the relevant vessel’svessel's tonnage. A tax credit is recognized for tonnage tax (or similar tax) paid abroad, up to the amount of the tax due in Greece. The owner, the manager and the bareboat charterer or the financial lessee (where applicable) are liable to pay the tax due to the Greek state. The payment of said dutiestax exhausts the tax liability of the foreign ship owning company, the bareboat charterer, the financial lessee (as applicable) and the relevant manager against any tax, duty, charge or contribution payable on income from the exploitation of the foreign flagged vessel.vessel outside Greece.
C. Organizational Structure
Please read exhibit 8.1 to this Annual Report for a list of our significant subsidiaries as of December 31, 2016.2021.
Affiliates included in the financial statements accounted for under the equity method:
In the consolidated financial statements of Navios Partners, Navios Europe Inc. (“Navios Europe I”), in which Navios Partners has an ownership interest of 5.0%, isthe following entities are included as an affiliateaffiliates and isare accounted for under the equity method for such periods during whichperiods: (i) Navios Containers and its subsidiaries (with an ownership interest 35.7% as of December 31, 2020). Following the completion of the NMCI Merger, as of March 31, 2021, Navios Containers was acquired by Navios Partners and ownership was 100%; (ii) Navios Europe I was an affiliate of Navios Partners. As of December 31, 2016, Navios Partners had no effective voting interest in Navios Europe I.
In the consolidated financial statements of Navios Partners, Navios Europe (II) Inc. (“Navios Europe II”), in which Navios Partners hasand its subsidiaries with an ownership interest of 5.0%, is included as an affiliate5% through the date of its liquidation on December 13, 2019; and is accounted for under the equity method, for such periods during which(iii) Navios Europe II wasand its subsidiaries with an affiliateownership interest of Navios Partners. As5% through the date of December 31, 2016, Navios Partners had no effective voting interest in Navios Europe II.its liquidation on June 29, 2020.
D. Property, plants and equipment
Other than our vessels, we do not have any material property, plants or equipment.
Item 4A. Unresolved Staff Comments
Not applicable.None
Item 5. Operating and Financial Review and Prospects
The following is a discussion of Navios Partners’ financial condition and results of operations for each of the fiscal years ended December 31, 2021, 2020 and 2019. Navios Partners’ financial statements have been prepared in accordance with U.S. GAAP. You should read this section together with the consolidated financial statements and the accompanying notes to those financial statements, which are included in this document.
This report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. These forward-looking statements are based on Navios Partners’ current expectations and observations. Included among the factors that, in our view, could cause actual results to differ materially from the forward-looking statements contained in this report are those discussed under “Risk Factors” and “Forward-Looking Statements”.
Overview
We are an international owner and operator of dry cargo and tanker vessels, formed in August 2007 by Navios Holdings, a vertically integrated seaborne shipping company with over 60 years of operating history in the dry cargo shipping industry.Holdings. We have been a public company since November 2007.
Equity Offerings and Issuances
On November 18, 2016, Navios Partners entered into a Continuous Offering Program Sales Agreement, pursuant to which Navios Partners may issue and sell from time to time through its agent common units representing limited partner interests having an aggregate offering priceAs of up to $25.0 million. During the year ended December 31, 2016, Navios Partners issued 244,201April 1, 2022, there were outstanding 30,197,087 common units and received net proceeds of $0.4 million. Pursuant to the issuance of the common units, Navios Partners issued 4,984 general partnership units to its general partner in order to maintain its 2.0% general partner interest. The net proceeds from the issuance of the general partnership units were $0.01 million.
On February 11, 2015, Navios Partners completed an equity offering, pursuant to which it issued 4,600,000 common units at $13.09 per unit and raised gross proceeds of $60.2 million (excluding the general partner contribution) to fund its fleet expansion. Simultaneously, Navios Partners completed a private placement of 1,120,547 common units and 22,868 general partner units at $13.09 per unit to Navios Holdings, raising additional gross proceeds of $15.0 million.
On February 14, 2014, Navios Partners completed an equity offering, pursuant to which it issued 5,500,000 common units at $17.30 per unit and raised gross proceeds of $95.2 million (excluding the general partner contribution) to fund its fleet expansion. On February 18, 2014, Navios Partners completed the exercise of the option previously granted to the unitholders in connection with the offering and issued 825,000 common units at $17.30 per unit and raised additional gross proceeds of $14.3 million.
As of March 10, 2017, there were outstanding: 86,564,353 common units and 1,766,624622,555 general partnership units. Navios Holdings currently owns a 19.4%an approximately 10.3% ownership interest in Navios Partners which includes the 2.0%and Olympos Maritime Ltd, our general partner, interest.through its ownership of all the general partner units currently owns a 2.0% ownership interest in Navios Partners based on all outstanding common units and general partner units.
Please see “Item 4. —- Information on the Partnership”.
Fleet DevelopmentDevelopments
Upon acquisition of the majority of outstanding stock of Navios Acquisition and the completion of the NMCI Merger, the fleets of Navios Acquisition and Navios Containers were included in Navios Partners’ owned fleet.
In February 2022, Navios Partners agreed to sell the Navios Utmost and the Navios Unite, two 2006-built Containerships of 8,204 TEU each, to an unrelated third party for an aggregate sales price of $220.0 million. The sale is expected to be completed during the second half of 2022 and the gain on sale of vessels is expected to be approximately $144.3 million.
On January 12, 2017,October 29, 2021, Navios Partners sold the Company completed the sale of the MSC Cristina,Navios Altair I, a 2011 South Korean-built Container2006-built Panamax vessel of 13,100 TEU. The vessel was sold74,475 dwt, to an unrelated third party for a total net salesales price of $125.0$13.5 million.
On December 30, 2016,August 16, 2021, Navios Partners acquired fromsold the Harmony N, a 2006-built Containership of 2,824 TEU, to an unrelated third party for a net sales price of $28.4 million.
On August 13, 2021, Navios Partners sold the Navios Beaufiks,Azalea, a 2004 Japanese-built2005-built Panamax vessel of 74,759 dwt, to an unrelated third party for a net sales price of $12.6 million.
On July 31, 2021, Navios Partners sold the Navios Dedication, a 2008-built Containership of 4,250 TEU to an unrelated third party for a net sales price of $33.9 million.
On July 9, 2021, Navios Partners acquired the Navios Azimuth, a 2011-built Capesize vessel of 180,310179,169 dwt, from its affiliate, Navios Holdings, for an acquisition cost of $15.3$30.0 million.
On April 22, 2015,June 30, 2021, Navios Partners acquired the Navios Ray, a 2012-built Capesize vessel of 179,515 dwt and the Navios Bonavis, a 2009-built Capesize vessel of 180,022 dwt, from its affiliate, Navios Holdings, for an unrelated third partyaggregate purchase price of $58.0 million.
On June 4, 2021, Navios Partners acquired the MSC Cristina,Navios Koyo, a 2011-built ContainerCapesize vessel of 13,100 TEU,181,415 dwt, from its affiliate, Navios Holdings, for an acquisition cost of $147.8$28.6 million of which $14.8(including $0.1 million relates to vessel deposits paid and transferred during the year.capitalized expenses).
On October 28, 2014,May 10, 2021, Navios Partners acquired the Ete N, a 2012-built Containership of 2,782 TEU, the Fleur N, a 2012-built Containership of 2,782 TEU and the Spectrum N, a 2009-built Containership of 2,546 TEU from Navios Acquisition, for an unrelated third partyaggregate purchase price of $55.5 million.
On March 30, 2021, Navios Partners acquired the YM Unity,Navios Avior, a 2006-built Container2012 built Panamax vessel of 8,204 TEU,81,355 dwt, and the Navios Centaurus, a 2012 built Panamax vessel of 81,472 dwt, from its affiliate, Navios Holdings, for an acquisition cost of $59.1 million.$39.3 million (including $0.1 million capitalized expenses).
On August 29, 2014, Navios Partners acquired fromMarch 25, 2021, the Company sold the Joie N, a 2011-built Ultra-Handymax vessel of 56,557 dwt, to an unrelated third party, for a net sales price of $8.2 million.
On February 10, 2021, the YM Utmost,Company sold the Castor N, a 2006-built Container vessel2007-built Containership of 8,2043,091 TEU to an unrelated third party for an acquisition costa net sales price of $59.1$8.9 million.
On January 18, 2014, Navios Partners acquired from28, 2021, the Company sold the Solar N, a 2006-built Containership of 3,398 TEU to an unrelated third party the Navios Sun,for a 2005-built Panamax vesselnet sales price of 76,619 dwt, for an acquisition cost of $16.2$11.1 million.
On January 7, 2014, Navios Partners acquired from13, 2021, the Company sold the Esperanza N, a 2008-built Containership of 2,007 TEU to an unrelated third party for a net sales price of $4.6 million.
On December 10, 2020, Navios Partners sold of the Navios La Paix,Soleil, a 2009-built Ultra–Handymax vessel of 57,337 dwt, to an unrelated third party for a net sales price of $8.2 million.
On September 30, 2020, Navios Partners acquired the Navios Gem, a 2014-built Ultra-HandymaxCapesize vessel of 61,485181,336 dwt and the Navios Victory, a 2014-built Panamax vessel of 77,095 dwt, from its affiliate, Navios Holdings, for a purchase price of $51.0 million.
On June 29, 2020, Navios Partners acquired five drybulk vessels, three Panamax and two Ultra-Handymax, for a fair value of $56.1 million in total, including working capital balances of $(2.7) million, following the liquidation of Navios Europe II.
On December 16, 2019, Navios Partners acquired four drybulk vessels, from an acquisition costentity affiliated with the Company's Chairwoman and CEO, for a fair value of $28.5$40.4 million, in total.
On December 13, 2019, Navios Partners acquired three Sub-Panamax and two Panamax Containerships for a fair value of $56.1 million in total, including working capital balances of $14.4 million, following the liquidation of Navios Europe I.
On April 23, 2019, Navios Partners sold the Navios Galaxy I, a 2001-built Panamax vessel of 74,195 dwt, to an unrelated third party, for a net sales price of $6.0 million.
Please read “Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources – Maintenance and Replacement Capital Expenditures Reserve – Vessels to be delivered” for a full description of vessels to be delivered to our fleet.
The historical results discussed below, and the historical financial statements and related notes included elsewhere in this annual report, present operating results of the fleet for the periods beginning from January 1, 20142019 to December 31, 2016.2021.
Statements of Operations | ||||||
Company name | Vessel name | Country of incorporation | 2021 | 2020 | 2019 | |
Libra Shipping Enterprises Corporation | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Alegria Shipping Corporation | Navios Alegria | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Felicity Shipping Corporation | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Gemini Shipping Corporation | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Galaxy Shipping Corporation(4) | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Aurora Shipping Enterprises Ltd. | Navios Hope | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Palermo Shipping S.A. | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Fantastiks Shipping Corporation(12) | Navios Fantastiks | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Sagittarius Shipping Corporation(12) | Navios Sagittarius | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Hyperion Enterprises Inc. | Navios Hyperion | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Chilali Corp. | Navios Aurora II | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Surf Maritime Co. | Navios Pollux | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Pandora Marine Inc. | Navios Melodia | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Customized Development S.A. | Navios Fulvia | Liberia | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Kohylia Shipmanagement S.A. | Navios Luz | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Orbiter Shipping Corp. | Navios Orbiter | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Floral Marine Ltd. | Navios Buena Ventura | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Golem Navigation Limited(13) | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Kymata Shipping Co. | Navios Helios | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Joy Shipping Corporation | Navios Joy | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Micaela Shipping Corporation | Navios Harmony | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Pearl Shipping Corporation | Navios Sun | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Velvet Shipping Corporation | Navios La Paix | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Perigiali Navigation Limited(12) | Navios Beaufiks | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Finian Navigation Co.(12) | Navios Ace | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Ammos Shipping Corp. | Navios Prosperity I | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Wave Shipping Corp. | Navios Libertas | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Casual Shipholding Co.(12) | Navios Sol | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Avery Shipping Company | Navios Symphony | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Coasters Ventures Ltd. | Navios Christine B | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Ianthe Maritime S.A. | Navios Aster | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Rubina Shipping Corporation | Hyundai Hongkong | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Topaz Shipping Corporation | Hyundai Singapore | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Beryl Shipping Corporation | Hyundai Tokyo | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Cheryl Shipping Corporation | Hyundai Shanghai | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Country of incorporation | Statements of operations | |||||||||
Company name | Vessel name | 2016 | 2015 | 2014 | ||||||
Libra Shipping Enterprises Corporation | Navios Libra II | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Alegria Shipping Corporation | Navios Alegria | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Felicity Shipping Corporation | Navios Felicity | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Gemini Shipping Corporation | Navios Gemini S | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Galaxy Shipping Corporation | Navios Galaxy I | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Aurora Shipping Enterprises Ltd. | Navios Hope | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Palermo Shipping S.A. | Navios Apollon | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Fantastiks Shipping Corporation | Navios Fantastiks | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Sagittarius Shipping Corporation | Navios Sagittarius | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Hyperion Enterprises Inc. | Navios Hyperion | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Chilali Corp. | Navios Aurora II | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Surf Maritime Co. | Navios Pollux | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Pandora Marine Inc. | Navios Melodia | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Customized Development S.A. | Navios Fulvia | Liberia | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Kohylia Shipmanagement S.A. | Navios Luz | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Orbiter Shipping Corp. | Navios Orbiter | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Floral Marine Ltd. | Navios Buena Ventura | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Golem Navigation Limited | Navios Soleil | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Kymata Shipping Co. | Navios Helios | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Joy Shipping Corporation | Navios Joy | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Micaela Shipping Corporation | Navios Harmony | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Pearl Shipping Corporation | Navios Sun | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/18 – 12/31 | |||||
Velvet Shipping Corporation | Navios La Paix | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/07 – 12/31 | |||||
Perigiali Navigation Limited (***) | Navios Beaufiks | Marshall Is. | 12/30 – 12/31 | — | — | |||||
Rubina Shipping Corporation | Hyundai Hongkong | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Topaz Shipping Corporation | Hyundai Singapore | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Beryl Shipping Corporation | Hyundai Tokyo | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Cheryl Shipping Corporation | Hyundai Shanghai | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Christal Shipping Corporation | Hyundai Busan | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Fairy Shipping Corporation | YM Utmost | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 8/29 – 12/31 | |||||
Limestone Shipping Corporation | YM Unity | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 10/28 – 12/31 | |||||
Dune Shipping Corp. (**) | MSC Cristina | Marshall Is. | 1/01 – 12/31 | 4/22 – 12/31 | — | |||||
Citrine Shipping Corporation | — | Marshall Is. | — | — | — | |||||
Chartered-in vessels | ||||||||||
Prosperity Shipping Corporation | Navios Prosperity | Marshall Is. | — | 1/01 – 03/05 | 1/01 – 12/31 | |||||
Aldebaran Shipping Corporation | Navios Aldebaran | Marshall Is. | — | 1/01 – 02/28 | 1/01 – 12/31 | |||||
Other | ||||||||||
JTC Shipping and Trading Ltd (*) | Holding Company | Malta | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Maritime Partners L.P. | N/A | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Maritime Operating LLC | N/A | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Partners Finance (US) Inc. | Co-Borrower | Delaware | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Partners Europe Finance Inc. | Sub-Holding Company | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 |
Statements of Operations | ||||||
Company name | Vessel name | Country of incorporation | 2021 | 2020 | 2019 |
Christal Shipping Corporation | Hyundai Busan | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Fairy Shipping Corporation (5) | Navios Utmost | Marshall Is. | 03/31 – 12/31 | — | — | |
Limestone Shipping Corporation (5) | Navios Unite | Marshall Is. | 03/31 – 12/31 | — | — | |
Dune Shipping Corp. | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Citrine Shipping Corporation | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Cavalli Navigation Inc. | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Seymour Trading Limited(2) | Navios Altair I | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Goldie Services Company | Navios Symmetry | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Andromeda Shiptrade Limited | Navios Apollon I | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Esmeralda Shipping Corporation | Navios Sphera | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Triangle Shipping Corporation | Navios Mars | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Oceanus Shipping Corporation(7),(19) | Castor N | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/13 – 12/31 | |
Cronus Shipping Corporation(7) | Protostar N | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/13 – 12/31 | |
Leto Shipping Corporation(7),(17) | Esperanza N | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/13 – 12/31 | |
Dionysus Shipping Corporation(7),(30) | Harmony N | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/13 – 12/31 | |
Prometheus Shipping Corporation(7),(18) | Solar N | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/13 – 12/31 | |
Camelia Shipping Inc.(8) | Navios Camelia | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/16 – 12/31 | |
Anthos Shipping Inc.(8) | Navios Anthos | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/16 – 12/31 | |
Azalea Shipping Inc.(8),( 1) | Navios Azalea | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/16 – 12/31 | |
Amaryllis Shipping Inc.(8) | Navios Amaryllis | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/16 – 12/31 | |
Zaffre Shipping Corporation(14) | Serenitas N | Marshall Is. | 1/01 – 12/31 | 6/29 – 12/31 | — | |
Wenge Shipping Corporation(14),(20) | Joie N | Marshall Is. | 1/01 – 12/31 | 6/29 – 12/31 | — | |
Sunstone Shipping Corporation(14) | Copernicus N | Marshall Is. | 1/01 – 12/31 | 6/29 – 12/31 | — | |
Fandango Shipping Corporation(14) | Unity N | Marshall Is. | 1/01 – 12/31 | 6/29 – 12/31 | — | |
Flavescent Shipping Corporation(14) | Odysseus N | Marshall Is. | 1/01 – 12/31 | 6/29 – 12/31 | — | |
Emery Shipping Corporation(15) | Navios Gem | Marshall Is. | 1/01 – 12/31 | 9/30 – 12/31 | — | |
Rondine Management Corp.(15) | Navios Victory | Marshall Is. | 1/01 – 12/31 | 9/30 – 12/31 | — | |
Prosperity Shipping Corporation | — | Marshall Is. | 1/01 – 12/31 | — | — | |
Aldebaran Shipping Corporation | — | Marshall Is. | 1/01 – 12/31 | — | — | |
JTC Shipping and Trading Ltd.(11) | Holding Company | Malta | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Navios Maritime Partners L.P. | N/A | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Navios Maritime Operating LLC. | N/A | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Navios Partners Finance (US) Inc. | Co-Borrower | Delaware | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Navios Partners Europe Finance Inc. | Sub-Holding Company | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Solange Shipping Ltd.(16) | Navios Avior | Marshall Is. | 03/30 – 12/31 | — | — | |
Mandora Shipping Ltd.(16) | Navios Centaurus | Marshall Is. | 03/30 – 12/31 | — | — | |
Olympia II Navigation Limited | Navios Domino | Marshall Is. | 03/31 – 12/31 | — | — |
Statements of Operations | ||||||
Company name | Vessel name | Country of incorporation | 2021 | 2020 | 2019 |
Pingel Navigation Limited | Navios Delight | Marshall Is. | 03/31 – 12/31 | — | — | |
Ebba Navigation Limited | Navios Destiny | Marshall Is. | 03/31 – 12/31 | — | — | |
Clan Navigation Limited | Navios Devotion | Marshall Is. | 03/31 – 12/31 | — | — | |
Sui An Navigation Limited(23) | Navios Dedication | Marshall Is. | 03/31 – 12/31 | — | — | |
Bertyl Ventures Co. | Navios Azure | Marshall Is. | 03/31 – 12/31 | — | — | |
Silvanus Marine Company | Navios Summer | Marshall Is. | 03/31 – 12/31 | — | — | |
Anthimar Marine Inc. | Navios Amarillo | Marshall Is. | 03/31 – 12/31 | — | — | |
Enplo Shipping Limited | Navios Verde | Marshall Is. | 03/31 – 12/31 | — | — | |
Morven Chartering Inc. | Navios Verano | Marshall Is. | 03/31 – 12/31 | — | — | |
Rodman Maritime Corp. | Navios Spring | Marshall Is. | 03/31 – 12/31 | — | — | |
Isolde Shipping Inc. | Navios Indigo | Marshall Is. | 03/31 – 12/31 | — | — | |
Velour Management Corp. | Navios Vermilion | Marshall Is. | 03/31 – 12/31 | — | — | |
Evian Shiptrade Ltd. | Navios Amaranth | Marshall Is. | 03/31 – 12/31 | — | — | |
Theros Ventures Limited | Navios Lapis | Marshall Is. | 03/31 – 12/31 | — | — | |
Legato Shipholding Inc. | Navios Tempo | Marshall Is. | 03/31 – 12/31 | — | — | |
Inastros Maritime Corp. | Navios Chrysalis | Marshall Is. | 03/31 – 12/31 | — | — | |
Zoner Shiptrade S.A. | Navios Dorado | Marshall Is. | 03/31 – 12/31 | — | — | |
Jasmer Shipholding Ltd. | Navios Nerine | Marshall Is. | 03/31 – 12/31 | — | — | |
Thetida Marine Co. | Navios Magnolia | Marshall Is. | 03/31 – 12/31 | — | — | |
Jaspero Shiptrade S.A. | Navios Jasmine | Marshall Is. | 03/31 – 12/31 | — | — | |
Peran Maritime Inc. | Navios Felicitas | Marshall Is. | 03/31 – 12/31 | — | — | |
Nefeli Navigation S.A. | Navios Unison | Marshall Is. | 03/31 – 12/31 | — | — | |
Crayon Shipping Ltd | Navios Miami | Marshall Is. | 03/31 – 12/31 | — | — | |
Chernava Marine Corp. | Bahamas | Marshall Is. | 03/31 – 12/31 | — | — | |
Proteus Shiptrade S.A | Bermuda | Marshall Is. | 03/31 – 12/31 | — | — | |
Vythos Marine Corp. | Navios Constellation | Marshall Is. | 03/31 – 12/31 | — | — | |
Navios Maritime Containers Sub L.P. | Sub-Holding Company | Marshall Is. | 03/31 – 12/31 | — | — | |
Navios Partners Containers Finance Inc. | Sub-Holding Company | Marshall Is. | 03/31 – 12/31 | — | — | |
Boheme Navigation Company | Sub-Holding Company | Marshall Is. | 03/31 – 12/31 | — | — | |
Navios Partners Containers Inc. | Sub-Holding Company | Marshall Is. | 03/31 – 12/31 | — | — | |
Iliada Shipping S.A. | Operating Company | Marshall Is. | 03/31 – 12/31 | — | — | |
Vinetree Marine Company | Operating Company | Marshall Is. | 03/31 – 12/31 | — | — | |
Afros Maritime Inc. | Operating Company | Marshall Is. | 03/31 – 12/31 | — | — | |
Cavos Navigation Co.(9) | Navios Libra | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |
Perivoia Shipmanagement Co.(10) | Navios Amitie | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 9/25 – 12/31 | |
Pleione Management Limited(10) | Navios Star | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 9/25 – 12/31 | |
Bato Marine Corp.(21) | TBN I | Marshall Is. | 03/05 – 12/31 | — | — |
Statements of Operations | ||||||
Company name | Vessel name | Country of incorporation | 2021 | 2020 | 2019 |
Agron Navigation Company(21) | TBN II | Marshall Is. | 03/05 – 12/31 | — | — | |
Teuta Maritime S.A.(22) | TBN VII | Marshall Is. | 03/05 – 12/31 | — | — | |
Ambracia Navigation Company(21) | TBN IV | Marshall Is. | 03/05 – 12/31 | — | — | |
Artala Shipping Co.(22) | TBN V | Marshall Is. | 03/05 – 12/31 | — | — | |
Migen Shipmanagement Ltd. | Sub-Holding Company | Marshall Is. | 03/05 – 12/31 | — | — | |
Bole Shipping Corporation(24) | Spectrum N | Marshall Is. | 04/28 – 12/31 | — | — | |
Brandeis Shipping Corporation(24) | Ete N | Marshall Is. | 05/10 – 12/31 | — | — | |
Buff Shipping Corporation(24) | Fleur N | Marshall Is. | 05/10 – 12/31 | — | — | |
Morganite Shipping Corporation(25) | TBN VI | Marshall Is. | 06/01 – 12/31 | — | — | |
Balder Martitime Ltd.(26) | Navios Koyo | Marshall Is. | 06/04 – 12/31 | — | — | |
Melpomene Shipping Corporation(27) | TBN VIII | Marshall Is. | 06/23 – 12/31 | — | — | |
Urania Shipping Corporation(27) | TBN IX | Marshall Is. | 06/23 – 12/31 | — | — | |
Terpsichore Shipping Corporation(28) | TBN X | Marshall Is. | 06/23 – 12/31 | — | — | |
Erato Shipping Corporation(28) | TBN XI | Marshall Is. | 06/23 – 12/31 | — | — | |
Lavender Shipping Corporation(12) (29) | Navios Ray | Marshall Is. | 06/30 – 12/31 | — | — | |
Nostos Shipmanagement Corp.(12) (29) | Navios Bonavis | Marshall Is. | 06/30 – 12/31 | — | — | |
Navios Maritime Acquisition Corporation | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Navios Acquisition Europe Finance Inc. | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Navios Acquisition Finance (US) Inc. | Co-Issuer of Ship Mortgage Notes | Delaware | 08/25 – 12/31 | — | — | |
Navios Maritime Midstream Partners GP LLC | Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Letil Navigation Ltd. | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Navios Maritime Midstream Partners Finance (US) Inc. | Sub-Holding Company | Delaware | 08/25 – 12/31 | — | — | |
Aegean Sea Maritime Holdings Inc. | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Amorgos Shipping Corporation | Nave Cosmos | Marshall Is. | 08/25 – 12/31 | — | — | |
Andros Shipping Corporation | Nave Polaris | Marshall Is. | 08/25 – 12/31 | — | — | |
Antikithira Shipping Corporation | Nave Equator | Marshall Is. | 08/25 – 12/31 | — | — | |
Antiparos Shipping Corporation | Nave Atria | Marshall Is. | 08/25 – 12/31 | — | — | |
Antipaxos Shipping Corporation | Nave Dorado | Marshall Is. | 08/25 – 12/31 | — | — | |
Antipsara Shipping Corporation | Nave Velocity | Marshall Is. | 08/25 – 12/31 | — | — | |
Crete Shipping Corporation | Nave Cetus | Marshall Is. | 08/25 – 12/31 | — | — | |
Delos Shipping Corporation | Nave Photon | Marshall Is. | 08/25 – 12/31 | — | — | |
Folegandros Shipping Corporation | Nave Andromeda | Marshall Is. | 08/25 – 12/31 | — | — | |
Ikaria Shipping Corporation | Nave Aquila | Marshall Is. | 08/25 – 12/31 | — | — | |
Ios Shipping Corporation | Nave Cielo | Cayman Islands | 08/25 – 12/31 | — | — | |
Iraklia Shipping Corporation | Bougainville | Marshall Is. | 08/25 – 12/31 | — | — | |
Kimolos Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Kithira Shipping Corporation | Nave Orbit | Marshall Is. | 08/25 – 12/31 | — | — |
Statements of Operations | ||||||
Company name | Vessel name | Country of incorporation | 2021 | 2020 | 2019 |
Kos Shipping Corporation | Nave Bellatrix | Marshall Is. | 08/25 – 12/31 | — | — | |
Lefkada Shipping Corporation | Nave Buena Suerte | Marshall Is. | 08/25 – 12/31 | — | — | |
Leros Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Mytilene Shipping Corporation | Nave Orion | Marshall Is. | 08/25 – 12/31 | — | — | |
Oinousses Shipping Corporation | Nave Jupiter | Marshall Is. | 08/25 – 12/31 | — | — | |
Psara Shipping Corporation | Nave Luminosity | Marshall Is. | 08/25 – 12/31 | — | — | |
Rhodes Shipping Corporation | Nave Cassiopeia | Marshall Is. | 08/25 – 12/31 | — | — | |
Samos Shipping Corporation | Nave Synergy | Marshall Is. | 08/25 – 12/31 | — | — | |
Samothrace Shipping Corporation | Nave Pulsar | Marshall Is. | 08/25 – 12/31 | — | — | |
Serifos Shipping Corporation | Nave Estella | Marshall Is. | 08/25 – 12/31 | — | — | |
Sifnos Shipping Corporation | Nave Titan | Marshall Is. | 08/25 – 12/31 | — | — | |
Skiathos Shipping Corporation | Nave Capella | Marshall Is. | 08/25 – 12/31 | — | — | |
Skopelos Shipping Corporation | Nave Ariadne | Cayman Islands | 08/25 – 12/31 | — | — | |
Skyros Shipping Corporation | Nave Sextans | Marshall Is. | 08/25 – 12/31 | — | — | |
Syros Shipping Corporation | Nave Alderamin | Marshall Is. | 08/25 – 12/31 | — | — | |
Thera Shipping Corporation | Nave Atropos | Marshall Is. | 08/25 – 12/31 | — | — | |
Tilos Shipping Corporation | Nave Spherical | Marshall Is. | 08/25 – 12/31 | — | — | |
Tinos Shipping Corporation | Nave Rigel | Marshall Is. | 08/25 – 12/31 | — | — | |
Zakynthos Shipping Corporation | Nave Quasar | Marshall Is. | 08/25 – 12/31 | — | — | |
Cyrus Investments Corp. | Baghdad | Marshall Is. | 08/25 – 12/31 | — | — | |
Olivia Enterprises Corp. | Erbil | Marshall Is. | 08/25 – 12/31 | — | — | |
Limnos Shipping Corporation | Nave Pyxis | Marshall Is. | 08/25 – 12/31 | — | — | |
Thasos Shipping Corporation | Nave Equinox | Marshall Is. | 08/25 – 12/31 | — | — | |
Agistri Shipping Limited | Operating Subsidiary | Malta | 08/25 – 12/31 | — | — | |
Paxos Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Donoussa Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Schinousa Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Alonnisos Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Makronisos Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Shinyo Loyalty Limited | Former Vessel-Owning Company | Hong Kong | 08/25 – 12/31 | — | — | |
Shinyo Navigator Limited | Former Vessel-Owning Company | Hong Kong | 08/25 – 12/31 | — | — | |
Amindra Navigation Co. | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Navios Maritime Midstream Partners L.P. | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Navios Maritime Midstream Operating LLC | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Shinyo Dream Limited | Former Vessel-Owning Company | Hong Kong | 08/25 – 12/31 | — | — | |
Shinyo Kannika Limited | Former Vessel-Owning Company | Hong Kong | 08/25 – 12/31 | — | — | |
Shinyo Kieran Limited | Nave Universe | British Virgin Islands | 08/25 – 12/31 | — | — |
Statements of Operations | ||||||
Company name | Vessel name | Country of incorporation | 2021 | 2020 | 2019 |
Shinyo Ocean Limited | Former Vessel-Owning Company | Hong Kong | 08/25 – 12/31 | — | — | |
Shinyo Saowalak Limited | Nave Constellation | British Virgin Islands | 08/25 – 12/31 | — | — | |
Sikinos Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Kerkyra Shipping Corporation | Nave Galactic | Marshall Is. | 08/25 – 12/31 | — | — | |
Doxa International Corp. | Nave Electron | Marshall Is. | 08/25 – 12/31 | — | — | |
Alkmene Shipping Corporation | Star N | Marshall Is. | 08/25 – 12/31 | — | — | |
Aphrodite Shipping Corporation | Aurora N | Marshall Is. | 08/25 – 12/31 | — | — | |
Dione Shipping Corporation | Lumen N | Marshall Is. | 08/25 – 12/31 | — | — | |
Persephone Shipping Corporation | Hector N | Marshall Is. | 08/25 – 12/31 | — | — | |
Rhea Shipping Corporation | Perseus | Marshall Is. | 08/25 – 12/31 | — | — | |
Tzia Shipping Corporation (21) | TBN XIV | Marshall Is. | 08/25 – 12/31 | — | — | |
Boysenberry Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Cadmium Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Celadon Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Cerulean Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |
Kleio Shipping Corporation (6) | TBN XII | Marshall Is. | 08/12 – 12/31 | — | — | |
Polymnia Shipping Corporation (6) | TBN XIII | Marshall Is. | 08/12 – 12/31 | — | — | |
Goddess Shiptrade Inc. (21) | TBN III | Marshall Is. | 08/02 – 12/31 | — | — | |
Navios Acquisition Merger Sub.Inc. | Merger SPV | Marshall Is. | 08/23 – 12/31 | — | — | |
Aramis Navigation Inc.(3) | Navios Azimuth | Marshall Is. | 07/09 – 12/31 | — | — | |
Thalia Shipping Corporation (6) | TBN XVII | Marshall Is. | 11/17-12/31 | — | — | |
Muses Shipping Corporation (6) | TBN XVIII | Marshall Is. | 11/17-12/31 | — | — | |
Euterpe Shipping Corporation (28) | TBN XVI | Marshall Is. | 11/17-12/31 | — | — | |
Calliope Shipping Corporation (28) | TBN XV | Marshall Is. | 11/17-12/31 | — | — |
(1) | The vessel was sold on August 13, 2021. |
(2) | The vessel was sold on October 29, 2021. |
(3) | The vessel was acquired on July 9, 2021, from Navios Holdings (see Note 7 - Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report). |
(4) | The vessel was sold on April 23, 2019. |
(5) | The vessel agreed to be sold in February 2022 (see Note 24 – Subsequent events to our consolidated financial statements, included elsewhere in this Annual Report). |
(6) | Expected to be delivered by the second half of 2024. |
(7) | The vessels were acquired on December 13, 2019, following the liquidation of Navios Europe I. |
(8) | The vessels were acquired on December 16, 2019. |
(9) | The vessel was delivered on July 24, 2019 (see Note 23 – Leases to our consolidated financial statements, included elsewhere in this Annual Report). |
(10) | The vessels were delivered on May 28, 2021 and June 10, 2021 (see Note 23 – Leases to our consolidated financial statements, included elsewhere in this Annual Report). |
(11) | Not a vessel-owning subsidiary and only holds right tocharter-in contracts. |
(12) | Vessels under the sale and leaseback transaction. |
(13) | The vessel |
(14) | The vessels were acquired on June 29, 2020, following the liquidation of Navios Europe II (see Note 7 - Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report). |
(15) | The vessels were acquired on September 30, 2020, from Navios Holdings (see Note 7 - Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report). |
(16) | The vessels were acquired on March 30, 2021, from Navios Holdings (see Note 7 – Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report). |
(17) | The vessel was sold on January |
(18) | The vessel was sold on January 28, 2021 (see Note 7 – Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report). |
(19) | The vessel was sold on February 10, 2021 (see Note 7 – Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report). |
(20) | The vessel was sold on March 25, 2021 (see Note 7 – Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report). |
(21) | Expected to be delivered by the second half of 2022. |
(22) | Expected to be delivered in the first half of 2023. |
(23) | The vessel was sold on July 31, 2021. |
(24) | The vessels were acquired on May 10, 2021 (see Note 7 – Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report). |
(25) | Expected to be delivered in the first half of 2023. |
(26) | The vessel was acquired on |
(27) | Expected to be delivered by the second half of 2023. |
(28) | Expected to be delivered by the first half of 2024. |
(29) | The vessel was acquired on June 30, |
(30) | The vessel was sold on August 16, 2021. |
Recent Developments
Financing arrangements
On March 28, 2022, Navios Partners entered into a new credit facility with a commercial bank for a total amount of up to $55.0 million in order to refinance the existing indebtedness of three of its vessels and for general corporate purposes. The credit facility matures in March 2027 and bears interest at daily cumulative or non-cumulative compounded RFR rate (as defined in the loan agreement) plus 2.25% per annum. On March 31, 2022, the entire amount was drawn under this loan.
Sales of vessels
In February 2022, Navios Partners agreed to sell the Navios Utmost and the Navios Unite, two 2006-built Containerships of 8,204 TEU each, to an unrelated third party for an aggregate sales price of $220.0 million. The sale is expected to be completed during the second half of 2022 and the gain on sale of vessels is expected to be approximately $144.3 million.
Our Charters
We generate revenues by charging our customers for the use of our vessels to transport their liquid and dry cargos. In general, the vessels in our fleet arechartered-out under time charters, which range in length from one to eleventwelve years at inception. From time to time, we operate vessels in the spot market until the vessels have been chartered under long-term charters.
For the year ended December 31, 2016, Navios Partners’ customers representing 10% or more2021, Singapore Marine represented approximately 14.5% of total revenues were Hyundai Merchant Marine Co. Ltd., Yang Ming Marine Transport Corporation and Mediterranean Shipping Co. S.A., which accounted for approximately 29.6%, 13.0% and 11.6%, respectively, ofour total revenues. For the year ended December 31, 2015, Navios Partners’2020 HMM, Singapore Marine and Cargill represented approximately 23.4%, 19.5% and 11.4%, respectively, of our total revenues. For the year ended December 31, 2019, HMM, Swissmarine and Cargill represented approximately 25.9%, 12.3% and 10.9%, respectively, of our total revenues. No other customers representingaccounted for 10% or more of total revenues were Hyundai Merchant Marine Co., Ltd., Navios Corporation and Yang Ming Marine Transport Corporation, which accounted for 24.0%, 17.4% and 11.4%, respectively, of total revenues. We believe that the combinationany of the long-term nature of our charters (which provide for the receipt of a fixed fee for the life of the charter) and our management agreement with the Manager, a wholly-owned subsidiary of Navios Holdings (which provides for a fixed management fee until December 31, 2017), provides us with a strong base of stable cash flows.years presented.
Our revenues are driven by the number of vessels in the fleet, the number of days during which the vessels operate and our charter hire rates, which, in turn, are affected by a number of factors, including:
Time charters are available for varying periods, ranging from a single trip (spot charter) to long-term which may be many years. In general, a long-term time charter assures the vessel owner of a consistent stream of global revenue. Operating the vessel in the spot market affords the owner greater spot market opportunity, which may result in high rates when vessels are in high demand or low rates when vessel availability exceeds demand. We intend to operate our vessels in the long-term charter market. Vessel charter rates are affected by world economics, international events, weather conditions, strikes, governmental policies, supply and demand and many other factors that might be beyond our control.
We could lose a customer or the benefits of a charter if:
Under some of our time charters, either party may terminate the charter contract in the event of war in specified countries or in locations that would significantly disrupt the free trade of the vessel. Some of the time charters covering our vessels require us to return to the charterer, upon the loss of the vessel, all advances paid by the charterer but not earned by us.
Vessel Operations
Under our charters, our vessel manager isOur Managers are generally responsible for the commercial, technical, health and safety and other management services related to the vessels’vessels' operation, and the charterer iswhile charterers are usually responsible for bunkering and substantially all of the vessel voyage costs, including canal tolls and port charges.
Under the management agreementManagement Agreements we entered into with the Manager,Managers, the Manager bearsManagers bear all of our vessel operating expenses in exchange for the payment of fees as described below.fees. Under this agreement,these agreements, the Manager isManagers are responsible for commercial, technical, health and safety and other management services related to the vessels’vessels' operation, including chartering, technical support, maintenance and maintenance, insurance but costsinsurance. Under the Management Agreements we have fixed the rates for these ship management services until December 31, 2021 with an annual increase of 3% after January 1, 2022 for the remaining contractual period unless agreed otherwise. Costs associated with special surveys, drydocking expenses and related drydockings will becertain extraordinary items under this agreement are reimbursed by Navios Partners at cost at occurrence. In October 2011, Navios Partners extended the duration of its existing Management Agreement with the Manager until December 31, 2017 and the fixed rate for ship management services of its owned fleet through December 31, 2013. The management fees, including drydocking expenses were: (a) $4,650 daily rate per Ultra-Handymax vessel; (b) $4,550 daily rate per Panamax vessel; and (c) $5,650 daily rate per Capesize vessel. In each of October 2013, August 2014, February 2015 and February 2016, Navios Partners amended its existing management agreement with the Manager to fix the fees for ship management services of its owned fleet excluding drydocking expenses which are reimbursed at cost by Navios Partners at: (a) $4,100 daily rate per Ultra-Handymax vessel; (b) $4,200 daily rate per Panamax vessel; (c) $5,250 daily rate per Capesize vessel; (d) $6,700 daily rate per Container vessel of TEU 6,800; (e) $7,400 daily rate per Container vessel of more than TEU 8,000; and (f) $8,750 daily rate per very large Container vessel of more than TEU 13,000 through December 31, 2017.
Extraordinary costs and expenses include fees and costs resulting from:
Payment of any extraordinary fees or expenses to the ManagerManagers could significantly increase our vessel operating expenses and impact our results of operations.
DuringFollowing the remaining term ofNMCI Merger, the Management Agreement we expect that we will reimbursecover the vessels acquired.
The operations of Navios Acquisition are managed by the Tankers Manager, an entity affiliated to the Manager, for allso the operations of Navios Acquisition remain un-affected following the completion of the actual operating costsNNA Merger on October 15, 2021.
For more information on the Management Agreements, please read “Item 7. – Major Unitholders and expenses it incurs in connection with the management of our fleet.Related Party Transactions - Management Agreements”.
Administrative Services
Under the Administrative Services Agreement we entered into with the Manager, we reimburse the Manager for reasonable costs and expenses incurred in connection with the provision of the services under this agreement within 15 days after the Manager submits to us an invoice for such costs and expenses, together with any supporting detail that may be reasonably required. Under this agreement which expires in December 2017,on January 1, 2025, the Manager provides significant administrative, financial and other support services to us.
For more information on the Administrative Services Agreement, please read “Item 7. – Major Unitholders and Related Party Transactions - Administrative Services Agreement”.
Trends and Factors Affecting Our Future Results of Operations
We believe the principal factors that will affect our future results of operations are the economic, regulatory, political and governmental conditions that affect the shipping industry generally and that affect conditions in countries and markets in which our vessels engage in business. Other key factors that will be fundamental to our business, future financial condition and results of operations include:
In addition to the factors discussed above, we believe certain specific factors will impact our combined and consolidated results of operations. These factors include:
Please read “Risk Factors” for a discussion of certain risks inherent in our business.
A. Operating results
Year Ended December 31, 20162021 Compared to the Year Ended December 31, 20152020
The following table presents consolidated revenue and expense information for the years ended December 31, 20162021 and 2015.2020. This information was derived from the audited consolidated revenue and expense accounts of Navios Partners for the respective periods.
Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
Time charter and voyage revenues | $ | 713,175 | $ | 226,771 | |
Time charter and voyage expenses | (36,142) | (11,028) | |||
Direct vessel expenses | (29,259) | (10,337) | |||
Vessel operating expenses | (191,449) | (93,732) | |||
General and administrative expenses | (41,461) | (24,012) | |||
Depreciation and amortization of intangible assets | (112,817) | (56,050) | |||
Amortization of unfavorable lease terms | 108,538 | — | |||
Gain on sale of vessels, net | 33,625 | — | |||
Vessels impairment loss | — | (71,577) | |||
Interest expense and finance cost, net | (42,762) | (24,159) | |||
Interest income | 859 | 639 | |||
Impairment of receivable in affiliated company | — | (6,900) | |||
Other income | 289 | 5,055 | |||
Other expense | (9,738) | (4,344) | |||
Equity in net earnings of affiliated companies | 80,839 | 1,133 | |||
Transaction costs | (10,439) | — | |||
Bargain gain | 48,015 | — | |||
Net income/ (loss) | $ | 511,273 | $ | (68,541) | |
Net loss attributable to the noncontrolling interest | 4,913 | — | |||
Net income/ (loss) attributable to Navios Partners’ unitholders | $ | 516,186 | $ | (68,541) |
Year Ended December 31, 2016 (In thousands of U.S dollars) | Year Ended December 31, 2015 (In thousands of U.S dollars) | |||||||
Time charter and voyage revenues (includes related party revenue of $1.9 million and $38.8 million for the years ended December 31, 2016 and 2015, respectively) | $ | 190,524 | $ | 223,676 | ||||
Time charter and voyage expenses | (5,673 | ) | (7,199 | ) | ||||
Direct vessel expenses | (6,381 | ) | (4,043 | ) | ||||
Management fees (entirely through related parties transactions) | (59,209 | ) | (56,504 | ) | ||||
General and administrative expenses | (12,351 | ) | (7,931 | ) | ||||
Depreciation and amortization | (92,370 | ) | (75,933 | ) | ||||
Vessel impairment losses | (27,201 | ) | — | |||||
Loss on sale of securities | (19,435 | ) | — | |||||
Interest expense and finance cost, net | (31,247 | ) | (31,720 | ) | ||||
Interest income | 541 | 222 | ||||||
Other income | 14,523 | 5,232 | ||||||
Other expense | (4,270 | ) | (3,995 | ) | ||||
|
|
|
| |||||
Net (loss)/ income | $ | (52,549 | ) | $ | 41,805 | |||
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The following table reflects certain key indicators of Navios Partners’ fleet performance for the years ended December 31, 2021 and 2020 (including the Navios Containers’ fleet and Navios Acquisition’s tanker fleet for the periods from April 1, 2021 to December 31, 2021 and from August 26, 2021 to December 31, 2021, respectively).
Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
Available Days (1) | 31,884 | 17,430 | |||
Operating Days (2) | 31,631 | 17,245 | |||
Fleet Utilization (3) | 99.2% | 98.9% | |||
Time Charter Equivalent (per day) (4) | $ | 21,709 | $ | 12,497 | |
Vessels operating at period end | 128 | 52 |
(1) | Available days for the fleet represent total calendar days the vessels were in Navios Partners’ possession for the relevant period after subtracting off-hire days associated with scheduled repairs, dry dockings or special surveys and ballast days relating to voyages. The shipping industry uses available days to measure the number of days in a relevant period during which a vessel is capable of generating revenues. |
(2) | Operating days are the number of available days in the relevant period less the aggregate number of days that the vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a relevant period during which vessels actually generate revenues. |
(3) | Fleet utilization is the percentage of time that Navios Partners’ vessels were available for generating revenue, and is determined by dividing the number of operating days during a relevant period by the number of available days during that period. The shipping industry uses fleet utilization to measure efficiency in finding employment for vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs, dry dockings or special surveys. |
(4) | Time Charter Equivalent rate (“TCE rate”): Time Charter Equivalent rate per day is defined as voyage, time charter revenues and bareboat charter-out revenues (grossed up by currently applicable fixed vessel operating expenses) less voyage expenses during a period divided by the number of available days during the period. The TCE rate per day is a standard shipping industry performance measure used primarily to present the actual daily earnings generated by vessels on various types of charter contracts for the number of available days of the fleet. |
Time charter and voyage revenues: Time charter and voyage revenues for the year ended December 31, 2016 decreased2021 increased by $33.2$486.4 million, or 14.8%214.5%, to $190.5$713.2 million, as compared to $223.7$226.8 million for the same period in 2015.2020. The decreaseincrease in time charter and voyage revenuesrevenue was primarily duemainly attributable to the declineincrease in the freight market during 2016,size of our fleet and to the increase in the TCE rate. For the year ended December 31, 2021, the TCE rate increased by 73.7% to $21,709 per day, as compared to $12,497 per day for the same period in 2015, and was partially mitigated by an increase in revenue due to the delivery of the MSC Cristina in April 2015. As a result of the vessel acquisition,2020. The available days of the fleet increased by 82.9% to 11,29631,884 days for the year ended December 31, 2016,2021, as compared to 11,051 days17,430 for the year ended December 31, 2015. Time Charter Equivalent rate per day (“TCE”) decreasedsame period in 2020 mainly due to $ 16,364 per day for the year ended December 31, 2016, from $19,739 per day for the year ended December 31, 2015.Mergers.
Time charter and voyage expenses: Time charter and voyage expenses for the year ended December 31, 2016 decreased2021 increased by $1.5$25.1 million, or 21.2%228.2%, to $5.7$36.1 million, as compared to $7.2$11.0 million for the year ended December 31, 2015.2020. The decreaseincrease was mainly attributable to the termination of thea: (i) $10.7 million increase in charter-in contracts of the Navios Prosperity hire expense; (ii) $5.3 million increase in brokers’ commissions; (iii) $4.5 million increase in bunkers expenses; (iv) $3.2 million increase in other voyage expenses; and the Navios Aldebaran(v) $1.4 million increase in the first quarter of 2015. On February 11, 2015, Navios Partners and Navios Holdings entered into a novation agreement whereby the rights to the time charter contracts of the Navios Aldebaran and the Navios Prosperity were transferred to Navios Holdings as of February 28, 2015 and March 5, 2015, respectively.port expenses.
Direct vessel expenses: Direct vessel expenses comprising offor the amortization of dry dock and special survey costs, of certain vessels in our fleet amountedyear ended December 31, 2021, increased by $19.0 million, or 184.5%, to $6.4$29.3 million, as compared to $10.3 million for the year ended December 31, 2016,2020. The increase of $19.0 million was mainly attributable to the increase in the size of our fleet and the increased crew related expenses as a result of covid-19 measures (pursuant to the terms of the Management Agreements).
Vessel operating expenses: Vessel operating expenses for the year ended December 31, 2021, increased by $97.7 million, or 104.3%, to $191.4 million, as compared to $4.0$93.7 million for the year ended December 31, 2015.
Management fees: Management fees for the year ended December 31, 2016, increased by $2.7 million or 4.8% to $59.2 million, as compared to $56.5 million for the year ended December 31, 2015.2020. The increase was mainly attributabledue to the increased daily management fee andincrease in the deliverysize of the MSC Cristina during the second quarter of 2015.
Pursuant to the amended Management Agreement, in each of October 2013, August 2014 and February 2015, the Manager, a wholly owned subsidiary of Navios Holdings, provided commercial and technical management services to Navios Partners’ vessels for a daily fee of: (a) $4,000 daily rate per Ultra-Handymax vessel; (b) $4,100 daily rate per Panamax vessel; (c) $5,100 daily rate per Capesize vessel; (d) $6,500 daily rate per Container vessel of TEU 6,800; (e) $7,200 daily rate per Container vessel of more than TEU 8,000; and (f) $8,500 daily rate per very large Container vessel of more than TEU 13,000 through December 31, 2015. In February 2016, Navios Partners further amended the Management Agreement with the Manager to fix the fees for ship management services of its owned fleet excluding drydocking expenses which will be reimbursed at cost by Navios Partners at: (a) $4,100 daily rate per Ultra-Handymax vessel; (b) $4,200 daily rate per Panamax vessel; (c) $5,250 daily rate per Capesize vessel; (d) $6,700 daily rate per Container vessel of TEU 6,800; (e) $7,400 daily rate per Container vessel of more than TEU 8,000; and (f) $8,750 daily rate per very large Container vessel of more than TEU 13,000 through December 31, 2017. Drydocking expenses under this agreement are reimbursed by Navios Partners at cost at occurrence. Effective August 31, 2016, Navios Partners could, upon request to Navios Holdings, partially or fully defer the reimbursement of dry docking and other extraordinary fees and expenses under the Management Agreement to a later date, but not later than January 5, 2018, and if reimbursed on a later date, such amounts would bear interest at a rate of 1% per annum over LIBOR.our fleet.
General and administrative expenses: General and administrative expenses increased by $4.4$17.5 million, or 55.7%72.9%, to $12.4$41.5 million for the year ended December 31, 2016,2021, as compared to $7.9$24.0 million for the year ended December 31, 2015.2020. The increase was mainly attributabledue to thea: (i) $15.1 million increase in administrative fees paid to the ManagerManagers due to the deliveryincreased number of the MSC Cristinaowned and chartered-in vessels in April 2015Navios Partners’ fleet; and the(ii) $2.8 million increase in legal and professional fees, as well as audit fees and directors’ fees.other administrative expenses. The above increase was partially mitigated by an approximately $0.4 million decrease in stock based compensation expenses.
Pursuant to the Administrative Services Agreement, the Manager also provides administrative services to Navios Partners, which include bookkeeping, auditDepreciation and accounting services, legalamortization of intangible assets: Depreciation and insurance services, administrative and clerical services, banking and financial services, advisory services, client and investor relations and other. The Manager is reimbursed for reasonable costs and expenses incurred in connection with the provisionamortization of these services. Navios Partners extended the duration of its existing Administrative Services Agreement with the Manager pursuant to the same terms, until December 31, 2017. For the year ended December 31, 2016 and 2015, the expenses charged by the Manager for administrative fees were $7.8 million and $6.2 million, respectively. The balance of $4.6 million and $1.7 million of general and administrative expenses,intangible assets for the year ended December 31, 2016 and 2015, respectively, related2021 increased by $56.7 million or 101.1%, to legal and professional fees,$112.8 million as well as audit fees and directors’ fees.
Depreciation and amortization: Depreciation and amortization amountedcompared to $92.4$56.1 million for the year ended December 31, 2016 compared to $75.9 million for the year ended December 31, 2015.2020. The increase of $16.4$56.7 million was mainly attributable to: (i) a $30.8 million increase due to a $20.5 million accelerated amortizationthe delivery of the fleet of Navios Luz and theAcquisition in Navios Buena Ventura favorable lease intangiblesPartners’ owned fleet; (ii) a $24.5 million increase in depreciation expense due to changethe delivery of the fleet of Navios Containers in their useful life (Refer Note 8 — Intangible Assets for further details).Navios Partners’ owned fleet; (iii) an $8.0 million increase in depreciation expense due to the delivery of 16 vessels in 2021 and 2020; and (iv) a $0.5 million increase in depreciation expense due to vessel additions. The above increase was partially mitigated by: (i) a $1.2an approximately $4.9 million decrease in depreciation expense of four of our vessels as a result of the impairment charge in the fourth quarter of the fiscal year 2020; and (ii) a $2.2 million decrease due to the committed sale of the MSC Cristinanine vessels in the second quarter of 2016; (ii) a $1.5 million decrease in amortization of the intangible for the Navios Luz2021 and the Navios Buena Ventura which were written off during the third quarter of 2016; and (iii) a $1.4 million decrease in amortization of the intangibles mainly due to the Navios Fulvia which was written off during the third quarter of 2015.2020. Depreciation of vessels is calculated using an estimated useful life of 25 years for drybulk and tanker vessels and 30 years for drybulk and container vessels,containerships, respectively, from the date the vessel was originally delivered from the shipyard. Intangible assets are amortized over the contract periods, which range from one
Amortization of unfavorable lease terms: Amortization of unfavorable lease terms amounted to ten years.
Vessel impairment losses:An impairment loss of $17.2$108.5 million was recorded in relation to the MSC Cristina, which was held for sale as of December 31, 2016. As of December 31, 2016, the Company had a current expectation that, more likely than not, the Navios Apollon would be sold before the end of its previously estimated useful life, and as a result performed an impairment test of the specific asset group and recorded an impairment loss of $10.0 million. There was no vessel impairment loss for the year ended December 31, 2015.
Loss on sale of securities:A loss of $19.4 million was recorded in relation2021, related to the loss on salefair value of the HMM securitiestime charters with unfavorable lease terms as determined at the acquisition date of December 31, 2016 (see Note 19).Navios Containers and at the date of obtaining control of Navios Acquisition. There was no loss on saleamortization of securitiesunfavorable lease terms for the year ended December 31, 2015.2020.
Gain on sale of vessels, net: Gain on sale of vessels amounted to $33.6 million for the year ended December 31, 2021, relating to a gain on sale of the Navios Altair I, the Harmony N, the Navios Azalea, the Navios Dedication, the Esperanza N, the Castor N and the Solar N amounted to $35.0 million, partially mitigated by a loss on sale of the Joie N that amounted to $1.4 million. There was no gain on sale of vessels for the year ended December 31, 2020.
Vessels impairment loss: As of December 31, 2021, the Company concluded that events and circumstances did not trigger the existence of potential impairment of its vessels, mainly due to the market improvement. As a result, there was no impairment for the year ended December 31, 2021. During the year ended December 31, 2020, Navios Partners recognized: (i) an impairment loss of $6.8 million for three containerships as the undiscounted projected cash flows did not exceed the vessels’ carrying value pursuant to the impairment assessment performed as of June 30, 2020; (ii) an impairment loss of $51.0 million for four drybulk vessels as the undiscounted projected cash flows did not exceed the vessels’ carrying value pursuant to the impairment assessment performed as of December 31, 2020; (iii) an impairment loss of $1.8 million related to the sale of the Esperanza N which was completed on January 13, 2021; (iv) an impairment loss of $2.0 million related to the sale of the Castor N which was completed on February 10, 2021; and (v) an impairment loss of $10.0 million related to the sale of the Navios Soleil which was completed on December 10, 2020.
Interest expense and finance cost, net:Interest expense and finance cost, net for the year ended December 31, 2016 decreased2021 increased by $0.5$18.6 million, or 1.5%76.9%, to $31.2$42.8 million, as compared to $31.7$24.2 million for the year ended December 31, 2015.2020. The decreaseincrease was mainly due to the decrease in the average outstanding loan balance to $558.1 million for the year ended December 31, 2016 as compared to $605.4 million for the same period in 2015. The decrease was partially mitigated by the higher weighted average interest rateand finance costs of 4.67% for the year ended December 31, 2016 as compared to 4.44% for the same period in 2015. As of December 31, 2016 and 2015, the outstanding loan balance under Navios Partners’Containers’ credit facilities was $526.6 million and $603.4 million, respectively.financial liabilities recognized following the completion of the NMCI Merger on March 31, 2021 and the interest and finance costs of Navios Acquisition’s credit facilities and financial liabilities recognized following the control obtained on August 25, 2021.
Interest income: Interest income increased by approximately $0.3 million to $0.5$0.9 million for the year ended December 31, 2016,2021, as compared to $0.2$0.6 million for the year ended December 31, 2015.2020.
Impairment of receivable in affiliated company: Impairment of receivable in affiliated company for the year ended December 31, 2020 amounted to $6.9 million, related to the other-than-temporary impairment recognized in the Navios Partners’ receivable from Navios Europe II. There was no impairment for the year ended December 31, 2021.
Other income: Other income for the year ended December 31, 20162021 amounted to $14.5$0.3 million, as compared to $5.2$5.1 million for the year ended December 31, 2015.2020. The increasedecrease was mainly attributable to $2.7 million related to the $9.6 million relating tosettlement of claims submitted underand recovery of other receivables of one of our vessels during the Navios Holdings Guarantee agreement.previous year.
Other expense: Other expense increased by $0.3for the year ended December 31, 2021 amounted to $9.7 million as compared to $4.3 million for the year ended December 31, 2016,2020 mainly due to the increase in claim expense and other miscellaneous expenses following the Mergers.
Equity in net earnings of affiliated companies: Equity in net earnings of affiliated companies for the year ended December 31, 2021 amounted to $80.8 million as compared to $4.0$1.1 million for the year ended December 31, 2015.2020. The amount of $80.8 million is the gain from equity in net earnings resulting from the remeasurement of the existing interest held in Navios Containers upon NMCI Merger. As of March 31, 2021, Navios Partners previously held interest of 35.7% in Navios Containers was remeasured to a fair value of $107.0 million, resulting in revaluation gain of $75.4 million which along with the equity gain of approximately $5.4 million from the operations of Navios Containers up to the closing date aggregate to a gain on acquisition of control in the amount of $80.8 million.
Transaction costs: Transaction costs amounted to $10.4 million for the year ended December 31, 2021 and were related to the Mergers. There were no transaction costs for year ended December 31, 2020.
Bargain gain: Bargain gain amounted to $48.0 million for the year ended December 31, 2021, resulting from the excess Navios Containers’ fair value of the identifiable net assets acquired of $342.7 million over the total purchase price consideration of $298.6 million and the excess of Navios Acquisition’s fair value of the identifiable net assets acquired of $211.6 million over the fair value of the consideration transferred of $150.0 million and the fair value of the noncontrolling interest of $57.6 million.
Net (loss)/ income:loss attributable to the noncontrolling interest: Net loss attributable to the noncontrolling interest amounted to $4.9 million for the year ended December 31, 2021.
Net income/ (loss)/ attributable to Navios Partners’ unitholders: Net income for the year ended December 31, 20162021 amounted to $(52.5)$516.2 million compared to $41.8net loss of $68.5 million for the year ended December 31, 2015.2020. The decreaseincrease in net income of $94.4$584.7 million was due to the factors discussed above.
Operating surplus: Navios Partners generated an Operating Surplus for the year ended December 31, 20162021 of $85.0$293.7 million, as compared to $112.7$39.9 million for the year ended December 31, 2015.2020. Operating Surplus is anon-GAAP financial measure used by certain investors to assist in evaluating a partnership’spartnership's ability to make quarterly cash distributions (See(see “Reconciliation of EBITDA and Adjusted EBITDA to Net Cash from Operating Activities”Activities, EBITDA and “Suspension of Distributions”Operating Surplus” contained herein).
Seasonality: Since Navios Partners’ vessels generally operate under long-term charters, theFor a detailed discussion of operating results of operations are not generally subject to the effect of seasonable variations in demand.
Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014
The following table presents consolidated revenue and expense information for the years ended December 31, 2015 and 2014. This information was derived from the audited consolidated revenue and expense accounts of Navios Partners for the respective periods.
Year Ended December 31, 2015 (In thousands of U.S dollars) | Year Ended December 31, 2014 (In thousands of U.S dollars) | |||||||
Time charter and voyage revenues (includes related party revenue of $38.8 million and $27.4 million for the years ended December 31, 2015 and 2014, respectively) | $ | 223,676 | $ | 227,356 | ||||
Time charter and voyage expenses | (7,199 | ) | (15,390 | ) | ||||
Direct vessel expenses | (4,043 | ) | (761 | ) | ||||
Management fees (entirely through related parties transactions) | (56,504 | ) | (50,359 | ) | ||||
General and administrative expenses | (7,931 | ) | (7,839 | ) | ||||
Depreciation and amortization | (75,933 | ) | (95,822 | ) | ||||
Interest expense and finance cost, net | (31,720 | ) | (28,761 | ) | ||||
Interest income | 222 | 243 | ||||||
Other income | 5,232 | 47,935 | ||||||
Other expense | (3,995 | ) | (1,749 | ) | ||||
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Net income | $ | 41,805 | $ | 74,853 | ||||
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Time charter and voyage revenues: Time charter and voyage revenues for the year ended December 31, 2015 decreased by $3.7 million or 1.6% to $223.7 million, as2020 compared to $227.4 million for the same period in 2014. The decrease was mainly attributable to the decrease in TCE to $19,739 per day for the year ended December 31, 2015, from $20,306 per day for the year ended December 31, 2014. The above decrease in time charter2019 please see “Item 5. Operating and voyage revenues was partially mitigated by an increase in revenue due to the delivery of the Navios La PaixFinancial Review and the Navios Sun in January 2014, the YM Utmost and the YM Unity in the second half of 2014 and the delivery of the MSC Cristina in April 2015. As a result of the vessel acquisitions, available days of the fleet increased to 11,051 days for the year ended December 31, 2015, as compared to 10,927 days for the year ended December 31, 2014.
Time charter and voyage expenses: Time charter and voyage expenses for the year ended December 31, 2015 decreased by $8.2 million or 53.2% to $7.2 million, as compared to $15.4 million for the year ended December 31, 2014. The decrease was mainly attributable to the termination of thecharter-in contracts of the Navios Prosperity and the Navios Aldebaran in the first quarter of 2015. On February 11, 2015, Navios Partners and Navios Holdings entered into a novation agreement whereby the rights to the time charter contracts of the Navios Aldebaran and the Navios Prosperity were transferred to Navios Holdings as of February 28, 2015 and March 5, 2015, respectively.
Direct vessel expenses: Direct vessel expenses, comprising of the amortization of dry dock and special survey costs, of certain vessels in our fleet amounted to $4.0 million for the year ended December 31, 2015, as compared to $0.8 million for the year ended December 31, 2014. The increase of $3.3 million was due to drydocks performed in advance during the year ended December 31, 2015.
Management fees: Management fees for the year ended December 31, 2015, increased by $6.2 million or 12.2% to $56.5 million, as compared to $50.4 million for the year ended December 31, 2014. The increase was mainly attributable to the increased number of owned vesselsProspects - A. Operating results” included in Navios Partners’ fleet.
Pursuant to the Management Agreement, the Manager, a wholly owned subsidiary of Navios Holdings, provided commercial and technical management services to Navios Partners’ vessels during 2015 for a daily fee of: (a) $4,000 daily rate per Ultra-Handymax vessel; (b) $4,100 daily rate per Panamax vessel; (c) $5,100 daily rate per Capesize vessel; (d) $6,500 daily rate per Container vessel of TEU 6,800; (e) $7,200 daily rate per Container vessel of more than TEU 8,000; and (f) $8,500 daily rate per very large Container vessel of more than TEU 13,000 through December 31, 2015. In February 2016, Navios Partners amended its existing management agreement2020 Annual Report filed on Form 20-F with the ManagerSEC on March 31, 2021.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to fix the fees for ship management services of its owned fleet excluding drydockinghave, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, which will be reimbursed at cost by Navios Partners at: (a) $4,100 daily rate per Ultra-Handymax vessel; (b) $4,200 daily rate per Panamax vessel; (c) $5,250 daily rate per Capesize vessel; (d) $6,700 daily rate per Container vessel of TEU 6,800; (e) $7,400 daily rate per Container vessel of more than TEU 8,000; and (f) $8,750 daily rate per very large Container vessel of more than TEU 13,000 through December 31, 2017.
General and administrative expenses: General and administrative expenses increased by $0.1 million or 1.2% to $7.9 million for the year ended December 31, 2015, as compared to $7.8 million for the year ended December 31, 2014. The increase was mainly attributable to the increase in administrative fees paid to the Manager due to the increased number of vessels in Navios Partners’ fleet.
Pursuant to the Administrative Services Agreement, the Manager also provides administrative services to Navios Partners, which include bookkeeping, audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client and investor relations and other. The Manager is reimbursed for reasonable costs and expenses incurred in connection with the provision of these services. Navios Partners extended the duration of its existing Administrative Services Agreement with the Manager pursuant to the same terms, until December 31, 2017. For the year ended December 31, 2015 and 2014, the expenses charged by the Manager for administrative fees were $6.2 million and $6.1 million, respectively. The balance of $1.7 million and $1.8 million of general and administrative expenses, for the year ended December 31, 2015 and 2014, respectively, related to legal and professional fees, as well as audit fees and directors’ fees.
Depreciation and amortization: Depreciation and amortization amounted to $75.9 million for the year ended December 31, 2015 compared to $95.8 million for the year ended December 31, 2014. The decrease of $19.9 million was attributable to: (a) a $22.0 million accelerated amortization of the Navios Pollux favorable lease intangible due to change in its useful life in 2014 (Refer to Note 8 — Intangible Assets for further details); and (b) a $6.3 million decrease of amortization of the intangibles which were written off in the first quarter of 2014 for the Navios Orbiter, the Navios Hyperion and the Navios Pollux and the intangible for the Navios Fulvia which was written off in third quarter of 2015. The above decrease was primarily mitigated by an increase in depreciation expense of $6.7 million due to the increased number of vessels that were delivered into our owned fleet. Depreciation of vessels is calculated using an estimated useful life of 25 and 30 years for drybulk and container vessels, respectively, from the date the vessel was originally delivered from the shipyard. Intangible assets are amortized over the contract periods, which range from one to ten years.
Interest expense and finance cost, net: Interest expense and finance cost, net for the year ended December 31, 2015 increased by $3.0 million or 10.3% to $31.7 million, as compared to $28.8 million for the year ended December 31, 2014. The increase was due to the increase in the average outstanding loan balance to $605.4 million for the year ended December 31, 2015 from $547.7 million for the year ended December 31, 2014 mitigated by the lower weighted average interest rate of 4.44% for the year ended December 31, 2015, compared to 4.69% for the same period in 2014. As of December 31, 2015 and 2014, the outstanding loan balance under Navios Partners’ credit facilities was $603.4 million and $583.3 million, respectively.
Interest income: Interest income decreased by $0.02 million to $0.22 million for the year ended December 31, 2015, as compared to $0.25 million for the year ended December 31, 2014.
Other income: Other income for the year ended December 31, 2015 amounted to $5.2 million compared to $47.9 million for the year ended December 31, 2014. The decrease was mainly attributable to the compensation
received of $47.6 million from our third-party insurer for the termination of the credit default insurance in the first quarter of 2014, which resulted in a gain of $47.6 million. Other income for the year ended December 31, 2015, was mainly attributable to $3.6 million relating to claims submitted under Navios Holdings Guarantee agreement.
Other expense: Other expense increased by $2.3 million to $4.0 million for the year ended December 31, 2015, as compared to $1.7 million for the year ended December 31, 2014.
Net income: Net income for the year ended December 31, 2015 amounted to $41.8 million compared to $74.9 million for the year ended December 31, 2014. The decrease in net income of $33.0 million was due to the factors discussed above.
Operating surplus: Navios Partners generated an Operating Surplus for the year ended December 31, 2015 of $112.7 million, as compared to $150.2 million for the year ended December 31, 2014. Operating Surplus is anon-GAAP financial measure used by certain investors to assist in evaluating a partnership’s ability to make quarterly cash distributions (See “Reconciliation of EBITDA and Adjusted EBITDA to Net Cash from Operating Activities” and “Suspension of Distributions” contained herein).
Seasonality: Since Navios Partners’ vessels generally operate under long-term charters, the results of operations, are not generally subject to the effect of seasonable variations in demand.liquidity, capital expenditures or capital resources.
B. Liquidity and Capital Resources
Credit facilities
As of December 31, 2016,2021, the total borrowings, net of deferred finance costs under the Navios Partners’Partners' credit facilities were $523.8$1,361.7 million.
Credit Facilities
Term Loan B facility:Facility:In June 2013, Navios Partners completed the issuance of the $250.0 million Term Loan B facility. The Term Loan B facility bears an interest rate of LIBOR plus 425 basis points (“bps”) and has a five-year term with 1.0% amortization profile.
On October 31, 2013 and November 1, 2013,March 14, 2017, Navios Partners completed the issuance of a $189.5$405.0 millionadd-on to its existing Term Loan B facility.Facility. The Term Loan B Facility bore an interest rate of LIBOR plus 500 bps, it was set to mature on September 14, 2020 and was repayable in equal quarterly installments of 1.25% of the initial principal amount. Navios Partners used the net proceeds of the Term Loan B Facility to: (i) refinance the Term Loan B Facility existing at the time; and (ii) pay fees and expenses related to the Term Loan B. On August 10, 2017, Navios Partners completed the issuance of a $53.0 million add-on to its Term Loan B Facility. The add-on to the Term Loan B facility bearsFacility bore the same terms as the Term Loan B facility.Facility. Navios Partners used the net proceeds to partially finance the acquisition of five Containerthree vessels.
During 2015 and 2016,On October 10, 2019, Navios Partners fully prepaid $21.0 million and $25.0 million, respectively, of the Term Loan B facility. These prepayments were fully applied to the balloon payment.Credit Facility’s outstanding balance of $253.8 million, initially repayable on September 14, 2020. Following the prepayment of March 2015 and May 2016,prepayments an amount of $0.3$2.0 million and 0.2$4.1 million respectively, waswritten-off from the deferred finance fees.fees and discount, respectively.
The Term Loan B facility is secured by first priority mortgages covering certain vessels owned by subsidiaries of
BNP PARIBAS Credit Facilities: On June 26, 2017, Navios Partners entered into a credit facility with BNP PARIBAS of up to $32.0 million (divided into two tranches) in additionorder to other collateral and is guaranteed by each subsidiary of Navios Partners. On March 31, 2016, YM Unity was added as collateral topartially finance the Term Loan B facility. On November 14, 2016, six dry cargo vessels were added as collateral to the Term Loan B facility and a Capesize vessel has been added upon delivery in December 2016 in exchange for $13.5 million, held in the escrow account. Upon deliveryacquisition of the Navios Beaufiks,Ace and the amountNavios Sol. On June 28, 2017, the first tranche of $13.5credit facility of $17.0 million was released anddrawn. On July 18, 2017, the vesselsecond tranche of credit facility of $15.0 million was added as collateral to the Term Loan B facility. The Term Loan B Agreement requires maintenance of a loan to value ratio of 0.8 to 1.0, and other restrictive covenants customary for facilities of this type (subject to negotiated exceptions and baskets), including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Term Loan B Agreement also provides for customary events of default, prepayment and cure provisions.
As ofdrawn. On December 31, 2016,13, 2018, Navios Partners repaid the outstanding balance of the Term Loan Bfirst tranche in the amount of $15.1 million. Following this repayment, an amount of $0.1 million was written-off from the deferred finance fees. On April 9, 2019, Navios Partners amended the existing credit facility, includingin order to refinance two vessels and replace theadd-on existing collateral under the credit facility. The facility matured in the third quarter of 2021 and bore interest at LIBOR plus 300 bps per annum. In May 2021, the outstanding balance of the loan amounting to $7.4 million was $384.8prepaid and refinanced.
On April 28, 2021, Navios Partners entered into new credit facility with BNP PARIBAS for a total amount of $40.0 million netto refinance the existing credit facility dated June 26, 2017, as amended on April 9, 2019 and to finance the acquisition of discounttwo 2012 built 2,782 TEU containerships. On May 10, 2021, the full amount of $1.5the credit facility was drawn. As of December 31, 2021, the remaining outstanding balance was $37.1 million and it is repayable in 14 equal consecutive quarterly installments of $1.4 million each, with a final balloon payment of $386.3$17.1 million to be repaid on the last repayment date. The facility matures in June 2018.
DVB Credit Facilities:On March 6, 2017,July 31, 2018, Navios Partners announcedentered into a credit facility with DVB Bank S.E. of up to $44.0 million (divided into two tranches) in order to finance the issuanceacquisition of the Navios Sphera and the Navios Mars. The amounts of $17.5 million and $26.5 million were drawn on August 30, 2018. Pursuant to the supplemental letter dated March 30, 2021, the repayment was amended. As of December 31, 2021, the remaining outstanding balance of the DVB credit facility was $33.6 million and is repayable in four consecutive quarterly installments of $0.8 million each, with a new $405.0final balloon payment of $30.4 million Term Loan B facility.to be repaid on the last repayment date. The Term Loan B facility matures in the fourth quarter 2022 and bears an interest rate ofat LIBOR +500 basis points and has a three and a half year term. The Term Loan B facility is secured by first priority mortgages covering certain vessels owned by subsidiaries ofplus 290 bps per annum.
On February 12, 2019, Navios Partners entered into a credit facility with DVB Bank S.E. of up to $66.0 million (divided into four tranches) in additionorder to other collateral,refinance the DVB credit facility dated June 28, 2017 and guaranteed by each subsidiary of Navios Partners.
Navios Partners intends to use the net proceeds ofthree capesize vessels previously included in the Term Loan B facility to: (i) to refinancecollateral package. On April 15, 2019, Navios Partners drew the existing Term Loan B; and (ii) to pay fees and expenses relatedtwo tranches of $15.7 million each. On October 10, 2019, Navios Partners drew the two additional tranches of $14.8 million each. Pursuant to the term loans. The issuancesupplemental letter dated March 30, 2021, as of December 31, 2021 the remaining outstanding balance of the new Term Loan B facility was $41.6 million and is subjectrepayable in five consecutive quarterly installments of $1.9 million each, with a final balloon payment of $32.3 million, to signingbe repaid on the last repayment date. The facility matures in the first quarter of definitive documentation.2023 and bears interest at LIBOR plus 260 bps per annum.
ABN AMROHCOB Credit Facilities: On September 22, 2014,26, 2019, Navios Partners entered into the “September 2014 Credit Facility”a new credit facility with Hamburg Commercial Bank AG of up to $56.0$140.0 million in order to finance a portionrefinance eight drybulk vessels and five Containerships, previously included in the Term Loan B collateral package. On October 10, 2019, the amount of $140.0 million of credit facility was drawn. The facility matured in the third quarter of 2021 and bore interest at LIBOR plus 320 bps per annum. In June 2021, the outstanding balance of the purchase price payableloan amounting to $107.8 million was prepaid and refinanced.
On May 11, 2021, Navios Partners entered into a new credit facility with Hamburg Commercial Bank for a total amount of up to $160.0 million, in connectionorder to: (i) refinance its existing HCOB credit facility dated September 26, 2019; (ii) refinance the existing facility of one dry bulk vessel; and (iii) to partially finance the acquisition of one dry bulk vessel. On June 8, 2021, the full amount of the credit facility was drawn. In October 2021, following the sale of one 2006-built panamax vessel, the amount of $3.8 million was prepaid. Following this partial prepayment, as of December 31, 2021, the outstanding balance of the credit facility was $143.8 million and is repayable in six consecutive quarterly installments of $6.1 million each and eight consecutive quarterly installments of $3.7 million each, with a final balloon payment of $78.0 million to be repaid on the last repayment date. The facility matures in the second quarter of 2025, bears interest at LIBOR plus 310 bps per annum.
Hellenic Bank Credit Facility: On June 25, 2020, the Company entered into a new credit facility with Hellenic Bank Public Company Limited in order to partially refinance the ABN credit facility dated December 12, 2019, relating to four of the containerships acquired from Navios Europe I, of up to $17.0 million. In the first quarter of 2021, following the sale of a 2006-built Containership of 3,398 TEU and a 2007-built Containership of 3,091 TEU, an aggregate amount of $7.9 million was prepaid.
On April 23, 2021, Navios Partners extended the credit facility with Hellenic Bank Public Company Limited dated June 25, 2020 for an amount of $8.9 million in order to partially finance the acquisition of one containership from Navios Acquisition. On April 28, 2021, the amount of $8.9 million was drawn. In August 2021, following the sale of one 2006-built containership of 2,824 TEU, the amount of $4.0 million was prepaid. In October 2021, an additional amount of $0.5 million was prepaid. As of December 31, 2021, the remaining outstanding balance was $10.1 million and is repayable in two consecutive quarterly installments of $0.9 million each, two consecutive quarterly installments of $0.4 million each, seven consecutive quarterly installments of approximately $0.3 million each and one quarterly installment of approximately $0.4 million with a final balloon payment of $5.0 million to be repaid on the last repayment date. The credit facility matures in the fourth quarter of 2024 and bears interest at LIBOR plus a margin ranging from 300 bps to 350 bps per annum.
Nordea/Skandinaviska Enskilda/NIBC Credit Facilities: On March 26, 2018, Navios Partners entered into a new credit facility with Nordea Bank AB, Skandinaviska Enskilda BanKen AB and NIBC Bank N.V. of up to $14.3 million (divided into two tranches) in order to partially finance the acquisition of the YM UtmostNavios Symmetry and the YM Unity.Navios Altair I. On May 18, 2018, the first tranche of the credit facility of $7.2 million was drawn. On June 1, 2018 the second tranche of the March 2018 credit facility of $7.2 million was drawn. On December 13, 2018, Navios Partners repaid the outstanding balance of the second tranche in the amount of $6.6 million. Following this repayment, an amount of $0.1 million was written-off from the deferred finance fees. As of December 31, 2021, the outstanding balance of the credit facility was $3.0 million and is repayable in six equal consecutive quarterly installments of $0.3 million each, with a final balloon payment of $1.2 million to be repaid on the last repayment date. The September 2014 Credit Facilityfacility matures in the second quarter of 2023 and bears interest at LIBOR plus 300 bps per annum. During 2015,
On December 28, 2018, Navios Partners prepaid $21.3 million.entered into a new credit facility with NIBC Bank N.V. of up to $28.5 million (divided into three tranches) in order to refinance three Ultra-Handymax vessels, previously included in the Term Loan B collateral package. On May 8, 2019, the first tranche of the credit facility of $11.9 million was drawn. On October 10, 2019, the two remaining tranches of the credit facility of $13.5 million in total were drawn. Following this prepayment, an amount of $0.3 million waswritten-off from the deferred finance fees. On March 31, 2016, the YM Unityamendment in December 2020, one Ultra-Handymax vessel was released and discharged from its obligations and liabilities under the September 2014 Credit Facility. On April 1, 2016, Navios Partners fully repaid the outstanding balance of $28.4 millionsecurity of the credit facility with ABN AMRO Bank N.V. Following this repayment, an amount of $0.3 millionand one other Handymax vessel waswritten-off from the deferred finance fees. collateralized. As of December 31, 2016, there was no outstanding amount under this facility.
On June 23, 2016, Navios Partners entered into the “June 2016 Credit Facility” of up to $30.0 million to be used for the general corporate purposes of the borrower under such facility. The June 2016 Credit Facility bears interest at LIBOR plus 400 bps per annum. The final maturity date was January 30, 2017. As of December 31, 2016, the outstanding balance of this facility was $29.0 million. On January 12, 2017, Navios Partners fully repaid the June 2016 Credit Facility.
Commerzbank/DVB Credit Facility:On March 27, 2015, Navios Partners prepaid $2.3 million of the July 2012 Credit Facility and the prepayment was applied to 2015 installments. On January 8, 2016, Navios Partners prepaid the 2016 installments in the amount of $16.2 million of the July 2012 Credit Facility. On November 10, 2016, Navios Partners prepaid $28.1 million in cash for the settlement of a nominal amount of $30.2 million of the July 2012 Credit facility achieving a $2.1 million gain on debt repayment. The prepayments of 2016 of this facility were accounted for as debt modification in accordance with ASC470Debt. Following these prepayments, an amount of $0.2 million waswritten-off from the deferred finance fees. As of December 31, 2016,2021, the outstanding balance of the July 2012 Creditcredit facility was $41.9$18.9 million and it wasis repayable in one quarterly installment of $1.6 million and foureight consecutive quarterly installments of $2.1$0.8 million each, with a final balloon payment of $31.9$12.9 million to be repaid on the last repayment date. The final maturity date is November 30, 2017.
HSH Credit Facility:On April 16, 2015, Navios Partners, through certainfacility matures in the fourth quarter of its wholly-owned subsidiaries, entered into the April 2015 Credit Facility (divided into two tranches), of up to $164.0 million in order to finance a portion of the purchase price payable in connection with the acquisition of the MSC Cristina2023 and one more super-post-panamax 13,100 TEU container vessel. On September 30, 2015, the second tranche of the April 2015 Credit Facility of $83.0 million was cancelled. As of December 31, 2016, the outstanding balance of the April 2015 Credit Facility was $71.0 million and is repayable in 22 equal consecutive quarterly installments of $1.5 million, with a final balloon payment of $38.4 million on the last repayment date. The final maturity date is April 20, 2022. The April 2015 Credit Facility bears interest at LIBOR plus 275 bps per annum.
ABN Credit Facilities: On December 12, 2019, the Company entered into a new credit facility with ABN Amro Bank N.V. of up to $23.5 million in order to finance the acquisition of the five container vessels from Navios Europe I which had subsequently been refinanced from Hellenic Bank Public Company Limited in June 2020. On September 30, 2020, the Company entered into a second supplemental agreement with ABN Amro Bank N.V., to extend the terms of the then outstanding balance. The credit facility matured in the second quarter of 2021 and bore interest at LIBOR plus 400 bps per annum up to February 28, 2021 and 600 bps per annum up to maturity date. In January 13, 2021, the outstanding balance of the loan amounting to $3.4 million was fully repaid.
On June 26, 2020, the Company entered into a new credit facility with ABN Amro Bank N.V. of up to $32.2 million in order to finance the acquisition of the five drybulk vessels acquired from Navios Europe II. In March 2021, following the sale of one 2011-built Ultra-Handymax vessel of 56,557 dwt, the amount of $4.6 million was prepaid. The facility matured in the second quarter of 2021 and bore interest at LIBOR plus 400 bps per annum up to December 31, 2020 and 425 bps per annum up to maturity date. In June 2021, the outstanding balance of the loan amounting to $21.5 million was prepaid and refinanced.
DORY Credit Facility: On December 16, 2019, the Company entered into a credit facility with Dory Funding DAC of up to $37.0 million in order to finance the acquisition of four drybulk vessels. The facility was scheduled to mature in the third quarter of 2022 and bore interest at LIBOR plus 475 bps per annum for the first twelve-month period after the utilization date, 600 bps for the following twelve-month period and 700 bps for the period commencing 24 months after the utilization date through the termination date. On January 12, 2017,25, 2021, an amount of $9.5 million was repaid under the facility for the release of one handymax vessel. In June 2021, the outstanding balance of the loan amounting to $25.0 million was prepaid and refinanced.
NBG Credit Facility: On June 17, 2021, Navios Partners fullyentered into a new credit facility with National Bank of Greece for a total amount of up to $43.0 million, in order to refinance the existing credit facilities of six dry bulk vessels. On June 18, 2021, the full amount was drawn. In August 2021, following the sale of one 2005-built Panamax vessel of 74,759 dwt, the amount of $6.0 million was prepaid. As of December 31, 2021, the remaining outstanding balance was $34.4 million and is repayable in two consecutive quarterly installments of $1.3 million each followed by 16 consecutive quarterly installments of $1.1 million each, together with a final balloon payment of $14.6 million to be paid on the last repayment date. The facility matures in the second quarter of 2026 and bears interest at LIBOR plus 300 bps per annum.
DNB BANK ASA Credit Facilities: On April 5, 2019, Navios Partners entered into a new credit facility with DNB Bank ASA of up to $40.0 million (divided into two tranches) in order to refinance two Capesize vessels, previously included in the Term Loan B collateral package. On October 10, 2019, the two tranches of the credit facility of $34.4 million were drawn. The facility was scheduled to mature in the second quarter of 2024 and bore interest at LIBOR plus 275 bps per annum. In December 2021, the outstanding balance of the loan amounting to $26.7 million was prepaid and refinanced and the vessels were released from the facility.
On August 19, 2021, Navios Partners entered into a new credit facility with DNB Bank ASA for a total amount of up to $18.0 million, in order to finance part of the acquisition cost of the Navios Azimuth. On August 20, 2021, the full amount was drawn. As of December 31, 2021, the remaining outstanding balance was $17.3 million and is repayable in 19 consecutive quarterly installments of $0.6 million each together with a final balloon payment of $5.2 million to be paid on the last repayment date. The facility matures in the third quarter of 2026 and bears interest at LIBOR plus 285 bps per annum.
On December 13, 2021, Navios Partners entered into a new sustainability linked credit facility with DNB Bank ASA of up to $72.7 million for the refinancing of the existing credit facilities of three tanker vessels and two dry bulk vessels. On December 15, 2021, the full amount was drawn. As of December 31, 2021, the total outstanding balance was $72.7 million and is repayable in 19 consecutive quarterly installments of $2.2 million each following a final balloon payment of $30.3 million to be paid on the last repayment date. The facility matures in the fourth quarter of 2026 and bears interest at LIBOR plus a margin (ranging from 270 bps to 280 bps per annum depending on the emission efficiency ratio of the vessels as defined in the loan agreement).
CACIB Credit Facilities: On July 4, 2019, Navios Partners entered into a new credit facility with Credit Agricole Corporate and Investment Bank (“CACIB”) of up to $52.8 million (divided into four tranches) in order to refinance three Capesize vessels and one Panamax vessel, previously included in the Term Loan B collateral package. In August 2019, the three tranches of the credit facility of $36.5 million, in total were drawn. In October 2019, the fourth tranche of the credit facility of $16.3 million was drawn On August 23, 2021, Navios Partners prepaid $11.4 million of the credit facility and released one vessel from the collateral package of the credit facility. The Company entered into a new sale and leaseback agreement of $15.0 million for the released vessel (see also Financial Liabilities below). As of December 31, 2021, the remaining outstanding balance of the credit facility was $26.5 million and is repayable in seven consecutive six-month installments of $2.3 million each, with a final balloon payment of $10.4 million to be repaid on the April 2015 Credit Facility.last repayment date. The facility matures in the second quarter of 2025 and bears interest at LIBOR plus 275 bps per annum.
On September 28, 2020, the Company entered into a credit facility with CACIB of up to $33.0 million in order to finance the acquisition of the two drybulk vessels acquired from Navios Holdings. The facility was drawn in full on September 30, 2020 and bore interest at LIBOR plus 325 bps per annum. In March 30, 2021, the outstanding balance of the loan amounting to $32.2 million was prepaid and refinanced.
On March 23, 2021, Navios Partners entered into a new credit facility with CACIB of $58.0 million in order to refinance the CACIB credit facility dated September 28, 2020 and to partially finance the acquisition of the Navios Centaurus and the Navios Avior. On March 30, 2021, the full amount was drawn. As of December 31, 2021, the remaining outstanding balance was $52.4 million is repayable in 17 consecutive quarterly installments of $1.6 million each, together with a final balloon payment of $25.2 million to be repaid on the last repayment date. The credit facility matures in the first quarter of 2026 and bears interest at LIBOR plus 300 bps per annum.
Upon completion of the NMCI Merger, Navios Partners assumed the following credit facilities:
ABN AMRO BANK N.V Facility: On December 3, 2018, Navios Containers entered into a facility agreement with ABN AMRO for an amount of up to $50.0 million divided into two tranches: (i) the first tranche is for an amount of up to $41.2 million in order to refinance the outstanding debt of four containerships and to partially finance the acquisition of one containership; and (ii) the second tranche is for an amount of up to $8.8 million in order to partially finance the acquisition of one containership. This loan bears interest at a rate of LIBOR plus 350 bps. Navios Containers drew the entire amount under this facility, net of the loan’s discount of $0.5 million in the fourth quarter of 2018. On June 28, 2019, Navios Containers entered into a supplemental agreement with ABN AMRO, under which Navios Containers made a partial prepayment of the loan in the aggregate amount of $9.4 million and two containerships were released from the facility. In December 2021, following an additional supplemental agreement with the ABN AMRO, the Company made a partial prepayment of the loan in the aggregate amount of $2.0 million and three containerships were released from the facility. As of December 31, 2021, the remaining outstanding balance of the credit facility was $13.1 million and is repayable in four equal consecutive quarterly installments of $0.8 million each, with a final balloon payment of $10.1 million to be repaid on the last repayment date. The Navios Holdings Creditfacility matures in the fourth quarter of 2022 and bears interest at LIBOR plus 350 bps per annum.
BNP Paribas Facility: In MayOn June 26, 2019, Navios Containers entered into a facility agreement with BNP Paribas for an amount of up to $54.0 million to refinance the existing facilities of seven containerships. On June 27, 2019, Navios Containers drew $48.8 million net of loan’s discount of $0.4 million. As of December 31, 2021, the remaining outstanding balance of the credit facility was $30.5 million and is repayable in ten equal consecutive quarterly installments of approximately $1.7 million each, with a final balloon payment of $13.5 million to be repaid on the last repayment date. The loan bears interest at a rate of LIBOR plus 300 bps and matures in the second quarter of 2024.
Upon acquisition of the majority of outstanding stock of Navios Acquisition, Navios Partners assumed the following credit facilities:
8 1/8% First Priority Ship Mortgages: On August 26, 2021, Navios Acquisition called for redemption all of its outstanding 8 1/8% First Priority Ship Mortgages (“Ship Mortgage Notes”) by delivery of a redemption notice to the registered holders of the Ship Mortgage Notes and remitted to the indenture trustee the aggregate redemption price payable to the holders of the Ship Mortgage Notes to satisfy and discharge Navios Acquisition’s obligations under the indenture relating to the Ship Mortgage Notes. Navios Acquisition funded the approximately $397.5 million aggregate redemption price with net proceeds from (i) the sale by Navios Acquisition pursuant to the NNA Merger (in reliance on the exemption from registration provided for under Section 4(a)(2) of the Securities Act) of 44,117,647 shares of Navios Acquisition common stock to Navios Partners for an aggregate purchase price of $150.0 million, and borrowings under the Hamburg Commercial Bank AG facility dated in August 2021 and BNP Paribas S.A. Bank facility dated in August 2021. The Ship Mortgage Notes were redeemed in full on September 25, 2021.
DVB Bank S.E. and Credit Agricole Corporate and Investment Bank: On December 29, 2011, Navios Acquisition entered into a loan agreement with DVB Bank SE and Credit Agricole Corporate and Investment Bank of up to $56.3 million (divided into two tranches of $28.1 million each) to partially finance the purchase price of two MR2 product tanker vessels. Each tranche of the facility was repayable in 32 quarterly installments of $0.4 million each with a final balloon payment of $15.6 million to be repaid on the last repayment date. The repayment started three months after the delivery of the respective vessel and bore interest at a rate of LIBOR plus: (a) up to but not including the drawdown date, 175 bps per annum; (b) thereafter until, but not including, the tenth repayment date, 250 bps per annum; and (c) thereafter 300 bps per annum. On December 15, 2021, the outstanding balance of the loan amounting to $33.6 million was prepaid and refinanced.
BNP Paribas S.A. Bank Facilities: On December 18, 2015, Navios PartnersAcquisition, through certain of its wholly owned subsidiaries, entered into a term loan facility with Navios Holdingsagreement of up to $60.0$44.0 million (the “Navios Holdings Credit Facility”).with BNP Paribas, as agent and the lenders named therein, for the partial post-delivery financing of a LR1 product tanker and a MR2 product tanker. The credit facility was repayable in 12 equal consecutive semi-annual installments in the amount of $2.0 million each, with a final balloon payment of $20.0 million repaid on the last repayment date. The loan matured in December 2021. The loan bore interest at LIBOR plus 230 bps per annum. In December 2021, the outstanding balance of the loan amounting to $22.0 million was fully repaid.
In August 2021, Navios Holdings Credit Facility hasAcquisition, entered into a marginloan facility agreement of up to $96.0 million with BNP Paribas, in order to partially refinance the existing indebtedness of five tanker vessels. Pursuant to an amendment in December 2021, one container vessel was added as collateral. Following the amendment, as of December 31, 2021, the remaining outstanding balance of the credit facility was $91.4 million and is repayable in 15 equal consecutive quarterly installments in the amount of $5.0 million each, with a final balloon payment of $16.4 million to be repaid on the last repayment date. The facility matures in the third quarter of 2025 and bears interest at LIBOR plus 285 bps per annum.
Hamburg Commercial Bank AG Facilities: In June 2017, Navios Acquisition entered into a loan facility for an amount of $24.0 million to refinance the credit facility with ABN AMRO Bank N.V. of its two chemical tankers. The facility was repayable in 17 equal consecutive quarterly installments of $0.6 million each, with a final balloon payment of the balance to be repaid on the last repayment date. The facility was scheduled to mature in September 2021 and bore interest at LIBOR plus 300 bps.bps per annum. In August 2021, the outstanding balance of the loan amounting to $14.8 million was prepaid and refinanced.
In October 2019, Navios Acquisition entered into a loan agreement with Hamburg Commercial Bank AG of up to $31.8 million in order to refinance the existing facility of one VLCC. The facility was repayable in four quarterly installments of $0.9 million each with a final balloon payment of $28.4 million repayable on the last repayment date. The facility was expected to mature in October 2020 and bore interest at LIBOR plus 280 bps per annum. In October 2020, Navios Acquisition extended the maturity date of the loan to October 2024. The remaining balance of the facility was January 2, 2017.repayable in 16 quarterly installments of $0.9 million each with a final balloon payment of $14.9 million repayable on the last repayment date and bore interest at LIBOR plus 390 bps per annum. In April 2016,August 2021, the Company drew down $21.0 million from Navios Holdings Credit Facility, which was fully repaid during April 2016. Following this prepayment, an amountoutstanding balance of $0.6the loan amounting to $25.9 million was written off fromprepaid and refinanced.
In August 2021, Navios Acquisition entered into a loan agreement with Hamburg Commercial Bank AG of $190.2 million in order to partially refinance the deferred finance fees.existing indebtedness of seven tanker vessels. Pursuant to an amendment in December 2021, two container vessels were added as collaterals. Following the amendment and as of December 31, 2021, the remaining outstanding balance of the credit facility was $182.9 million and is repayable in ten quarterly installments of $7.3 million each, and four quarterly installments of $4.5 million each, with a final balloon payment of $91.4 million, to be repaid on the last repayment date. The facility matures in the second quarter of 2025 and bears interest at LIBOR plus 295 bps per annum.
Eurobank S.A: In June 2020, Navios Acquisition entered into a loan agreement with Eurobank S.A. of $20.8 million in order to refinance two LR1s. As of December 31, 2016, there2021, the remaining outstanding balance of the credit facility was no$16.0 million and is repayable in ten quarterly installments of $0.8 million each with a final balloon payment of $8.0 million repayable on the last repayment date. The facility matures in the second quarter of 2024 and bears interest at LIBOR plus 300 bps per annum.
The credit facilities prohibit us from paying distributions to our unitholders or making new investments if, before and after giving effect to such distribution or investment we are not in compliance with the financial covenants described above or upon the occurrence of an event of default. Events of default under our credit facilities include:
Financial Liabilities
In December 2018, the Company entered into two sale and leaseback agreements of $25.0 million in total, with unrelated third parties for the Navios Fantastiks and the Navios Beaufiks. Navios Partners has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transfer of the vessels was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under the sale and leaseback agreements as a financial liability. Navios Partners is obligated to make 69 and 60 consecutive monthly payments, respectively, of approximately $0.2 million and $0.2 million each, respectively, commencing in December 2018. As of December 31, 2021, the outstanding balance under the sale and leaseback agreements of the Navios Fantastiks and the Navios Beaufiks was $18.5 million in total. The agreements mature in the third quarter of 2024 and fourth quarter of 2023, respectively, with a purchase obligation of $6.3 million per vessel on the last repayment date.
On April 5, 2019, the Company entered into a new sale and leaseback agreement of $20.0 million, with unrelated third parties for the Navios Sol, a 2009-built Capesize vessel of 180,274 dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. On April 11, 2019, the amount of $20.0 million was drawn. Navios Partners is obligated to make 120 consecutive monthly payments of approximately $0.2 million each that commenced in April 2019. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Sol was $16.8 million. The agreement matures in the second quarter of 2029, with a purchase obligation of $6.3 million on the last repayment date.
On June 7, 2019, the Company entered into a new sale and leaseback agreement of $7.5 million, with unrelated third parties for the Navios Sagittarius, a 2006-built Panamax vessel of 75,756 dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. On June 28, 2019, the amount of $7.5 million was drawn. Navios Partners is obligated to make 36 consecutive monthly payments of approximately $0.2 million each that commenced in June 2019. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Sagittarius was $2.8 million. The agreement matures in the second quarter of 2022, with a purchase obligation of $2.0 million on the last repayment date.
On July 2, 2019, the Company entered into a new sale and leaseback agreement of $22.0 million, with unrelated third parties for the Navios Ace, a 2011-built Capesize vessel of 179,016 dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability.
On July 24, 2019, the amount of $22.0 million was drawn. Navios Partners is obligated to make 132 consecutive monthly payments of approximately $0.2 million each that commenced in July 2019. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Ace was $19.1 million. The agreement matures in the third quarter of 2030, with a purchase obligation of $6.3 million on the last repayment date.
In June 2021, the Company entered into a new sale and leaseback agreement of $15.0 million, with unrelated third parties for the Navios Bonavis, a 2009- built Capesize vessel of 180,022 dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. On June 28, 2021, the amount of $15.0 million was drawn. Navios Partners is obligated to make 72 consecutive monthly payments of approximately $0.2 million that commenced in June 2021. The agreement matures in the second quarter of 2027, with a purchase obligation of $5.0 million on the last repayment date. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Bonavis was $14.1 million.
In June 2021, the Company entered into a new sale and leaseback agreement of $18.5 million, with unrelated third parties for the Navios Ray, a 2012-built Capesize vessel of 179,515 dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. On June 28, 2021, the amount of $18.5 million was drawn. Navios Partners is obligated to make 108 consecutive monthly payments of approximately $0.2 million each that commenced in June 2021. The agreement matures in the second quarter of 2030, with a purchase obligation of $5.0 million on the last repayment date. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Ray was $17.8 million.
On August 16, 2021, the Company entered into a new sale and leaseback agreement of $15.0 million with an unrelated third party for the Navios Pollux, a 2009-built Capesize vessel of 180,727 dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. On August 25, 2021, the amount of $15.0 million was drawn. Navios Partners is obligated to make 72 consecutive monthly payments of approximately $0.2 million each that commenced in August 2021. The agreement matures in the third quarter of 2027, with a purchase obligation of $5.0 million on the last repayment date. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Pollux was $14.4 million.
Upon completion of the NMCI Merger, Navios Partners assumed the following financial liabilities:
On May 25, 2018, Navios Containers entered into a $119.0 million sale and leaseback transaction with unrelated third parties in order to refinance the outstanding balance of the existing facilities of 18 containerships. Navios Containers has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transfer of the vessels was determined to be a failed sale. In accordance with ASC 842-40, Navios Containers did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under the sale and leaseback transaction as a financial liability. On June 29, 2018, Navios Containers completed the sale and leaseback of the first six vessels for $37.5 million. On July 27, 2018 and on August 29, 2018, Navios Containers completed the sale and leaseback of four additional vessels for $26.0 million. On November 9, 2018, Navios Containers completed the sale and leaseback of four additional vessels for $26.7 million. Navios Containers did not proceed with the sale and leaseback transaction of the four remaining vessels. In July 2021, following the sale of one 2008-built container vessel of 4,250 TEU, the amount of $4.8 million was prepaid. Following the prepayment, Navios Containers is obligated to make 28 monthly payments in respect of all 13 vessels ranging from $0.3 million to $0.8 million each. Navios Containers also has an obligation to purchase the vessels at the end of the fifth year for $41.9 million. As of December 31, 2021, the outstanding balance under this sale and leaseback transaction was $57.1 million.
On March 11, 2020, Navios Containers completed a $119.1 million sale and leaseback transaction with unrelated third parties to refinance the existing credit facilities of two 8,204 TEU containerships and two 10,000 TEU containerships. Navios Containers has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transfer of the vessels was determined to be a failed sale. In accordance with ASC 842-40, Navios Containers did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under the sale and leaseback transaction as a financial liability. Navios Containers drew the entire amount on March 13, 2020, net of discount of $1.2 million. Navios Containers also has an obligation at maturity to purchase: (i) the two 10,000 TEU containerships for $25.5 million in the aggregate; and (ii) the two 8,204 TEU containerships for $18.0 million in the aggregate. The sale and leaseback agreement: (i) is repayable in 28 quarterly installments of $2.0 million each, in the aggregate, matures in March 2027 and bears interest at LIBOR plus 310 bps per annum for the two 10,000 TEU containerships; and (ii) is repayable in 20 quarterly installments of: (a) $16,000 per day, in the aggregate, for the first eight installments; and (b) $6,900 per day, in the aggregate, for the remaining 12 installments, matures in March 2025 and bears interest at LIBOR plus 335 bps per annum for the two 8,204 TEU containerships. As of December 31, 2021, the outstanding balance under this sale and leaseback transaction was $94.7 million.
Upon acquisition of the majority of outstanding stock of Navios Acquisition, Navios Partners assumed the following financial liabilities:
On March 31, 2018, Navios Acquisition entered into a $71.5 million sale and leaseback agreement with unrelated third parties to refinance the outstanding balance of the existing facility (See Note 18 — Transactionson four product tankers. Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was accounted for as a failed sale. In accordance with relatedASC 842-40 the Company did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under sale and lease back agreement as a financial liability. In April 2018, the Company drew $71.5 million under this agreement. The agreement will be repayable in 24 equal consecutive quarterly installments of approximately $1.5 million each, with a repurchase obligation of $35.8 million on the last repayment date. The sale and leaseback agreement matures in April 2024 and bears interest at LIBOR plus 305 bps per annum. As of December 31, 2021, the outstanding balance under this agreement was $49.2 million.
In March and April 2019, Navios Acquisition entered into sale and leaseback agreements with unrelated third parties for $103.2 million in order to refinance $50.3 million outstanding on the existing facility on three product tankers and affiliates).to finance two product tankers. Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale. Following a prepayment made in April 2021, the agreements will be repayable in 17 equal consecutive quarterly installments of $2.3 million each, followed by one quarterly installment of $1.4 million, with a purchase obligation of $34.0 million to be repaid on the last repayment date. The sale and leaseback agreements mature in March and April 2026 respectively, and bear interest at LIBOR plus 350 bps per annum. As of December 31, 2021, the outstanding balance under these agreements was $73.9 million.
In August 2019, Navios Acquisition entered into an additional sale and leaseback agreement of $15.0 million, with unrelated third parties in order to refinance one product tanker. Navios Acquisition has a purchase option in place and an assessment has been performed indicating that the likelihood of the vessel remaining in the property of the lessor at the end of the lease term is remote. In such a case, the buyer-lessor does not obtain control of the vessel and under ASC 842-40, the transaction was determined to be a failed sale. Navios Acquisition is obligated to make 60 consecutive monthly payments of approximately $0.2 million, commencing as of August 2019, with a purchase obligation of $5.6 million to be repaid on the last repayment date. The agreement matures in August 2024 and bears interest at LIBOR plus an implied margin of 380 bps per annum. As of December 31, 2021, the outstanding balance under this agreement was $10.5 million.
In September 2019, Navios Acquisition entered into additional sale and leaseback agreements with unrelated third parties for $47.2 million in order to refinance three product tankers. Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale.
Following a prepayment made in April 2021, the agreements will be repaid through periods ranging from four to seven years in consecutive quarterly installments of up to $1.4 million each, with a purchase obligation of $18.0 million to be repaid on the last repayment date. The agreements mature in September 2023 and September 2026 and bear interest at LIBOR plus a margin ranging from 350 bps to 360 bps per annum, depending on the vessel financed. As of December 31, 2021, the outstanding balance under this agreement was $33.7 million.
In October 2019, Navios Acquisition entered into sale and leaseback agreements with unrelated third parties for $90.8 million in order to refinance six product tankers. Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale. The agreements will be repaid through periods ranging from three to eight years in consecutive quarterly installments of up to $2.8 million each, with a repurchase obligation of up to $25.8 million in total. The sale and leaseback arrangements bear interest at LIBOR plus a margin ranging from 335 bps to 355 bps per annum, depending on the vessel financed. As of December 31, 2021, the outstanding balance under these agreements was $68.2 million.
In June 2020, Navios Acquisition entered into sale and leaseback agreements with unrelated third parties for $72.1 million in order to refinance one MR1, one MR2 and two LR1s. Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale. Following a prepayment made in April 2021, the agreements will be repaid through periods ranging from four to seven years in consecutive quarterly installments of up to $1.8 million each, with a repurchase obligation of up to $23.9 million in total. The sale and leaseback arrangements bear interest at LIBOR plus a margin ranging from 390 bps to 410 bps per annum, depending on vessel financed. As of December 31, 2021, the outstanding balance under the agreements was $58.3 million.
As of December 31, 2021, the security deposits under certain sale and leaseback agreements were $10.1 million, and are presented under “Other long-term assets” in the Consolidated Balance Sheets.
Amounts drawn underof the July 2012 Credit Facilitycredit facilities are secured by first preferred mortgages on certain Navios Partners’ vessels and other collateral and are guaranteed by the respective vessel-owning subsidiary. Amounts drawn under the September 2014 Credit Facility, the April 2015 Credit Facilitysubsidiaries. The credit facilities and the June 2016 Credit Facility are secured by first preferred mortgages on certain Navios Partners’ vessels and other collateral and are guaranteed by Navios Partners. Our credit facilitiesfinancial liabilities contain a number of restrictive covenants that prohibit or limit Navios Partners from, among other things: incurring or guaranteeing indebtedness; entering into affiliate transactions; charging, pledging or encumbering the vessels; changing the flag, class, management or ownership of Navios Partners’ vessels; changing the commercial and technical management of Navios Partners’ vessels; selling or changing the beneficial ownership or control of Navios Partners’ vessels; not maintaining Navios Holdings’ (or its affiliates), Angeliki Frangou’s or their affiliates’ ownership in Navios Partners of at least 15.0%5.0%; and subordinating the obligations under the credit facilities to any general and administrative costs relating to the vessels, including the fixed daily fee payable under the management agreement.Management Agreements.
OurThe Company’s credit facilities and certain financial liabilities also require compliance with a number of financial covenants, including: (i) maintain a required security amount ranging over 105% to 140%; (ii) minimum free consolidated liquidity in an amount equal to $0.5 million per owned vessel and a number of $15.0 millionvessels as at December 31, 2016defined in the Company’s credit facilities and at least the higher of $20.0 million and the aggregate of interest and principal falling due during the previous six months all the other times;financial liabilities; (iii) maintain a ratio of EBITDA to interest expense of at least 2.00 : 2.00:1.00; (iv) maintain a ratio of total liabilities or total debt to total assets (as defined in ourthe Company’s credit facilities) ranging offrom less than 0.75 or 0.80 : 1.00;to 0.80; and (v) maintain a minimum net worth ranging from $30.0 million to $135.0 million for the periods prior to any distributions by the Company. million.
It is an event of default under the credit facilities and certain financial liabilities if such covenants are not complied with in accordance with the terms and subject to the prepaymentprepayments or cure provisionprovisions of each facility.the facilities.
As of December 31, 2016,2021, Navios Partners was in compliance with the financial covenants and/or the prepaymentprepayments and/or the cure provisions, as applicable, in each of its credit facilities.
The credit facilities prohibit us from paying distributions to our unitholders or making new investments if, before and after giving effect to such distribution or investment we are not in compliance with thecertain financial covenants described above or upon the occurrence of an event of default. Events of default under our credit facilities include:
liabilities.
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Liquidity and Cash Sources and UsesCapital Resources
In addition to distributions on our units, our primary short-term liquidity needs are to fund general working capital requirements, cash reserve requirements including those under our credit facilities and debt service, while our long-term liquidity needs primarily relate to expansion and investment capital expenditures and other maintenance capital expenditures and debt repayment. Expansion capital expenditures are primarily for the purchase or construction of vessels to the extent the expenditures increase the operating capacity of or revenue generated by our fleet, while maintenance capital expenditures primarily consist of drydocking expenditures and expenditures to replace vessels in order to maintain the operating capacity of or revenue generated by our fleet. Investment capital expenditures are those capital expenditures that are neither maintenance capital expenditures nor expansion capital expenditures.
We anticipate that our primary sources of funds for our short-term liquidity needs will be cash flows from our equity offerings, operations, proceeds from asset sales, long-term bank borrowings and bank borrowings.other debt raisings. As of December 31, 2016,2021, Navios Partners’ current assets totaled $56.3$226.3 million, while current liabilities totaled $98.9$395.5 million, resulting in a negative working capital position of $42.6$169.2 million. In January 2017, Navios Partners soldPartners’ cash forecast indicates that it will generate sufficient cash through its contracted revenue of $2,872.9 million as of April 1, 2022 and cash proceeds from sale of vessels (see Note 24 – Subsequent events to our consolidated financial statements, included elsewhere in this Annual Report) to make the MSC Cristina to an unrelated third partyrequired principal and interest payments on its indebtedness, provide for the normal working capital requirements of the business for a total net sale priceperiod of $125.0 million and repaidat least 12 months from the balancedate of the April 2015 Credit Facilityissuance of $71.0 million and the balance of the June 2016 Credit Facility of $29.0 million. our consolidated financial statements.
Generally, our long-term sources of funds derive from cash from operations, long-term bank borrowings and other debt or equity financings to fund acquisitions and expansion and investment capital expenditures, including opportunities we may pursue under the Omnibus Agreement. We cannot assure you that we will be able to raise the size of our credit facilitiessecure adequate financing or obtainingto obtain additional funds on favorable terms.terms, to meet our liquidity needs.
Cash deposits and cash equivalents in excess of amounts covered by government provided insurance are exposed to loss in the event ofnon-performance by financial institutions. Navios Partners does maintain cash deposits and equivalents in excess of government provided insurance limits. Navios Partners also minimizes exposure to credit risk by dealing with a diversified group of major financial institutions.
As December 31, 2016,Navios Partners may use funds to repurchase its outstanding common units and/or indebtedness from time to time. Repurchases may be made in the total borrowings, netopen market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms Navios Partners deems appropriate and subject to its cash requirements for other purposes, compliance with the covenants under the Navios Partners’ credit facilities, were $523.8 million.and other factors management deems relevant.
On February 14, 2014,In January 2019, the Board of Directors of Navios Partners completed its public offeringauthorized a common unit repurchase program for up to $50.0 million of 5,500,000the Company's common units over a two year period. Common unit repurchases were made from time to time for cash in open market transactions at $17.30 per unitprevailing market prices or in privately negotiated transactions. The timing and raised gross proceedsamount of approximately $95.2 millionrepurchases under the program were determined by Navios Partners' management based upon market conditions and other factors. Repurchases were made pursuant to fund its fleet expansion. The net proceeds of this offering, including the underwriting discount and excluding offering costs estimated at $0.3 million were approximately $91.1 million. Pursuant to this offering, Navios Partners issued 112,245 general partnership units to its general partner. The net proceeds from the issuancea program adopted under Rule 10b5-1 of the general partnership units were $1.9 million. On February 18, 2014, Navios Partners completed the exerciseSecurities Exchange Act of the option previously granted to the underwriters in connection with the offering and issued 825,000 additional common units at the public offering price less the underwriting discount. As a result1934, as amended. The program did not require any minimum repurchase or any specific number of the exercise of the option, Navios Partners raised additional gross proceeds of $14.3 million and net proceeds, including the underwriting discount, of approximately $13.7 million and issued 16,837 additional general partnership units to its general partner. The net proceeds from the issuance of the general partnership units were $0.3 million.
On February 11, 2015, Navios Partners completed its public offering of 4,000,000 common units at $13.09 per unit and raised gross proceeds of approximately $52.4 million to fund its fleet expansion. The net proceeds of this offering, including the underwriting discount and excluding offering costs of $0.2 million were approximately $50.1 million. Pursuant to this offering, Navios Partners issued 81,633 general partnership units to its general partner. The net proceeds from the issuance of the general partnership units were $1.1 million. On the same date, Navios Partners completed the exercise of the option previously granted to the underwriters in connection with the offering and issued 600,000 additional common units at the public offering price less the underwriting discount. As a result of the exercise of the option, Navios Partners raised additional gross proceeds of $7.9 million and net proceeds, including the underwriting discount, of approximately $7.5 million and issued 12,245 additional general partnership units to its general partner. The net proceeds from the issuance of the general partnership units were $0.2 million. In addition, Navios Partners completed a private placement of
1,120,547 common units and 22,868 general partner unitscould have been suspended or reinstated at $13.09 per unit to Navios Holdings, raising additional gross proceeds of $15.0 million. Navios Holdings currently owns a 19.4% interestany time in Navios Partners' discretion and without notice. Repurchases were subject to restrictions under Navios Partners' credit facilities. As of December 31, 2021, since the commencement of the common unit repurchase program, Navios Partners which includeshad repurchased and cancelled 312,952 common units on a split adjusted basis, for a total cost of approximately $4.5 million. There were no repurchases during the 2.0% interest through Navios Partners’ general partner which Navios Holdings ownsyear ended December 31, 2021, and controls.the program expired in January 2021. The Company may in the future enact new repurchase programs if the Board of Directors deems it advisable for the Company.
On November 18, 2016, Navios Partners entered into a Continuous Offering Program Sales Agreement pursuant to which Navios Partners may issuefor the issuance and sellsale from time to time through its agent common units representing limited partner interests having an aggregate offering price of up to $25.0 million. DuringAn amended Sales Agreement was entered into on August 3, 2020. As of April 1, 2022, since the year ended December 31, 2016,commencement of sales pursuant to the amended Sales Agreement, Navios Partners has issued 244,201 common1,286,857 units and received net proceeds of $0.4$23.9 million. No additional sales will be made under this program. Pursuant to the issuance of the common units, Navios Partners issued 4,98426,265 general partnership units to its general partner in order to maintain its 2.0% general partnerownership interest. The net proceeds from the issuance of the general partnership units were $0.01$0.5 million.
On April 9, 2021, Navios Partners entered into a Continuous Offering Program Sales Agreement (“$75.0m Sales Agreement”) for the issuance and sale from time to time through its agent common units having an aggregate offering price of up to $75.0 million. As of March 10, 2017, there were outstanding: 86,564,353April 1, 2022, since the commencement of the $75.0m Sales Agreement, Navios Partners has issued 2,437,624 units and received net proceeds of $73.1 million. No additional sales will be made under this program. Pursuant to the issuance of the common units, and 1,766,624Navios Partners issued 49,747 general partnership units. Duringunits to its General Partner in order to maintain its 2.0% ownership interest. The net proceeds from the years ended December 31, 2016, 2015 and 2014,issuance of the aggregate amount of cash distribution paid was $0, $132.3 million and $139.0 million, respectively. In February 2016, we announced that our board of directors decided to suspend the quarterly cash distributions to our unitholders, including the distributiongeneral partnership units were approximately $1.5 million.
On May 21, 2021, Navios Partners entered into a new Continuous Offering Program Sales Agreement (“$110.0m Sales Agreement”) for the quarter ended December 31, 2015. (See “Suspensionissuance and sale from time to time through its agent common units having an aggregate offering price of Distributions” contained herein).up to $110.0 million. As of April 1, 2022, since the commencement of the $110.0m Sales Agreement, Navios Partners has issued 3,963,249 units and received net proceeds of $103.7 million. No additional sales will be made under this program. Pursuant to the issuance of the common units, Navios Partners issued 80,883 general partnership units to its General Partner in order to maintain its 2.0% ownership interest. The net proceeds from the issuance of the general partnership units were approximately $2.2 million.
Please See “Item 4.A - History and Development of the Partnership” for further discussion of Navios Partners' Liquidity and Capital Resources.
Cash flows for the year ended December 31, 20162021 compared to the year ended December 31, 2015:2020:
The following table presents cash flow information for the years ended December 31, 20162021 and 2015.2020. This information was derived from the audited consolidated statementConsolidated Statements of cash flowsCash Flows of Navios Partners for the respective periods.
Year Ended December 31, 2021 | Year Ended December 31, 2020 | ||||
(In thousands of U.S. dollars) | |||||
Net cash provided by operating activities | $ | 277,173 | $ | 94,086 | |
Net cash used in investing activities | (106,252) | (83,854) | |||
Net cash used in financing activities | (32,203) | (9,906) | |||
Net increase in cash, cash equivalents and restricted cash | $ | 138,718 | $ | 326 |
Year Ended December 31, 2016 | Year Ended December 31, 2015 | |||||||
(In thousands of U.S. dollars) | ||||||||
Net cash provided by operating activities | $ | 56,527 | $ | 123,276 | ||||
Net cash provided by / (used in) investing activities | 5,051 | (149,301 | ) | |||||
Net cash used in financing activities | (70,968 | ) | (46,720 | ) | ||||
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Decrease in cash and cash equivalents | $ | (9,390 | ) | $ | (72,745 | ) | ||
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Cash provided by operating activities for the year ended December 31, 20162021 as compared to the year ended December 31, 2015:
Net cash provided by operating activities decreased by $66.7 million to $56.5 million for the year ended December 31, 2016, as compared to $123.3 million for the same period in 2015.
Net (loss)/ income decreased by $94.4 million to a net loss of $52.5 million for the year ended December 31, 2016, from a net income of $41.8 million for the year ended December 31, 2015. In determining net cash provided by operating activities for the year ended December 31, 2016, net loss was adjusted2020:
Net cash provided by operating activities increased by $183.1 million to $277.2 million inflow for the effects of certainnon-cash items, including $92.4 million depreciation and amortization, $19.4 million loss in relation to the sale of the HMM securities, $17.2 million impairment loss in relation to the committed sale of the MSC Cristina held for sale, $10.0 million impairment loss on the sale of the Navios Apollon, $6.4 million amortization of deferred drydock and special survey costs, $5.7 million non cash accrued interest income and amortization of deferred revenue, $4.0 million amortization andwrite-off of deferred finance costs, $2.1 million non cash gain on debt repayment and $0.1 million equity compensation expense. For the year ended December 31, 2015, net income was adjusted2021, as compared to $94.1 million inflow for the effectssame period in 2020.
The net cash outflow resulting from the change in operating assets and liabilities of certainnon-cash items, including $75.9$96.4 million depreciation and amortization, $3.7 million amortization and writeoff of deferred financing costs and $4.0 million amortization of deferred drydock and special survey costs.
Accounts receivable increased by $6.0 million, from $4.0 million atfor the year ended December 31, 2015, to $10.02021 resulted from a: (i) $53.4 million at December 31, 2016 due to the increase in amounts due from charterers.
Accounts payable increased by $0.6related parties; (ii) $49.8 million from $2.7payments for dry dock and special survey costs; (iii) $14.5 million at December 31, 2015, to $3.3 million at December 31, 2016.
Accrued expenses increased by $1.9 million from $2.5 million at December 31, 2015, to $4.4 million at December 31, 2016. The increase was mainlydecrease in amounts due to an increase in accrued legalrelated parties; and professional fees of $2.0(iv) $7.7 million and an increase in accrued voyage expenses of $0.1 million. The increase was partially offset by a decrease in accrued loan interestexpenses. This was partially mitigated by a: (i) $17.7 million increase in deferred revenue; (ii) $9.8 million decrease in prepaid expenses and other current assets; (iii) $1.2 million increase in accounts payable; and (iv)$0.3 million decrease in accounts receivable.
The net cash inflow resulting from the change in operating assets and liabilities of $0.2 million.
Deferred revenue primarily relates to cash received from charterers prior to it being earned. Deferred revenue, net of commissions decreased by $1.0$14.9 million from $6.1 million atfor the year ended December 31, 2015, to $5.12020 resulted from a: (i) $3.7 million at December 31, 2016.
Amountsdecrease in prepaid expenses and other current assets; (ii) $27.5 million increase in amounts due to related parties amounted to $11.1parties; and (iii) $20.6 million as of December 31, 2016 and $8.7decrease in amounts due from related parties. This was partially mitigated by a: (i) $6.5 million as of December 31, 2015. The balance mainly consisted of drydockincrease in accounts receivable; (ii) $2.3 million decrease in accounts payable; (iii) $1.7 million decrease in accrued expenses; (iv) $1.3 million decrease in deferred revenue; (v) $24.0 million payments for dry dock and special survey expenses.
Amounts due from related parties amounted to $19.6costs; and (vi) $1.0 million as of December 31, 2016decrease in operating lease liabilities current and $0 as of December 31, 2015. The balance mainly consisted of management fees and other receivables.
Payments for drydock and special survey costs incurred at December 31, 2016 and December 31, 2015 were $0 and $13.5 million, respectively, and related to drydock and special survey costs incurred for certain vessels of the fleet.non-current.
Cash provided by/ (used in)used in investing activities for the year ended December 31, 20162021 as compared to the year ended December 31, 2015:
Net cash provided byused in investing activities increased by $154.4 million to $5.1 million inflow for the year ended December 31, 2016,2020:
Net cash used in investing activities increased by $22.4 million to $106.3 million outflow for the year ended December 31, 2021, as compared to $149.3$83.9 million outflow for the same period in 2015.2020.
Cash provided byused in investing activities of $5.1$106.3 million for the year ended December 31, 20162021 was mainly due to: (i) $20.8$217.0 million related to vessel acquisitions and additions; and (ii) $61.8 million related to deposits for the acquisition/ option to acquire vessels and capitalized expenses. This was partially mitigated by: (i) $121.0 million of proceeds fromrelated to the sale of the HMM securities; (ii) $15.3 million paid for the acquisition ofNavios Altair I, the Navios Beaufiks, which was deliveredAzalea, the Navios Dedication, the Joie N, the Castor N, the Solar N, the Harmony N and the Esperanza N in December 2016;2021; (ii) $42.6 million of cash acquired from business acquisitions through the Mergers; and (iii) $0.5$8.9 million loan granted to Navios Europe (II) Inc. (“Navios Europe II”).of proceeds from the senior unsecured notes of HMM.
Cash used in investing activities of $149.3$83.9 million for the year ended December 31, 20152020 was mainly due to: (i) $147.8$72.4 million paidrelated to vessel acquisitions and additions; (ii) $10.7 million related to deposits for the acquisitionoption to acquire two bareboat charter-in vessels and capitalized expenses; and (iii) a $13.6 million repayment to Navios Holdings in relation to the seller’s credit. This was partially mitigated by: (i) $8.2 million of proceeds related to the sale of the Navios Soleil on December 10, 2020; and (ii) $4.7 million of proceeds from the note receivable related to the sale of the MSC Cristina, which was delivered in April 2015; (ii) $0.8 million loan granted to Navios Europe II; and (iii) $0.7 million used for investment in Navios Europe II.Cristina.
Cash used in financing activities for the year ended December 31, 20162021 as compared to the cash used in financing activities for the year ended December 31, 2015:2020:
Net cash used in financing activities increased by $24.2$22.3 million to $71.0$32.2 million outflow for the year ended December 31, 2016,2021, as compared to $46.7$9.9 million outflow for the same period in 2015.2020.
Cash used in financing activities of $32.2 million for the year ended December 31, 2021 was mainly due to: (i) loans and financial liabilities repayments of $959.2 million; (ii) payment of $12.2 million of deferred finance fees relating to the new credit facilities and sale and leaseback agreements; and (iii) payment of a total cash distributions of $4.6 million. This was partially mitigated by: (i) $735.3 million of proceeds from the new credit facilities and sale and leaseback agreements; and (ii) $208.5 million of proceeds from the issuance of 7,330,222 common units and 384,733 additional general partner units related to the Continuous Offering Program Sales Agreements and the acquisitions of Navios Containers and Navios Acquisition
Cash used in financing activities of $71.0$9.9 million for the year ended December 31, 20162020 was mainly due to: (i) loanpayment of a total cash distribution of $7.9 million; (ii) loans and financial liabilities repayments of $104.6$82.7 million; and (ii)(iii) a payment of $1.1 million of deferred financingfinance costs relatingrelated to the June 2016 Credit Facility and the Navios Holdings Credit Facility.new credit facilities. This overall decrease was partially offset by: (i) $79.5 million of proceeds of $29.0from the from the new credit facilities and sale and leaseback agreements; and (ii) $2.3 million on June 23, 2016, under the June 2016 Credit Facility; (ii) a $5.3 million decrease in restricted cash related to the amounts held in retention accounts in order to service debt payments, as required by Navios Partners’ credit facilities; and (iii) $0.4 millionof proceeds from the issuance of 244,201357,508 common units and 7,298 additional general partner units in November 2016, net of offering costs.
Cash used in financing activities of $46.7 million for the year ended December 31, 2015 was due to: (i) $72.1 million proceeds from the issuance of 4,600,000 common units in February 2015, net of offering costs;
(ii) $1.5 million proceeds from the issuance of additional general partnership units; and (iii) proceeds of $79.8 million on April 20, 2015, under the April 2015 Credit Facility. This overall increase was partially offset by: (i) loan repayments of $60.7 million; (ii) payment of a total cash distribution of $132.3 million; (iii) payment of $0.7 million of deferred finance costs relating to the April 2015 Credit Facility; and (iv) a $6.4 million increase in restricted cash related to the amounts held in retention accounts in order to service debt payments or asContinuous Offering Program Sales Agreement.
For a detailed discussion of cash collateral, as required by Navios Partners’ credit facilities.
Cash flows for the year ended December 31, 20152020 compared to the year ended December 31, 2014:
The following table presents cash flow information for the years ended December 31, 20152019 please see “Item 5. Operating and 2014. This information was derived from the audited consolidated statement of cash flows of Navios Partners for the respective periods.
Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||
(In thousands of U.S. dollars) | ||||||||
Net cash provided by operating activities | $ | 123,276 | $ | 171,661 | ||||
Net cash used in investing activities | (149,301 | ) | (123,272 | ) | ||||
Net cash (used in)/provided by financing activities | (46,720 | ) | 15,760 | |||||
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(Decrease)/increase in cash and cash equivalents | $ | (72,745 | ) | $ | 64,149 | |||
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Cash provided by operating activities for the year ended December 31, 2015 as compared to the year ended December 31, 2014:
Net cash provided by operating activities decreased by $48.4 million to $123.3 million for the year ended December 31, 2015, as compared to $171.7 million for the same period in 2014.
Net income decreased by $33.0 million to $41.8 million for the year ended December 31, 2015, from $74.9 million for the year ended December 31, 2014. In determining net cash provided by operating activities for the year ended December 31, 2015, net income was adjusted for the effects of certainnon-cash items, including $75.9 million depreciationFinancial Review and amortization, $3.7 million amortization andwrite-off of deferred financing costs and $4.0 million amortization of deferred drydock and special survey costs. For the year ended December 31, 2014, net income was adjusted for the effects of certainnon-cash items, including depreciation and amortization of $95.8 million, $3.1 million amortization andwrite-off of deferred financing cost and $0.8 million amortization of deferred dry dock and special survey costs.
Accounts receivable decreased by $9.3 million, from $13.3 million at December 31, 2014, to $4.0 million at December 31, 2015 due to the decrease in amounts due from charterers.
Accounts payable decreased by $1.1 million, from $3.8 million at December 31, 2014, to $2.7 million at December 31, 2015.
Accrued expenses decreased by $1.1 million from $3.6 million at December 31, 2014, to $2.5 million at December 31, 2015.
Deferred revenue primarily relates to cash received from charterers prior to it being earned. Deferred revenue, net of commissions increased by $1.8 million from $4.3 million at December 31, 2014, to $6.1 million at December 31, 2015.
Amounts due to related parties increased by $6.8 million, from $1.9 million at December 31, 2014, to $8.7 million at December 31, 2015. The increase was mainly attributable to an increase in other payables for drydock and special survey expenses of $5.7 million and management fees outstanding of $1.2 million and other receivables of $1.8 million.
Payments for drydock and special survey costs incurred at December 31, 2015 and December 31, 2014 were $13.5 million and $8.7 million, respectively, and related to drydock and special survey costs incurred for certain vessels of the fleet.
Cash used in investing activities for the year ended December 31, 2015 as compared to the year ended December 31, 2014:
Net cash used in investing activities increased by $26.0 million to $149.3 million for the year ended December 31, 2015, as compared to $123.3 million for the same period in 2014.
Cash used in investing activities of $149.3 million for the year ended December 31, 2015 was due to: (i) $147.8 million paid for the acquisition of the MSC Cristina, which was delivered in April 2015; (ii) $0.8 million loan granted to Navios Europe II; and (iii) $0.7 million used for investmentProspects - A. Operating results” included in Navios Europe II.Partners’ 2020 Annual Report filed on Form 20-F with the SEC on March 31, 2021.
Cash used in investing activities of $123.3 million for the year ended December 31, 2014 was due to: (i) $36.9 million paid for the acquisition of the Navios La Paix and the Navios Sun in January 2014 of which $33.4 million was released from escrow; (ii) $5.9 million paid as deposits for the acquisition of a vessel which was delivered to Navios Partners in the fourth quarter of 2014; (iii) a $0.5 million loan granted to Navios Europe I; (iv) $59.1 million paid for the acquisition of the YM Utmost in August 2014; and (v) $59.1 million paid for the acquisition of the YM Unity in October 2014.
Cash used in financing activities for the year ended December 31, 2015 as compared to cash provided by financing activities for the year ended December 31, 2014:
Net cash used in financing activities decreased by $62.5 million to $46.7 million outflow for the year ended December 31, 2015, as compared to $15.8 million inflow for the same period in 2014.
Cash used in financing activities of $46.7 million for the year ended December 31, 2015 was due to: (i) $72.1 million proceeds from the issuance of 4,600,000 common units in February 2015, net of offering costs; (ii) $1.5 million proceeds from the issuance of additional general partnership units; and (iii) proceeds of $79.8 million on April 20, 2015, under the April 2015 Credit Facility. This overall increase was partially offset by: (i) loan repayments of $60.7 million; (ii) payment of a total cash distribution of $132.3 million; (iii) payment of $0.7 million of deferred financing costs relating to the April 2015 Credit Facility; and (iv) a $6.4 million increase in restricted cash related to the amounts held in retention accounts in order to service debt payments or as cash collateral, as required by Navios Partners’ credit facilities.
Cash provided by financing activities of $15.8 million for the year ended December 31, 2014 was due to: (a) $104.5 million of proceeds from the issuance of 6,325,000 common units in February 2014, net of offering costs; (b) $2.2 million of proceeds from the issuance of additional general partnership units; and (c) proceeds of $56.0 million under the September 2014 Credit Facility. This overall increase was partially offset by: (a) loan repayments of $7.1 million; (b) payment of a total cash distribution of $139.0 million; and (c) payment of $0.9 million of deferred financing costs relating to the September 2014 Credit Facility.
Reconciliation of EBITDA and Adjusted EBITDA to Net Cash from Operating Activities, EBITDA and Operating Surplus
Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | ||||||
(In thousands of U.S. dollars) | ||||||||
Net cash provided by operating activities | $ | 277,173 | $ | 94,086 | $ | 70,395 | ||
Net increase in operating assets | 93,092 | 7,261 | 11,069 | |||||
Decrease/ (increase) in operating liabilities | 3,274 | (22,207) | (2,643) | |||||
Net interest cost | 41,903 | 23,520 | 39,082 | |||||
Amortization and write-off of deferred finance cost | (3,741) | (2,141) | (10,916) | |||||
Amortization of operating lease right-of-use asset | 401 | (956) | (378) | |||||
Non cash accrued interest income and amortization of deferred revenue | (460) | 1,588 | 12,638 | |||||
Stock-based compensation | (523) | (946) | (2,018) | |||||
Gain on sale of vessels, net | 33,625 | — | — | |||||
Vessels impairment loss | — | (71,577) | (36,680) | |||||
Other than temporary impairment loss in Navios Containers investment | — | — | (42,603) | |||||
Non cash accrued interest income from receivable from affiliates | — | 279 | ||||||
Bargain gain | 48,015 | |||||||
Impairment of receivable in affiliated company | — | (6,900) | — | |||||
Allowance for credit losses | — | (1,495) | — | |||||
Change in estimated guarantee claim receivable | — | — | (3,638) | |||||
Equity in earnings of affiliated companies, net of dividends received | 80,839 | 1,133 | 2,532 | |||||
Net loss attributable to noncontrolling interest | 4,913 | — | — | |||||
EBITDA(1) | $ | 578,511 | $ | 21,366 | $ | 37,119 | ||
Equity in earnings of affiliated companies | (80,839) | — | — | |||||
Bargain gain | (48,015) | — | — | |||||
Transaction costs | 10,439 | — | — | |||||
Gain on sale of vessels, net | (33,625) | — | — | |||||
Impairment of receivable in affiliated company | — | 6,900 | — | |||||
Vessels impairment loss | — | 71,577 | 36,680 | |||||
Revision of estimated guarantee claim receivable | — | — | 3,638 | |||||
Other than temporary impairment loss in Navios Containers investment | — | — | 42,603 | |||||
Adjusted EBITDA | $ | 426,471 | $ | 99,843 | $ | 120,040 | ||
Cash interest income | 745 | 219 | 626 | |||||
Cash interest paid | (50,382) | (23,717) | (32,869) | |||||
Maintenance and replacement capital expenditures | (83,147) | (36,455) | (29,039) | |||||
Operating Surplus | $ | 293,687 | $ | 39,890 | $ | 58,758 |
Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | ||||||||||
(In thousands of U.S. dollars) | ||||||||||||
Net cash provided by operating activities | $ | 56,527 | $ | 123,276 | $ | 171,661 | ||||||
Net decrease in operating assets | 37,133 | 8,499 | 6,002 | |||||||||
Net decrease in operating liabilities | (4,524 | ) | (6,361 | ) | (3,136 | ) | ||||||
Net interest cost | 30,706 | 31,498 | 28,518 | |||||||||
Amortization andwrite-off of deferred financing cost and discount | (4,003 | ) | (3,727 | ) | (3,091 | ) | ||||||
Vessel impairment losses | (27,201 | ) | — | — | ||||||||
Loss on sale of securities | (19,435 | ) | — | — | ||||||||
Gain on debt repayment | 2,140 | — | — | |||||||||
Equity compensation expense | (93 | ) | — | — | ||||||||
Non cash accrued interest income and amortization of deferred revenue | 5,717 | — | — | |||||||||
Equity in earnings of affiliates | (59 | ) | 94 | — | ||||||||
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EBITDA(1) | $ | 76,908 | $ | 153,279 | $ | 199,954 | ||||||
Vessel impairment losses | 27,201 | — | — | |||||||||
Loss on sale of securities | 19,435 | — | — | |||||||||
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Adjusted EBITDA | $ | 123,544 | $ | 153,279 | $ | 199,954 | ||||||
Cash interest income | 7 | 51 | 169 | |||||||||
Cash interest paid | (26,694 | ) | (26,787 | ) | (25,870 | ) | ||||||
Maintenance and replacement capital expenditures | (11,899 | ) | (13,811 | ) | (24,047 | ) | ||||||
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Operating Surplus | $ | 84,958 | $ | 112,732 | $ | 150,206 | ||||||
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(1)
Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | ||||||
(In thousands of U.S. dollars) | ||||||||
Net cash provided by operating activities | $ | 277,173 | $ | 94,086 | $ | 70,395 | ||
Net cash used in investing activities | $ | (106,252) | $ | (83,854) | $ | (17,034) | ||
Net cash used in financing activities | $ | (32,203) | $ | (9,906) | $ | (84,414) |
102 |
Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | ||||||||||
(In thousands of U.S. dollars) | ||||||||||||
Net cash provided by operating activities | $ | 56,527 | $ | 123,276 | $ | 171,661 | ||||||
Net cash provided by/ (used in) investing activities | $ | 5,051 | $ | (149,301 | ) | $ | (123,272 | ) | ||||
Net cash (used in)/provided by financing activities | $ | (70,968 | ) | $ | (46,720 | ) | $ | 15,760 |
EBITDA and Adjusted EBITDA
EBITDA represents net incomeincome/ (loss) attributable to Navios Partners’ unitholders before interest and finance costs, before depreciation and amortization (including intangible accelerated amortization) and income taxes. Adjusted EBITDA represents EBITDA plus vesselbefore impairment losses, and losschange in estimated guarantee claim receivable, gain on sale of securities. We use EBITDAvessels, equity in net earnings of affiliated companies, transaction costs and bargain gain. Navios Partners uses Adjusted EBITDA as a liquidity measure and reconcilereconciles EBITDA and Adjusted EBITDA to net cash provided by/(used in)by operating activities, the most comparable U.S. GAAP liquidity measure. EBITDA in this document is calculated as follows: net cash provided by/(used in)by operating activities adding back, when applicable and as the case may be, the effect ofof: (i) net increase/(decrease) in operating assets,assets; (ii) net (increase)/decrease in operating liabilities,liabilities; (iii) net interest cost,cost; (iv) amortization andwrite-off of deferred finance charges and other related expenses,financing cost; (v) provision for losses on accounts receivable, (vi) equity in earningsnet earnings/ (loss) of affiliates, net of dividends received,affiliated companies; (vi) impairment charges; (vii) payments for drydock
and special survey costs, (viii) gain/(loss) on sale of assets/subsidiaries, (ix) impairment charges, (x) non cashnon-cash accrued interest income and amortization of deferred revenue,revenue; (viii) stock-based compensation expense; (ix) non-cash accrued interest income from receivable from affiliated companies; (x) amortization of operating lease right-of-use asset; (xi) gain/(loss) on debt repaymentssale of assets and bargain purchase gain; and (xii) equity compensation expense.net loss attributable to noncontrolling interest. Navios Partners believes that EBITDA and Adjusted EBITDA are each the basis upon which liquidity can be assessed and presents useful information to investors regarding Navios Partners’ ability to service and/or incur indebtedness, pay capital expenditures, meet working capital requirements and make cash distributions. Navios Partners also believes that EBITDA and Adjusted EBITDA are used: (i) by potential lenders to evaluate potential transactions; (ii) to evaluate and price potential acquisition candidates; and (iii) by securities analysts, investors and other interested parties in the evaluation of companies in our industry.
Each of EBITDA and Adjusted EBITDA have limitations as an analytical tool, and should not be considered in isolation or as a substitute for the analysis of Navios Partners’ results as reported under U.S. GAAP. Some of these limitations are: (i) EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital needs; and (ii) although depreciation and amortization arenon-cash charges, the assets being depreciated and amortized may have to be replaced in the future. EBITDA and Adjusted EBITDA do not reflect any cash requirements for such capital expenditures. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as a principal indicator of Navios Partners’ performance. Furthermore, our calculation of EBITDA and Adjusted EBITDA may not be comparable to that reported by other companies due to differences in methods of calculation.
EBITDA for the year ended December 31, 20162021 was affected by the accounting effect of a: (i) an $80.8 million gain from equity in net earnings of affiliated companies; (ii) a $48.0 million bargain gain upon obtaining control over Navios Acquisition and upon completion of NMCI Merger; (iii) a $33.6 million gain related to the sale of eight of our vessels; and (iv) $10.4 million of transaction costs in relation to the NNA Merger and NMCI Merger. Excluding these items, Adjusted EBITDA increased by $326.7 million to $426.5 million for the year ended December 31, 2021, as compared to $99.8 million for the same period in 2020. The increase in Adjusted EBITDA was primarily due to a: (i) $486.4 million increase in time charter and voyage revenues; and (ii) $4.9 million increase in net loss attributable to noncontrolling interest. The above increase was partially mitigated by a: (i) $97.7 million increase in vessel operating expenses, mainly due to the increased fleet; (ii) $25.1 million increase in time charter and voyage expenses; (iii) $17.5 million increase in general and administrative expenses, mainly due to the increased fleet; (iv) $13.0 million increase in direct vessel expenses (excluding the amortization of deferred drydock, special survey costs and other capitalized items); (v) $5.4 million increase in other expense; (vi) $4.8 million decrease in other income; and (vii) $1.1 million decrease in equity in net earnings of affiliated companies.
EBITDA for the year ended December 31, 2020 was negatively affected by the accounting effect of a $27.2a: (i) $6.9 million loss related to the other-than-temporary impairment recognized in the Navios Partners’ receivable from Navios Europe II; (ii) $6.8 million impairment loss onrelated to three containerships; (iii) $1.8 million impairment loss of related to the sale of the MSC Cristina and the Navios Apollon and a $19.4Esperanza N; (iv) $2.0 million impairment loss onrelated to the sale of the HMM securities.Castor N; (v) $10.0 million impairment loss related to the sale of the Navios Soleil; and (vi) $51.0 million impairment loss related to four of our vessels. EBITDA for the year ended December 31, 2019 was negatively affected by the accounting effect of a: (i) $7.3 million impairment loss related to the sale of the Navios Galaxy I; (ii) $3.6 million revision of the estimated guarantee claim receivable; (iii) $29.3 million impairment loss related to one of our vessels; and (iv) $42.6 million OTTI loss in Navios Containers investment. Excluding these items, Adjusted EBITDA decreased by $29.7$20.2 million to $123.5$99.8 million for the year ended December 31, 2016,2020, as compared to $153.3$120.0 million for the same period in 2015.2019. The decrease in Adjusted EBITDA was primarily due to a: (i) $33.2 million decrease in revenue;
(ii) $2.7$25.5 million increase in management feesvessel operating expenses, mainly due to the increased number of vessels and the increased daily management fee; (iii) $4.4fleet; (ii) $3.0 million increase in general and administrative expenses; and (iv) $0.3expenses, mainly due to the increased fleet; (iii) $2.9 million increase in other expenses.expenses; and (iv) $1.4 million decrease in equity in net earnings of affiliated companies. The above decrease was partially mitigated by a: (i) $1.5$7.4 million increase in time charter and voyage revenues; (ii) $1.3 million decrease in time charter and voyage expenses; and (ii) $9.3(iii) $4.0 million increase in other income.
EBITDA decreased by $46.7 million to $153.3 million for the year ended December 31, 2015, as compared to $200.0 million for the same period in 2014. The decrease in EBITDA was due to: (i) a $3.7 million decrease in revenue; (ii) a $6.2 million increase in management fees; (iii) a $0.1 million increase in general and administrative expenses due to the increased fleet; (iv) a $42.7 million decrease in other income; and (v) a $2.3 million increase in other expenses. The above decrease was partially mitigated by an $8.2 million decrease in time charter and voyage expenses.
Operating Surplus
Operating Surplus represents net income adjusted for depreciation and amortization expense,non-cash interest expense, non-cash interest income, equity compensation expense, estimated maintenance and replacement capital expenditures andone-off items. Maintenance and replacement capital expenditures are those capital expenditures required to maintain over the long term the operating capacity of, or the revenue generated by, Navios Partners’Partners' capital assets.
Operating Surplus is a quantitative measure used in the publicly-traded partnership investment community to assist in evaluating a partnership’spartnership's ability to make quarterly cash distributions.distributions and is a non-GAAP measure. Operating Surplus is not required by accounting principles generally accepted in the United States and should not be considered a substitute for net income, cash flow from operating activities and other operations or cash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity.
Borrowings
Navios Partners’Partners' long-term third party borrowings are reflected in its balance sheet aspresented under the captions “Long-term financial liabilities, net”, “Long-term debt, net”, “Current portion of financial liabilities, net” and “Current portion of long-term debt, net”. As of December 31, 20162021 and December 31, 2015,2020, total debt,borrowings, net amounted to $523.8$1,361.7 million and $598.1$486.9 million, respectively. The current portion of long-term debt,borrowings, net amounted to $74.0$255.1 million at December 31, 20162021 and $23.3$201.8 million at December 31, 2015.2020.
Capital Expenditures
Navios Partners finances its capital expenditures with cash flow from operations, owners’ contribution, equity raisings, long-term bank borrowings and bank borrowings.other debt raisings. Capital expenditures for the years ended December 31, 2016, 20152021, 2020 and 20142019 amounted to $15.3$278.8 million, $147.8$83.1 million and $122.8$23.7 million, respectively.
For the year ended December 31, 2016,2021, expansion capital expenditures of $15.3$278.8 million related to: (i) $61.8 million representing deposits for the acquisition/option to acquire five Capesize bareboat charter-in vessels expected to be delivered by the acquisitionsecond half of 2022 and first half of 2023, two Panamax bareboat charter-in vessels expected to be delivered by the Navios Beaufiks in December 2016. second half of 2022 and first half of 2023, six Containerships expected to be delivered by the second half of 2023, first half of 2024 and second half of 2024; and (ii) $217.0 million relating to vessel acquisitions, additions and capitalized expenses to our fleet.
For the year ended December 31, 2015,2020, expansion capital expenditures of $147.8$83.1 million related to the acquisition of the MSC Cristina in April 2015. The reserve for estimated maintenance and replacement capital expendituresto: (i) $10.7 million representing deposits for the yearsoption to acquire two Panamax bareboat charter-in vessels expected to be delivered by the first half of 2021; and (ii) $72.4 million relating to vessel acquisitions, additions and capitalized expenses to our fleet.
For the year ended December 31, 2016, 20152019, expansion capital expenditures of $23.7 million related to: (i) $2.5 million representing a deposit for the option to acquire a Panamax bareboat charter-in vessel expected to be delivered by the first half of 2021; and 2014 amounted(ii) $21.2 million relating to $11.9 million, $13.8 millionvessel acquisitions, additions and $24.0 million, respectively.capitalized expenses to our fleet.
Maintenance for our vessels and expenses related to drydocking expenses are reimbursed at cost by Navios Partners to our ManagerManagers under the amended management agreement. In October 2011, Navios Partners extendedManagement Agreements. For more information on the duration of its existing Management Agreement with the Manager until December 31, 2017. In each of October 2013, August 2014, February 2015Agreements, please read “Item 7. – Major Unitholders and February 2016, Navios Partners amended its existingRelated Party Transactions - Management Agreement with the Manager to fix the fees for ship management services of its owned fleet, excluding drydocking expenses, which are reimbursed at cost by Navios Partners at: (a) $4,100 daily rate per Ultra-Handymax vessel; (b) $4,200 daily rate per Panamax vessel; (c) $5,250 daily rate per Capesize vessel; (d) $6,700 daily rate per Container vessel of TEU 6,800; (e) $7,400 daily rate per Container vessel of more than TEU 8,000; and (f) $8,750 daily rate per very large Container vessel of more than TEU 13,000 through December 31, 2017.Agreements”.
Maintenance and Replacement Capital Expenditures Reserve
Our annual maintenance and replacement capital expenditures reserve for the years ended December 31, 20162021 and 20152020 was $11.9$83.1 million and $13.8$36.5 million, respectively, for replacing our vessels at the end of their useful lives.
The amount for estimated replacement capital expenditures attributable to future vessel replacement was based on the following assumptions: (i) current market price to purchase a five year old vessel of similar size and specifications;(ii) a 25-year useful life for drybulk and tanker vessels anda 30-year useful life for container vessels;containerships; and (iii) a relative net investment rate.
The amount for estimated maintenance capital expenditures attributable to future vessel drydocking and special survey was based on certain assumptions including the remaining useful life of the owned vessels of our fleet, market costs of drydocking and special survey and a relative net investment rate.
Our Board of Directors, with the approval of the conflicts committee,Conflicts Committee, may determine that one or more of our assumptions should be revised, which could cause our Board of Directors to increase or decrease the amount of estimated maintenance and replacement capital expenditures. The actual cost of replacing the vessels in our fleet will depend on a number of factors, including prevailing market conditions, charter hire rates and the availability and cost of financing at the time of replacement. We may elect to finance some or all of our maintenance and replacement capital expenditures through the issuance of additional common units which could be dilutive to existing unitholders.
Vessels to be delivered
Possible AcquisitionsIn November 2021, Navios Partners agreed to purchase four 5,300 TEU newbuilding containerships (two plus two optional), from an unrelated third party, for a purchase price of Other Vessels$62.8 million each. The vessels are expected to be delivered into Navios Partners’ fleet during the first and the second half of 2024. Navios Partners agreed to pay in total $25.1 million in four installments for each vessel and the remaining amount of $37.7 million plus extras for each vessel will be paid upon delivery of the vessel. The closing of the transaction of the two optional containerships is subject to completion of customary documentation.
Although we do not currently haveOn October 1, 2021, Navios Partners exercised its option to acquire two 5,300 TEU newbuilding containerships, from an unrelated third party, for a purchase price of $61.6 million each. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2024. Navios Partners agreed to pay in place any other agreements relatingtotal $18.5 million in three installments for each vessel and the remaining amount of $43.1 million for each vessel plus extras will be paid upon delivery of the vessel. On November 15, 2021, the first installment of each vessel of $6.2 million, or $12.3 million accumulated for the two vessels, was paid.
On July 2, 2021, Navios Partners agreed to acquisitionspurchase four 5,300 TEU newbuilding containerships, from an unrelated third party, for a purchase price of other$61.6 million each. The vessels we assess potential acquisition opportunities onare expected to be delivered into Navios Partners’ fleet during the second half of 2023 and first half of 2024. Navios Partners agreed to pay in total $18.5 million in three installments for each vessel and the remaining amount of $43.1 million for each vessel plus extras will be paid upon delivery of the vessel. On August 13, 2021, the first installment of each vessel of $6.2 million, or $24.6 million accumulated for the four vessels, was paid.
On June 30, 2021, Navios Partners agreed to acquire a regular basis. newbuilding Panamax vessel, from an unrelated third party, for a purchase price of $34.3 million. The vessel has approximately 81,000 dwt and is expected to be delivered in Navios Partners’ fleet during the first half of 2023. Navios Partners agreed to pay in total $34.3 million, of which $3.4 million was paid in July 2021 and the remaining amount of $30.9 million will be paid during 2022 and first half of 2023. In January 2022, Navios Partners declared its option to purchase the vessel. Pursuant to a novation agreement dated January 28, 2022, the Company agreed to novate the shipbuilding contract and to simultaneously enter into a bareboat charter agreement to bareboat charter-in the vessel, under a ten-year bareboat contract, from an unrelated third party.
In June 2021, Navios Partners agreed to bareboat charter-in, under a ten-year bareboat contract, from an unrelated third party, one newbuilding Capesize vessel, of approximately 180,000 dwt. Navios Partners has the option to acquire the vessel after the end of year four for the remaining period of the bareboat charter. Navios Partners agreed to pay in total $12.0 million, representing a deposit for the option to acquire the vessel after the end of the fourth year of which $6.0 million was paid in September 2021 and the remaining amount of $6.0 million will be paid upon the delivery of the vessel. The vessel is expected to be delivered by the second half of 2022. In September 2021, Navios Partners declared its option to purchase the vessel.
Pursuant to a novation agreement dated December 20, 2021, the Company agreed to novate the shipbuilding contract and to simultaneously enter into a bareboat charter agreement to bareboat charter-in a newbuilding Panamax vessel, under a ten-year bareboat contract, from an unrelated third party. The vessel has approximately 81,000 dwt and is expected to be delivered in Navios Partners’ fleet during the second half of 2022. Navios Partners agreed to pay in total $6.3 million, of which $3.2 million was paid in April 2021 and the remaining amount will be paid during the first quarter of 2022. In December 2021, Navios Partners declared its option to purchase the vessel.
On March 25, 2021, Navios Partners agreed to bareboat charter-in, under a 15-year bareboat contract, from an unrelated third party, one newbuilding Capesize vessel, of approximately 180,000 dwt. Navios Partners has the option to acquire the vessel after the end of year four for the remaining period of the bareboat charter. Navios Partners agreed to pay in total $3.5 million, representing a deposit for the option to acquire the vessel after the end of the fourth year of which $1.8 million was paid in August 2021 and the remaining amount will be paid upon the delivery of the vessel. The vessel is expected to be delivered by the first half of 2023.
On January 25, 2021, Navios Partners agreed to bareboat charter-in, under a 15-year bareboat contract each, from an unrelated third party, three newbuilding Capesize vessels of approximately 180,000 dwt each. Navios Partners has the options to acquire the vessels after the end of year four for the remaining period of the bareboat charters. Navios Partners agreed to pay in total $10.5 million, representing a deposit for the options to acquire the vessels after the end of the fourth year, of which $5.3 million was paid in August 2021 and the remaining amount will be paid upon the delivery of the vessels. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2022 and the first half of 2023.
In the second quarter of 2020, Navios Acquisition exercised its option for a fourth newbuilding Japanese VLCC of approximately 310,000 dwt under a 12-year bareboat charter agreement with de-escalating purchase options and expected delivery in the second half of 2022.
Pursuant to our Omnibus Agreement with Navios Holdings, as amended, in June 2009, we will have the opportunity to purchase additional drybulk vessels from Navios Holdings when those vessels are fixed under charters of three or more years upon their expiration of their current charters or upon completion of their construction. Subject to the terms of our loan agreements, we could elect to fund any future acquisitions with equity or debt or cash on hand or a combination of these forms of consideration. Any debt incurred for this purpose could make us more leveraged and increase our debt service obligations or could subject us to additional operational or financial restrictive covenants.
C. Research and development, patents and licenses, etc.
Not applicable.
D. Trend information
Our results of operations depend primarily on the charter hire rates that we are able to realize for our vessels, which depend on the demand and supply dynamics characterizing the drybulk market at any given time. For other trends affecting our business please see other discussions in “Item 5—5 - Operating and Financial Review and Prospects”.
E.Off-Balance Sheet Arrangements Critical Accounting Estimates
We have nooff-balance sheet arrangements that have or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
F. Contractual Obligations and Contingencies
The following table summarizes our long-term contractual obligations as of December 31, 2016:
Payments due by period (Unaudited) | ||||||||||||||||||||
Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Total | ||||||||||||||||
(In thousands of U.S. dollars) | ||||||||||||||||||||
Loan obligations(1) | $ | 76,767 | $ | 398,117 | $ | 11,826 | $ | 41,387 | $ | 528,097 | ||||||||||
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Total contractual obligations | $ | 76,767 | $ | 398,117 | $ | 11,826 | $ | 41,387 | $ | 528,097 | ||||||||||
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Navios Holdings, Navios Acquisition and Navios Partners will make available to Navios Europe I (in each case, in proportion to their ownership interests in Navios Europe I) revolving loans up to $24.1 million to fund working capital requirements (collectively, the “Navios Revolving Loans I”). As of December 31, 2016, the amounts undrawn from the Navios Revolving Loans I were $9.1 million, of which Navios Partners’ portion was $0.5 million (See Note 18—Transactions with related parties and affiliates).
Navios Holdings, Navios Acquisition and Navios Partners will make available to Navios Europe II (in each case, in proportion to their ownership interests in Navios Europe II) revolving loans up to $38.5 million to fund working capital requirements (collectively, the “Navios Revolving Loans II”). As of December 31, 2016, the amounts undrawn from the Navios Revolving Loans II were $14.1 million, of which Navios Partners’ portion was $0.7 million (See Note 18—Transactions with related parties and affiliates).
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with USU.S. GAAP. The preparation of these financial statements requires us to make estimates in the application of our accounting policies based on the best assumptions, judgments and opinions of management. Following is a discussion of the accounting policies that involve a higher degree of judgment and the methods of their application that affect the reported amount of assets and liabilities, revenues and expenses and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies are those that reflect significant judgments or uncertainties, and potentially result in materially different results under different assumptions and conditions. For a description of all of our significant accounting policies, seeplease refer to Note 2 — Summary of significant accounting policies to the Notesnotes to the consolidated financial statements, included elsewhere in this Annual Report.
Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, management evaluates the estimates and judgments, including those related to uncompleted voyages, future drydock dates, the selection of useful lives for tangible assets and scrap value expected future cash flows from long-lived assets to support impairment tests, provisions necessary for accounts receivable, valuation of intangible assets and liabilities acquired in business combinations, provisions for legal disputes, and contingencies and the valuation estimates inherent in the deconsolidation gain. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions and/or conditions.
Intangible Assets and Unfavorable Lease Terms: Navios Partners' intangible assets and liabilities consist of favorable lease terms and unfavorable lease terms. When a vessel along with the current charter contract are acquired as part of a business combination, intangible assets and unfavorable lease terms are recorded at fair value.
Fair value is determined by reference to market data and the discounted amount of expected future cash flows. Where charter rates are higher than market charter rates, an asset is recorded, being the difference between the acquired charter rate and the market charter rate for an equivalent vessel. Where charter rates are less than market charter rates, a liability is recorded, being the difference between the assumed charter rate and the market charter rate for an equivalent vessel. The determination of the fair value of acquired assets and assumed liabilities requires Navios Partners to make significant assumptions and estimates of many variables including market charter rates, contracted charter rates, remaining duration of the charter agreements, the level of utilization of its vessels and its relevant discount rate. The use of different assumptions could result in a material change in the fair value of these items, which could have a material impact on Navios Partners' financial position and results of operations.
The amortizable value of favorable leases would be considered impaired if their carrying values could not be recovered from the future undiscounted cash flows associated with the assets. As of December 31, 2016, Navios Partners owned a fleet2021, the management of 30 vessels, with an aggregate carrying valuethe Company has considered various indicators and concluded that events and circumstances did not trigger the existence of $1,077.4 million, includingpotential impairment of its intangible assets and that step one of the carrying valueimpairment analysis was not required. As of existing time charters on its fleet of vessels. On avessel-by-vessel basis, aseach of December 31, 2016,2020 and 2019, the carrying value of Navios Partners’ vessels (including the carrying value of the time charter, if any, on the specified vessel) exceeded the estimated fair value of those same vessels (including the estimated fair value of the time charter, if any, on the specified vessel) by approximately $431.6 million in the aggregate (the unrealized loss).
Avessel-by-vessel summary asmanagement, after considering various indicators, performed an impairment test which included intangible assets. As of December 31, 2016, follows (with an * indicating those individual vessels whose carrying value exceeds its estimated fair value, including the related time charter, if any):2021, 2020 and 2019 there was no impairment of intangible assets.
Vessel name | Date of Acquisition | Purchase Price(1) | Carrying Value as of December 31, 2016(1) | |||||||||
(In millions of U.S. dollars) | ||||||||||||
Navios Libra II | 11/16/2007 | $ | 26.3 | $ | 8.7 | * | ||||||
Navios Alegria | 11/16/2007 | 38.9 | 23.0 | * | ||||||||
Navios Felicity | 11/16/2007 | 31.3 | 12.9 | * | ||||||||
Navios Gemini S | 11/16/2007 | 24.3 | 8.2 | * | ||||||||
Navios Galaxy I | 11/16/2007 | 30.7 | 17.0 | * | ||||||||
Navios Hope | 07/01/2008 | 80.0 | 50.5 | * | ||||||||
Navios Apollon(2) | 10/29/2009 | 32.0 | 5.1 | |||||||||
Navios Fantastiks | 05/02/2008 | 87.7 | 56.7 | * | ||||||||
Navios Sagittarius | 01/12/2010 | 59.4 | 28.3 | * | ||||||||
Navios Hyperion | 01/08/2010 | 63.0 | 22.1 | * | ||||||||
Navios Aurora II | 03/18/2010 | 110.3 | 58.5 | * | ||||||||
Navios Pollux | 05/21/2010 | 110.0 | 55.3 | * | ||||||||
Navios Melodia | 11/15/2010 | 78.8 | 58.5 | * | ||||||||
Navios Fulvia | 11/15/2010 | 98.2 | 53.3 | * | ||||||||
Navios Luz | 05/19/2011 | 78.0 | 45.2 | * | ||||||||
Navios Orbiter | 05/19/2011 | 52.0 | 22.8 | * | ||||||||
Navios Buena Ventura | 06/15/2012 | 67.5 | 39.7 | * | ||||||||
Navios Soleil | 07/24/2012 | 21.1 | 18.0 | * | ||||||||
Navios Helios | 07/27/2012 | 21.1 | 17.2 | * | ||||||||
Navios Joy | 09/11/2013 | 47.5 | 42.3 | * | ||||||||
Navios Harmony | 10/11/2013 | 18.0 | 16.3 | * | ||||||||
Hyundai Hongkong | 12/04/2013 | 55.2 | 50.0 | * | ||||||||
Hyundai Tokyo | 12/04/2013 | 55.1 | 50.0 | * | ||||||||
Hyundai Singapore | 12/10/2013 | 55.2 | 50.2 | * | ||||||||
Hyundai Shanghai | 12/13/2013 | 55.2 | 50.1 | * | ||||||||
Hyundai Busan | 12/16/2013 | 55.8 | 50.6 | * | ||||||||
Navios La Paix | 1/8/2014 | 28.5 | 25.5 | * | ||||||||
Navios Sun | 1/17/2014 | 16.2 | 14.4 | * | ||||||||
YM Utmost | 8/29/2014 | 59.1 | 55.7 | * | ||||||||
YM Unity | 10/28/2014 | 59.1 | 55.8 | * | ||||||||
MSC Cristina(3) | 22/04/2015 | — | — | |||||||||
Navios Beaufiks | 30/12/2016 | 15.3 | 15.3 | * | ||||||||
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$ | 1,630.8 | $ | 1,077.4 | |||||||||
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Impairment of Long Lived Assets
Assets: Vessels, other fixed assets and other long lived assets held and used by Navios Partners are reviewed periodically for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular asset may not be fully recoverable. In accordance with accounting for the “impairment or disposal of long-lived assets”, Navios Partners’Partners' management evaluates the carrying amounts and periods over which long-lived assets are depreciated to determine if events or changes in circumstances have occurred that would require modification to their carrying values or useful lives. Measurement of the impairment loss is based on the fair value of the asset. Navios Partners determines the fair value of its assets on the basis of management estimates and assumptions by making use of available market data and taking into consideration third party valuations performed on an individual vessel basis. In evaluating useful lives and carrying values of long-lived assets, certain indicators of potential impairment, are reviewed such as undiscounted projected operating cash flows, vessel sales and purchases, business plans and overall market conditions.
Undiscounted projected net operating cash flows are determined for each vesselasset group and compared to the carrying value of the vessel, the unamortized portion of deferred drydock and special survey costs, ballast water treatment system costs, exhaust gas cleaning system costs and other capitalized items, if any, related to the vessel and the related carrying value of the intangible assets with respect to the time charter agreement attached to that vessel.vessel or the carrying value of deposits for newbuildings. Within the shipping industry, vessels are customarily bought and sold with a charter attached. The value of the charter may be favorable or unfavorable when comparing the charter rate to thenthe current market rates. The loss recognized either on impairment (or on disposition) will reflect the excess of carrying value over fair value (selling price) for the vessel asset group.
DuringThe management of the fourth quarterCompany has considered various indicators, including but not limited to the market price of fiscal 2016, managementits long-lived assets, its contracted revenues and cash flows and the economic outlook. As of December 31, 2021, the Company concluded that events and circumstances did not trigger the existence of potential impairment of its vessels and the related intangible assets and that step one of the impairment analysis was not required.
As of December 31, 2020, the Company concluded that events occurred and circumstances had changed, which indicated that potential impairment of Navios Partners’Partners' long-lived assets maymight exist. These indicators included continued deteriorationvolatility in the spotcharter market andas well as the related,potential impact of the current drybulk and container sector hasmarketplace may have on management’s expectation forthe Company’s future revenues.operations. As a result, an impairment assessment of long-lived assets (step one) was performed.
Navios PartnersThe Company determined the undiscounted projected net operating cash flows for each vessel and compared it to the vessel’svessels' carrying value together with the carrying value of deferred drydock and special survey costs, ballast water treatment system costs, exhaust gas cleaning system costs and other capitalized items, if any, related to the vessel and the carrying value of the related intangible assets, if applicable. The significant factors and assumptions the Company used in the undiscounted projected net operating cash flow analysis included: determining the projected net operating cash flows by considering the charter revenues from existing time charters for the fixed fleet days (Navios Partners’Partners' remaining charter agreement rates) and an estimated daily time charter equivalent for the unfixed days (based on a combination ofone-year average historical time charter rates for the first year and10-year ten-year average historicalone-year time charter rates for the remaining period, adjusted for outliers)period), over the remaining economic life of each vessel, net of brokerage and address commissions, and excluding days of scheduledoff-hires, management fees fixed vessel operating expenses as determined by the Management Agreements in effect until December 20172024 and thereafter assuming an increase of 3.0% every second year and utilization rate of 98.6% based on the fleet’sfleet's historical performance.
Where the undiscounted projected net operating cash flows do not exceed the carrying value of an asset group, management proceeded to perform step two of the impairment assessment. In step two of the impairment assessment, the Company determined fair value of its vessels through a combination of a discounted cash flow analysis utilizing market participant assumptions from available market data and third-party valuations from independent ship brokers performed on an individual vessel basis. The significant factors and assumptions used by management in determining fair value of vessels included those in developing the projected net operating cash flows over the remaining economic life of each vessel and the discount rate.
During the fourth quarter of fiscal year 2020, our assessment concluded that step two of the impairment analysis was not required for certain of our vessels held and no impairment of vessels and the intangible assets existed as of December 31, 2016,used, as the undiscounted projected net operating cash flows exceededdid not exceed the carrying value.
In connection with its annual impairment testing on its vessels as of December 31, 2016, As a result, the Company performs sensitivity analysis onrecorded an impairment loss of $51.0 million for four of our vessels, being the most sensitive and/or subjective assumptions that havedifference between the potential to affect the outcome of the test, principally the projected charter rate used to forecast future cash flows for unfixed days. In that regard, there would continue to be no impairment required to be recognized on any of the Company’s vessels when assuming a decline in the10-year average (of theone-year charter rate for similar vessels), which is the rate that the Company uses to forecast future cash flows for unfixed days, ranging from 10.6% to 75.8% (depending on the vessel).
In addition, the Company compared theten-year historical average (of theone-year charter rate for similar vessels), with current rates for five-year, three-year andone-year charters (for similar vessels). A comparison of theten-year historical average (of theone-year charter rate)fair value and the current rates for five-year, three-year andone-year charters (for similar vessels) follows (as of December 31, 2016):
Current Time Charter Rates of Various Terms (for Similar Vessels) vs. Ten-year Historical Average (of the One-Year Charter Rate) | ||||||||||||
5-Year Average | 3-Year Average | 1-Year Average | ||||||||||
(% above (below) the10-year average) | ||||||||||||
Ultra-Handymax | (45.4 | %) | (48.4 | %) | (61.9 | %) | ||||||
Panamax | (50.6 | %) | (52.4 | %) | (64.5 | %) | ||||||
Capesize | (55.6 | %) | (56.6 | %) | (74.4 | %) | ||||||
Container 6,800 TEU | n/a | * | (11.7 | %) | (42.1 | %) | ||||||
Container 8,200 TEU | n/a | * | (3.5 | %) | (27.9 | %) |
As disclosed elsewhere, the Company’s fleet includes 30 vessels for which thevessels’ carrying value (includingtogether with the carrying value of deferred drydock and special survey costs related to the time charter, if any, onvessels, presented under the specified vessel) exceeds the estimated fair value of those same vessels (including the estimated fair value of the time charter, if any, on the specified vessel) by approximately $431.6 millioncaption “Vessels impairment loss” in the aggregate (the unrealized loss). If testing for impairment using current rates for five-year, three-year andone-year charters historical average (of theone-year charter rate for similar vessels)Consolidated Statements of Operations (see Note 7 — Vessels, net to our consolidated financial statements, included elsewhere in lieu of theten-year historical average (of theone-year charter rate for similar vessels), Navios Partners estimates that an additional one, five and one of its vessels, respectively, would have carrying values in excess of their projected undiscounted future cash flows.this Annual Report).
As of December 31, 2016, the10-year historical average rates for its vessels (which naturally varies by type of vessel) used in determining future cash flows for purposes of its impairment analysis were less than 5% higher than the Company’s average daily time charter equivalent rate achieved in fiscal year 2016 of $16,364 per day.
In the eventJune 30, 2020, our assessment concluded that impairment would occur, the fair value of the related asset would be determined and an impairment charge would be recorded to operations calculated by comparing the asset’s carrying value to its fair value. Fair value is estimated primarily through the use of third-party valuations performed on an individual vessel basis.
Although management believes the underlying assumptions supporting this assessment are reasonable, if charter rate trends and the length of the current market downturn vary significantly from our forecasts, management may be required to perform step two of the impairment analysis was required for three containerships held and used, as the undiscounted projected net operating cash flows did not exceed the carrying value. As a result, the Company recorded an impairment loss of $6.8 million for these vessels, being the difference between the fair value and the vessels’ carrying value together with the carrying value of deferred drydock and special survey costs related to the vessels presented under the caption “Vessels impairment loss” in the future that could expose Navios Partners to material impairment charges in the future.Consolidated Statements of Operations.
As of December 31, 2016,2019, our assessment concluded that step two of the impairment analysis was required for certain of our vessels held and used, as the undiscounted projected net operating cash flows did not exceed the carrying value. As a result, the Company recorded an impairment loss of $27.2$29.3 million for one vessel, being the difference between the fair value and the vessel's carrying value together with the carrying value of deferred drydock and special survey costs related to the vessel, presented under the caption “Vessels impairment loss” in the Consolidated Statements of Operations (see Note 7 — Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report).
During the years ended December 31, 2020 and 2019, an impairment loss of $13.8 million and $7.3 million, respectively, was also recognized in connection with the committed salesales of the MSC CristinaNavios Soleil in December 2020, the Esperanza N in January 2021, the Castor N in February 2021 and the Navios ApollonGalaxy in April 2019, as the carrying amount of each asset group was not recoverable and exceeded its fair value less costs to sell (see Note 6 and Note 7)7 — Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report).
The total impairment loss is included under “Vessel impairment losses” in the consolidated Statements of Operations. Impairment loss recognized amounted to $27.2$0 million, $0$71.6 million and $0$36.7 million for the years ended December 31, 2016, 20152021, 2020 and 2014, respectively.2019, respectively, and was presented under the caption “Vessels impairment loss” in the Consolidated Statements of Operations.
Vessels,
Net:Vessels are stated at historical cost, which consists of the contract price and pre-delivery costs incurred during the construction and delivery of newbuildings, including capitalized interest, and any material expenses incurred upon acquisition (improvements and delivery expenses). of second hand vessels. Vessels acquired in an asset acquisition or in a business combination are recorded at fair value. The fair value of the vessels is determined based on vessel valuations, from independent third party shipbrokers. Subsequent expenditures for major improvements and upgradingupgrades are capitalized, provided they appreciably extend the life, increase the earningearnings capacity or improve the efficiency or safety of the vessels. The cost and related accumulated depreciation of assets retired or sold are removed from the accounts at the time of sale or retirement and any gain or loss is included in the accompanying Consolidated Statements of Operations.
Expenditures for routine maintenance and repairs are expensed as incurred.
Depreciation is computed using the straight line method over the useful life of the vessels, after considering the estimated residual value. Management estimates the residual values of ourthe Company’s drybulk, containerships and container vesselstankers based on a scrap value cost of steel times the weight of the ship noted in lightweight ton (“LWT”). Residual values are periodically reviewed and revised to recognize changes in conditions, new regulations or other reasons. Revisions of residual values affect the depreciable amount of the vessels and affects depreciation expense in the period of the revision and future periods. The estimated scrap rate used to calculate the vessel’s scrap value is $340 per lightweight ton,LWT as we believe these levels are consistent with those of similar companies within the shipping industry. each of December 31, 2021 and 2020.
Management estimates the useful life of ourthe Company’s vessels to be 25 years for drybulk and tanker vessels and 30 years from the drybulk and container vessel’scontainerships, respectively from the original construction, respectively.construction. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, its useful life isre-estimated to end at the date such regulations become effective. An increase in the useful life of a vessel or in its residual value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of a vessel or in its residual value would have the effect of increasing the annual depreciation charge.
Deferred Drydock and Special Survey Costs
OurCosts: Navios Partners' vessels are subject to regularly scheduled dry dockingdrydocking and special surveys which are generally carried out every 30 or 60 months, depending on the vessels' ages to coincide with the renewal of the related certificates issued by the classification societies, unless a further extension is obtained in rare cases and under certain conditions. In eachThe cost of October 2013, August 2014, February 2015drydocking and February 2016, Navios Partners amended its existing management agreement withspecial surveys are deferred and amortized over the Managerabove periods or to fix the fees for ship managementnext drydocking or special survey date if such date has been determined.
Costs capitalized as part of the drydocking or special survey consist principally of the actual costs incurred at the yard, and expenses relating to spare parts, paints, lubricants and services of its owned fleet (excludingincurred solely during the drydocking expenses which are reimbursed at cost by Navios Partners) at: (a) $4,100 daily rate per Ultra-Handymax vessel; (b) $4,200 daily rate per Panamax vessel; (c) $5,250 daily rate per Capesize vessel; (d) $6,700 daily rate per Container vessel of TEU 6,800; (e) $7,400 daily rate per Container vessel of more than TEU 8,000;or special survey period.
Revenue and (f) $8,750 daily rate per very large Container vessel of more than TEU 13,000 through December 31, 2017.Expense Recognition:
Revenue Recognition
Revenue is recorded when services are rendered, under a signed charter agreement or other evidence of an arrangement, the price is fixed or determinable, and collection is reasonably assured. Revenue is generated from time chartering
Revenues from time chartering and bareboat chartering of vessels are accounted for as operating leases and are thus recognized on a straight line basis as the average lease revenue over the rental periods of such charter agreements, as service is performed. A time charter involves placing a vessel at the charterers' disposal for a period of vessels.
Voyage revenuestime during which the charterer uses the vessel in return for the transportationpayment of cargoa specified daily hire rate. Short period charters for less than three months are recognized ratablyreferred to as spot-charters. Charters extending three months to a year are generally referred to as medium-term charters. All other charters are considered long-term. The Company has determined to recognize lease revenue as a combined single lease component for all time charters (operating leases) as the related lease component and non-lease components will have the same timing and pattern of the revenue recognition of the combined single lease component. The performance obligations in a time charter contract are satisfied over term of the estimated relative transit time of each voyage. Voyage expenses are recognized as incurred. A voyage is deemed to commencecontract beginning when athe vessel is availabledelivered to the charterer until it is redelivered back to the Company. Under time charters, operating costs such as for loadingcrews, maintenance and is deemed to end uponinsurance are typically paid by the completionowner of the discharge of the current cargo. Estimated losses on voyages are provided for in full at the time such losses become evident. vessel.
Revenue from voyage contracts
Under a voyage charter, a vessel is provided for the transportation of specific goods between specific ports in return for payment of an agreed upon freight per ton of cargo.
Revenues Upon adoption of ASC 606, the Company recognizes revenue ratably from time charteringport of vessels are accounted forloading to when the charterer's cargo is discharged as operating leaseswell as defer costs that meet the definition of “costs to fulfill a contract” and are thus recognized on a straight line basis as the average minimum lease revenue over the rental periods of such charter agreements, as service is performed. A time charter involves placing a vessel at the charterers’ disposal for a period of time during which the charterer uses the vessel in return for the payment of a specified daily hire rate. Under time charters, operating costs such as for crews, maintenance and insurance are typically paid by the owner of the vessel.
Revenues from profit-sharing are calculated at an agreed percentage of the excess of the charterer’s average daily income over an agreed amount and accounted for on an accrual basis based on provisional amounts and for those contracts that provisional accruals cannot be made due to the nature of the profit share elements, these are accounted for on the actual cash settlement.
Revenues are recorded net of address commissions. Address commissions represent a discount providedrelate directly to the charterers based on a fixed percentage of the agreed upon charter rate. Since address commissions represent a discount (sales incentive) on services rendered by Navios Partners and no identifiable benefit is received in exchange for the consideration provided to the charterer, these commissions are presented as a reduction of revenue.contract.
Pooling arrangements
For vessels operating in pooling arrangements, the Company earns a portion of total revenues generated by the pool, net of expenses incurred by the pool. The amount allocated to each pool participant vessel, including the
Company’s Company's vessels, is determined in accordance with an agreed-upon formula, which is determined by points awarded to each vessel in the pool based on the vessel’svessel's age, design and other performance characteristics. Revenue under pooling arrangements is accounted for as variable rate operating leases on the accrual basis and is recognized when an agreement with the pool exists, price is fixed, service is provided and the collectability is reasonably assured.
The allocation of such net revenue may be subject to future adjustments by the pool however, such changes are not expected to be material. The Company recognizes net pool revenue on a monthly and quarterly basis, when the vessel has participated in a pool during the period and the amount of pool revenue can be estimated reliably based on the pool report.
Revenue from profit-sharing
Profit-sharing revenues are calculated at an agreed percentage of the excess of the charterer's average daily income (calculated on a quarterly or semi annual basis) over an agreed amount and accounted for on an accrual basis based on provisional amounts and for those contracts that provisional accruals cannot be made due to the nature of the profit sharing elements, these are accounted for on the actual cash settlement or when such revenue becomes determinable.
Revenues are recorded net of address commissions. Address commissions represent a discount provided directly to the charterers based on a fixed percentage of the agreed upon charter or freight rate. Since address commissions represent a discount (sales incentive) on services rendered by the Company and no identifiable benefit is received in exchange for the consideration provided to the charterer, these commissions are presented as a reduction of revenue.
Recent Accounting PronouncementsPronouncements:
In January 2017, FASB issued Accounting Standard UpdateNo. 2017-01, “Business Combinations”Please refer to clarify the definitionNote 2 — Summary of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. Under current implementation guidance the existence of an integrated set of acquired activities (inputs and processes that generate outputs) constitutes an acquisition of business. This ASU provides a screen to determine when a set of assets and activities does not constitute a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This update is effective for public entities with reporting periods beginning after December 15, 2017, including interim periods within those years. The amendments of this ASU should be applied prospectively on or after the effective date. Early adoption is permitted, including adoption in an interim period 1) for transactions for which the acquisition date occurs before the issuance date or effective date of the ASU, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and 2) for transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. The Company is currently assessing the impact that adopting this newsignificant accounting guidance will have on its consolidated financial statements.
In January 2017, FASB issued Accounting Standard UpdateNo. 2017-03 “Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323).” The ASU amends the Codification for SEC staff announcements made at recent Emerging Issues Task Force (EITF) meetings. The SEC guidance that specifically relates to our Consolidate Financial Statement was from the September 2016 meeting, where the SEC staff expressed their expectations about the extent of disclosures registrants should make about the effects of the new FASB guidance as well as any amendments issued prior to adoption, on revenue (ASU2014-09), leases (ASU2016-02) and credit losses on financial instruments (ASU2016-13) in accordance with SAB Topic 11.M. Registrants are required to disclose the effect that recently issued accounting standards will have on their financial statements when adopted in a future period. In cases where a registrant cannot reasonably estimate the impact of the adoption, then additional qualitative disclosures should be considered. The ASU incorporates these SEC staff views into ASC 250 and adds references to that guidance in the transition paragraphs of each of the three new standards. The adoption of this new accounting guidance did not have a material effect on the Company’s Consolidated Financial Statements.
In November 2016, FASB issued Accounting Standards UpdateNo. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. This update addresses the classification and presentation of changes in restricted cash on the statement of cash flows under Topic 230, Statement of Cash Flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements.
In August 2016, FASB issued Accounting Standards UpdateNo. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective for public
business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements.
In March 2016, FASB issued Accounting Standards UpdateNo. 2016-09, “Compensation — Stock Compensation (Topic 718)”, which simplifies several aspects of accounting for share-based compensation including the tax consequences, classification of awards as equity or liabilities, forfeitures and classification on the statement of cash flows. This update is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted. The adoption of this new accounting guidance did not have a material effect on the Company’s Consolidated Financial Statements.
In February 2016, the FASB issued Accounting Standards UpdateNo. 2016-02, “Leases (Topic 842)”(“ASU 2016-02”). ASU2016-02 will apply to both types of leases — capital (or finance) leases and operating leases. Accordingpolicies to the new Accounting Standard, lessees will be requirednotes to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months.ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements, and footnotes disclosures.
In January 2016, FASB issued Accounting Standards UpdateNo. 2016-01, “Financial Instruments — Overall (Subtopic825-10) — Recognition and Measurement of Financial Assets and Financial Liabilities”. The amendmentsincluded elsewhere in this update require an entity (i) to measure equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income; (ii) to perform a qualitative assessment to identify impairment in equity investments without readily determinable fair values; (iii) to present separately in other comprehensive income the fair value of a liability resulting from a change in the instrument-specific credit risk; and (iv) to present separately financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet. The amendments also eliminate the requirement, for public business entities, to disclose the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost on the balance sheet and clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related toavailable-for-sale securities in combination with the entity’s other deferred tax assets. For public business entities, the update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this new standard is not expected to have a material impact on the Company’s results of operations, financial position or cash flows.Annual Report.
In August 2014, the FASB issued ASUNo. 2014-15, Presentation of Financial Statements-Going Concern (Subtopic205-40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. This standard requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. Before this new standard, no accounting guidance existed for management on when and how to assess or disclose going concern uncertainties. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The adoption of the new standard is not expected to have a material impact on Navios Partners’ results of operations, financial position or cash flows.
In May 2014, the FASB issued ASU2014-09, Revenue from Contracts with Customers, clarifying the method used to determine the timing and requirements for revenue recognition on the statements of income. Under the new standard, an entity must identify the performance obligations in a contract, the transaction price and allocate the price to specific performance obligations to recognize the revenue when the obligation is completed. The amendments in this update also require disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flow arising from contracts. The new accounting guidance is effective for interim and annual periods beginning after December 15, 2016. In August 2015, FASB issued Accounting Standard UpdateNo. 2015-14 which deferred the effective date of ASU2014-09 for all
entities by one year. The standard will be effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. The Company is currently assessing the impact that adopting this new accounting guidance will have its consolidated financial statements.
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management
The following table sets forth information regarding our current directors and senior management:
Name | Age | Position | ||||
|
| |||||
Angeliki Frangou | 57 | |||||
Efstratios Desypris | 49 | Chief | ||||
George Achniotis | 57 | Executive Vice President-Business Development and Director | ||||
Shunji Sasada | 64 | Director | ||||
Serafeim Kriempardis | 74 | Director (Class III) | ||||
| 59 | Director (Class II) | ||||
Kunihide Akizawa | Director (Class I) | |||||
| 58 | Director (Class I) | ||||
| 53 | |||||
| 48 |
Biographical information with respect to each of our current directors and our executive officers is set forth below. The business address for our directors and executive officers is 7 Avenue de Grande Bretagne, Monte Carlo, MC 98000 Monaco. Each of Ms. Frangou, Mr. Achniotis and Mr. Sasada were appointed as directors by our general partner, pursuant to our partnership agreement.
Angeliki Frangouhas been our ChairmanChairwoman of the Board of Directors and CEOChief Executive Officer since August 2007. In addition,our inception. Ms. Frangou has also been the ChairmanChairwoman and Chief Executive Officer of Navios Maritime Holdings Inc. (NYSE: NM), our sponsor, since August 2005, and the Chairman and Chief Executive Officer of Navios Acquisition (NYSE: NNA), an affiliated corporation, since 2008 and the Chairman and Chief Executive Officer of Navios Midstream (NYSE: NAP), an affiliated limited partnership since October 2014.2005. Ms. Frangou has been the ChairmanChairwoman and a Member of the Board of Directors of Navios South American Logistics Inc. since its inception in December 2007. Previously, Ms. Frangou served as Chairman, Chief Executive Officer and President of International Shipping Enterprises Inc., which acquired Navios Holdings. From 1990 until August 2005, Ms. Frangou was the Chief Executive Officer of Maritime Enterprises Management S.A. and its predecessor company, which specialized in the management of dry cargo vessels. Ms. Frangou is the Chairman of IRF European Finance Investments Ltd., listed on the SFM of the London Stock Exchange. Ms. Frangou isalso a Member of the Board of the United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited,Limited. Since 2015, Ms. Frangou has been a Member of the Board of Trustees of Fairleigh Dickinson University. Ms. Frangou also acts as Vice ChairmanChairwoman of the China Classification Society Mediterranean Committee, and is a member of the International General Committee and of the Hellenic and Black Sea Committee of Bureau Veritas, as well asand is also a member of the Greek Committee of Nippon Kaiji Kyokai. Since March 2016, Ms. Frangou is a Member of the DNV GL Greek National Committee. Since February 2015, Ms. Frangou is a Member of the Board of the Union of Greek Shipowners. Since October 2015, Ms. Frangou has been a Member of the Board of Trustees of Fairleigh Dickinson University. Since July 2013, Ms. Frangou has been a Member of the Board of Visitors of the Columbia University School of Engineering and Applied Science. Ms. Frangou received a bachelor’s degreeBachelor's Degree in mechanical engineering,Mechanical Engineering, summa cum laude, from Fairleigh Dickinson University and a master’s degreeMaster's Degree in mechanical engineeringMechanical Engineering from Columbia University.
StratosEfstratios Desypris ishas been the Chief Operating Officer of Navios Partners since November 2021. He has also served as Chief Financial Officer of Navios Maritime Partners L.P. since January 2010.from 2010 through November 2021. In addition, Mr. Desypris is the Chief Financial Controller of Navios Holdings, Navios Partners’Partners' sponsor, since May 2006.2006 and the Chief Financial Officer of N Shipmanagement Acquisition since September 2019. Mr. Desypris ishas also been a Director and Senior Vice President — Business Development of Navios MidstreamContainers since October 2014.November 2018. He also serves as a Director and theSVP- Strategic SVP-Strategic Planning of Navios South American Logistics Inc and as a Director in Navios Europe.Inc. Before joining Navios Group,Holdings, Mr. Desypris worked for 9 years in the accounting profession, most recently as manager of the audit department at Ernst & Young in Greece. Mr. Desypris started his career as an auditor with Arthur Andersen & Co. in 1997. He holds a Bachelor of Science degree in Economics from the University of Piraeus.
George Achniotiswas appointed to our Board of Directors in August 2007 and he has been our Executive Vice President-Business Development since February 2008. Mr. Achniotis has been Navios Holdings’Holdings' Chief Financial Officer since April 12, 2007. Prior to being appointed Chief Financial Officer of Navios Holdings, Mr. Achniotis served as Senior Vice President —- Business Development of Navios Holdings from August 2006 to April 2007. Prior to joining Navios Holdings, Mr. Achniotis was a partner at PricewaterhouseCoopers from 1999 to August 2006. Mr. Achniotis holds a BachelorsBachelor of Science degree in engineering from the University of Manchester and he is a member of the institute of chartered accountants in England and Wales. Mr. Achniotis is also a member of the institute of certified accountants in Cyprus.
Shunji Sasada was appointed to our Board of Directors in August 2007. Mr. Sasada has also served as a director of Navios Holdings and President of Navios Corporation since January 2015, as director in Navios Maritime Midstream Partners L.P. since October 2014.2015. Mr. Sasada started his shipping career in 1981 in Japan with Mitsui O.S.K. Lines, Ltd. (“MOSK”). InLtd..In 1991, Mr. Sasada joined Trinity Bulk Carriers as its chartering manager as well as subsidiary board member representing MOSKMitsui O.S.K. Lines Ltd. as one of the shareholders. After an assignment in Norway, Mr. Sasada moved to London and started MOSK’sMitsui O.S.K. Lines Ltd.’s own Ultra Handymax operation as its General Manager. Mr. Sasada joined Navios Holdings in May 1997. Mr. Sasada was Senior Vice President —- Fleet Development of Navios Holdings from October 1, 2005 to July 2007 and Chief Operating Officer tountil December 2014. Mr. Sasada is thehas been a member of the North American Committee of Nippon Kaiji Kyokai since inception. Mr. Sasada is a graduate of Keio University, Tokyo, with a B.A. degree in business and he is thea member of Board of TrusteeTrustees of Keio Academy of New York.
Serafeim Kriempardis was appointed to our Board of Directors in December 2009. Mr. Kriempardis previously served as the Head of Shipping of Piraeus Bank from 2007 to 2009 and as the Head of Shipping of Emporiki Bank of Greece from 1999 to 2007. Prior to serving as Head of Shipping at Emporiki Bank, Mr. Kriempardis served in the Project Finance and Corporate and Feasibility departments of the bank. Mr. Kriempardis is an accountant by training and holds a Bachelor’sBachelor's degree in Economics from the Athens University of Economics and Business and a Diploma in Management from the McGill University of Canada. MrMr. Kriempardis also serves as chairman of the Audit Committee, and chairman of the compensation committee. Mr KriempardisCompensation Committee and as a member of our Conflicts Committee, is an independent director.
Robert Pierot was appointed to our Board of Directors in October 2007. Since 1979, Mr. Pierot has been engaged in brokering the sale and purchase of a variety of marine assets ranging from U.S. flag inland waterway marine assets, both United States and internationally flagged vessels ranging from large bulk carriers, tankers, container vessels, U.S. inland waterway equipment and vessels that are used to service the offshore oil and gas exploration and production facilities. Currently, Mr. Pierot serves as Chairman and Chief Executive Officer of Jacq. Pierot Jr. & Sons, Inc., a privately held shipbrokers firm based in New York. Mr. Pierot served as a board member for Chiles Offshore prior to its sale to another U.S. publicly traded offshore drilling rig company. Previously, Mr. Pierot has served as a member of the United States Department of Transportation’s Shipbuilding Subcommittee, the Marine Transportation System National Advisory Council. Since 1980, Mr. Pierot has been a member of the Board of Directors of the Hellenic-American Chamber of Commerce and previously served as Chairman of the Board from mid 2011 to mid 2013.
Lampros TheodorouOrthodoxia Zisimatou was appointed to our Board of Directors in June 2016. Mr. Theodorou founded Garnet & Associates Inc. in 2014 and2017. Mrs. Zisimatou has been directora practicing maritime lawyer since that time. For almost 20 years, Mr. Theodorou worked at EFG Eurobank S.A., as Deputy General Manager1988, focusing on S&P contracts and headcontracts of affreightment. She has been a member of the Shipping Unit, while before that as Vice PresidentPermanent Committee of Maritime Policy, Security and headProtection of the Environment and of the Legal Committee of the Hellenic Chamber of Shipping Department at The Chase Manhattan Bank in Piraeus. Mr. Theodorousince 2007. She has also served as anon-executive director of Paragon Shipping Inc. Maritime Arbitrator for the period May 2015 to April 2016. Mr TheodorouHellenic Chamber of Shipping since 2007. Since 2009, Mrs. Zisimatou has acted as the Secretary General of the Union of Piraeus Shipping Lawyers. She earned a bachelor's degree in Law from the faculty of Law of the University of Athens. Mrs. Zisimatou also serves on our Audit, CommitteeCompensation and Conflicts Committees and is an independent director.
Kunihide Akizawa has 40 years of experience in shipping and logistics. Mr. Theodorou earnedAkizawa started his shipping career in 1982 in Japan with Mitsui O.S.K. Lines, Ltd. He worked in the accounting department, the export department focusing on the Red Sea and Mediterranean areas, the bulk department, and a bachelor’schartering manager of Skaarup Shipping International Corporation, which was a joint-venture company with Mitsui O.S.K. Lines, Ltd. In 1995, Mr. Akizawa joined ITOCHU Corporation in the logistics division. In 2011, he became President of MarineNet, a subsidiary of ITOCHU Corporation as well as five other major Japanese trading houses. In 2016, he was appointed as President of IMECS Co., Ltd, the ship-owning arm of ITOCHU and full subsidiary. In 2021, he joined Fleet Management Limited as Vice President Business Development. Mr. Akizawa is a graduate of Gakushuin University, Tokyo with a B.A. degree in Economics.
Alexander Kalafatides has been a member of our board of directors since 2019. Mr. Kalafatides has nearly 40 years of experience in general management and marketing. Mr. Kalafatides holds the position of global sales and marketing director of IUC International LLC, a designer and importer of consumer products, and he also serves as an adjunct professor in International Business Administrationat Drexel University. He has been involved in considerable turnarounds in various sectors including the marine sector, where he served as Partner and Vice President of CCSI, Inc., a company acting as the sales agent of the Chevron/Texaco joint venture. Following its successful turnaround, the company was acquired by the Chevron/Texaco group. Mr. Kalafatides received his M.B.A. in marketing and international business from the New York University, his B.S.E. in computer engineering & science at the University of PiraeusPennsylvania and a master’s degree in Business OperationsCertificate of Director Education from Drexel University's Gupta Governance Institute. Mr. Kalafatides serves as chairman of the University of Arkansas.
Dimitris Papastefanou Gkouras was appointed to our Board of Directors in June 2013. From 2007 until 2012, Mr. Papastefanou Gkouras served as Credit Director of Shipping for Marfin Egnatia Bank as wellConflicts Committee and as a member of
the bank’s Greek and International Credit Committees. Prior to his position with Marfin Egnatia Bank, Mr. Papastefanou Gkouras served in various managing and advisory roles within the corporate and shipping finance sectors, including stints with Greek and other European banks, including Credit Commercial de France. Mr. Papastefanou Gkouras received a B.A. in Economics and History from American College of Greece — Deree in Athens, Greece and a diploma in Economic Analysis from the University of Kent, England. Mr. Papastefanou Gkouras also serves on our Audit Committee, and is an independent director.
Vasiliki Papaefthymiou was appointed our Secretary in August 2007. Ms. Papaefthymiou has been Executive Vice President —- Legal and a member of Navios Holdings’Holdings' board of directors since August 25, 2005, and prior to that was a member of the board of directors of ISE. Ms. Papaefthymiou has served as general counsel for Maritime Enterprises Management S.A. since October 2001, where she has advised the company on shipping, corporate and finance legal matters. Ms. Papaefthymiou provided similar services as general counsel to Franser Shipping from October 1991 to September 2001. Ms. Papaefthymiou received her undergraduate degree from the Law School of the University of Athens and a Master degree in Maritime Law from Southampton University in the United Kingdom. Ms. Papaefthymiou is admitted to practice law before the Bar in Piraeus, Greece.
Erifyli Tsironi has been our Chief Financial Officer since November 4th, 2021. Ms. Tsironi is also Senior Vice President – Credit Management of Navios Holdings since October 2014. Ms. Tsironi served as Chief Financial Officer of Navios Maritime Containers L.P. since 2019 until completion of the merger with Navios Maritime Partners L.P. in 2021, and as Chief Financial Officer of Navios Maritime Midstream Partners L.P since its inception in 2014 until completion of the merger with Navios Maritime Acquisition Corporation in 2018. Ms. Tsironi has 25 years experience in shipping. Before joining us, she was Global Dry Bulk Sector Coordinator and Senior Vice President at DVB Bank SE focusing on ship finance. Ms. Tsironi joined the Bank in 2000 serving as Assistant Local Manager and Senior Relationship Manager. Previously, she served as account manager/shipping department in ANZ Investment Bank/ANZ Grindlays Bank Ltd from May 1997 until December 1999. Ms. Tsironi holds a BSc. in Economics, awarded with Honours, from the London School of Economics and Political Science and a MSc in Shipping, Trade and Finance, awarded with Distinction, from Bayes (ex Cass) Business School of City University in London.
B. Compensation
Reimbursement of Expenses of Our General Partner
Our General Partner does not receive any management fee or other compensation for services from us, although it will be entitled to reimbursement for expenses incurred on our behalf. In addition, we reimburse the Manager and certain affiliates for expenses incurred pursuant to the Management Agreement and Administrative Services Agreement we entered into with the Manager. Our General Partner and its other affiliates are reimbursed for expenses incurred on our behalf. These expenses include all expenses necessary or appropriate for the conduct of our business and allocable to us, as determined by our General Partner. For the years ended December 31, 2016, 20152021, 2020 and 20142019 no amounts were paid to the General Partner.
Officers’Officers' Compensation
We and our General Partner were formed in August 2007. Because our officers, including our Chief Executive Officer and our Chief Financial Officer, are employees of Navios Holdings,the Managers, their compensation is set and paid by Navios Holdings,the Managers, and we reimburse Navios Holdingsthe Managers for time they spend on partnershipthe Company's matters pursuant to the administrative services agreement.Administrative Services Agreement. Under the terms of the administrative agreement,Administrative Services Agreement, we reimburse Navios Holdingsthe Managers for the actual costs and expenses it incursthey incur in providing administrative support services to us. The amount of our reimbursements to Navios Holdingsthe Managers for the time of our officers depends on an estimate of the percentage of time our officers spent on our business and is based on a percentage of the salary and benefits that Navios Holdings paysthe Managers pay to such officers. Our officers, and officers and employees of affiliates of our General Partner, may participate in employee benefit plans and arrangements sponsored by Navios Holdings, our General Partner or their affiliates, including plans that may be established in the future. Our board of directors may establish such plans without the approval of our limited partners. For the years ended December 31, 2016, 20152021, 2020 and 2014,2019, the feefees charged by the ManagerManagers for administrative services, was $7.8$28.8 million, $6.2$13.7 million and $6.1$10.4 million, respectively.
Compensation of Directors
Our officers or officersand directors who are also employees of Navios Holdings who also serve as our directorsthe Managers do not receive additional compensation for their service as directors.directors, other than Ms. Frangou who receives, a fee of $0.15 million per year for acting as a director and as Chairwoman of the Board. Eachnon-management director receives compensation for attending meetings of our board of directors, as well as committee meetings.Non-management directors receive Each non-management director receives a director fee of $45,000$0.06 million per year. Ms. Frangou receives a fee of $150,000 per year for acting as a director and as our Chairman of the Board. The Chairman of our audit committee, our conflicts committeeAudit Committee and our compensation committeeCompensation Committee receives an additional fee of $20,000$0.03 million per year and the Chairman of our Conflicts Committee receives an additional fee of $0.01 million per year. In addition, each director is reimbursed forout-of-pocket expenses in connection with attending meetings of the board of directors or committees. Each director is fully indemnified by us for actions associated with being a director to the extent permitted under Marshall Islands law.
In December, 2016,For the compensation committee of Navios Partners authorized and approved a cash payment of $1.7 million for which all service conditions had been met as of December 31, 2016. Also, the compensation committee of Navios Partners authorized and approved an additional $1.7 million cash payment to the directors and/or officers of the Company subject to fulfillment of certain service conditions in 2017.
In January 2017, Navios Partners authorized and issued in the aggregate 2,040,000 restricted common units to certain of its directors and officers. These awards of restricted common units are based on service conditions only and vest ratably over a period of three years.
For each of the yearsyear ended December 31, 2016, 2015 and 2014,2021, the aggregate annual compensationfees paid to our currentnon-management executive directors was $0.2were $0.3 million and $0.15$0.2 million was paid to Ms. Frangou for acting as a director and as our ChairmanChairwoman of the Board.
In December 2021, the Compensation Committee of Navios Partners authorized and approved a cash payment of $3.3 million to our officers and directors for which all service conditions had been met as of December 31, 2021. Also, the Compensation Committee of Navios Partners authorized and approved an additional $3.3 million cash payment to the directors and officers of the Company subject to fulfillment of certain service conditions in 2022.
In February 2019, December 2019, December 2018 and December 2017, Navios Partners granted restricted common units to its directors and officers, which are based solely on service conditions and vest over four years each, respectively. Following the NNA Merger, Navios Partners assumed the restricted common units granted in December 2018 and December 2017 to directors and officers of Navios Acquisition, which are based solely on service conditions and vest over four years each, respectively. Upon the NNA Merger, the unvested restricted common units were 11,843 after exchange on a 1 to 0.1275 basis. The fair value of restricted common units is determined by reference to the quoted stock price on the date of grant or the date that the grants were exchanged upon completion of the NNA Merger. Compensation expense, net of estimated forfeitures, is recognized based on a graded expense model over the vesting period. There were no restricted common units exercised, forfeited or expired during the years ended December 31, 2021, 2020 and 2019. As of December 31, 2021, 347,389 restricted common units were vested, cumulatively.
C. Board Practices
Our partnership agreement provides that our General Partner has delegated to our board of directors the authority to oversee and direct our operations, management and policies on an exclusive basis and such delegation will be binding on any successor general partner of the partnership. Our General Partner, Navios GP L.L.C., is wholly owned by Navios Holdings. Our executive officers manage ourday-to-day activities consistent with the policies and procedures adopted by our board of directors. All of our executive officers and three of our directors also are executive officers directors and/or affiliatesdirectors of Navios Holdings and our Chief Executive Officer is also the ChairmanChairwoman and Chief Executive Officer of Navios Acquisition and Navios Holdings.
Following our first annual meeting of unitholders in 2008, our board of directors consisted of seven members, three persons who were appointed by our General Partner in its sole discretion and four who were elected by the common unitholders. Directors appointed by our general partner serve as directors for terms determined by our general partner. Directors elected by our common unitholders are divided into three classes serving staggered three-year terms. OneTwo of the four directors elected by our common unitholders were designated as our Class I elected directors and will serve until our annual meeting of unitholders in 2024; one director was designated as the Class II elected director and will serve until our annual meeting of unitholders in 2016 as the term was renewed for three years during our 2013 annual meeting of unitholders;2022; and one director was designated as ourthe Class III elected director and will serve until our annual meeting of unitholders in 2017 as the term was renewed for three years during our 2014 annual meeting of unitholders; and the remaining two directors were designated as the Class I elected directors and will serve until our annual meeting of unitholders in 2018, as their term was renewed for three years during our 2015 annual meeting of unitholders.2023. At each subsequent annual meeting of unitholders, directors will be elected to succeed the class of directors whose terms have expired by a plurality of the votes of the common unitholders.unitholders, as such holders and voting are determined pursuant to our partnership agreement. Directors elected by our common unitholders will be nominated by the board of directors or by any limited partner or group of limited partners that holds at least 10% of the outstanding common units.
With respect tounits and complies with the annual meeting heldrequirements in 2016, the required quorum for such meeting was not achieved and therefore no business was able to be transacted, including the election of the directors whose term was set to expire at the 2016 annual meeting. Accordingly, such directors will remain as directors until such time as they are removed orre-elected. We intend to hold an annual meeting with respect to 2016 as promptly as practicable, and ifre-elected such directors terms will expire in 2019.our partnership agreement.
With respect to our corporate governance, there are several significant differences between us and a domestic issuer in that the New York Stock Exchange does not require a listed limited partnership like us to have a majority of independent directors on our board of directors or to establish a compensation committeeCompensation Committee, although we meet both requirements, or a nominating/corporate governance committee.
We have three committees: an audit committee,Audit Committee, a conflicts committeeConflicts Committee and a compensation committee.Compensation Committee. Three independent members of our board of directors serve on a conflicts committeethe Conflicts Committee to review specific matters that the board believes may involve potential conflicts of interest. The conflicts committeeConflicts Committee determines if the resolution of the conflict of interest is fair and reasonable to us.
The members of the conflicts committeeConflicts Committee may not be officers
or employees of our general partner or directors, officers or employees of its affiliates, and must meet the independence standards established by the New York Stock Exchange to serve on an audit committeeAudit Committee of a board of directors and certain other requirements. Any matters approved by the conflicts committeeConflicts Committee are conclusively deemed to be fair and reasonable to us, approved by all of our partners, and not a breach by our directors, our general partner or its affiliates of any duties any of them may owe us or our unitholders. The members of our conflicts committeeConflicts Committee are Messrs. Lampros Theodorou,Alexander Kalafatides and Serafeim Kriempardis and Dimitris Papastefanou Gkouras.Mrs. Orthodoxia Zisimatou.
In addition, we have an audit committeeAudit Committee of three independent directors. One of the members of the audit committeeAudit Committee is an “audit committee financial expert” for purposes of SEC rules and regulations. The audit committee,Audit Committee, among other things, reviews our external financial reporting, engages our external auditors and oversees our internal audit activities and procedures and the adequacy of our internal accounting controls. Our audit committeeAudit Committee is comprised of Messrs. Lampros Theodorou, Dimitris Papastefanou Gkouras and Serafeim Kriempardis (financial expert), Alexander Kalafatides and our audit committee financial expert is Mr. Serafeim Kriempardis.Mrs. Orthodoxia Zisimatou.
Lastly, we have a compensation committeeCompensation Committee consisting of two independent directors, Messrs. Lampros TheodorouMrs. Orthodoxia Zisimatou and Mr. Serafeim Kriempardis. The compensation committeeCompensation Committee is governed by a written charter, which was approved by our board of directors. The compensation committeeCompensation Committee is responsible for reviewing and approving the compensation of the Company’sCompany's executive officers and for establishing, reviewing and evaluating the long-term strategy of our compensation plan.
Employees of the Manager, a subsidiary of Navios Holdings,Managers, provide assistance to us and our operating subsidiaries pursuant to the Management AgreementAgreements and the Administrative Services Agreement.
Our Chief Executive Officer, Ms. Angeliki Frangou, our Chief Operating Officer, Mr. Efstratios Desypris,and our Chief Financial Officer, Mr. Efstratios Desypris,Mrs. Erifili Tsironi, our Secretary, Vasiliki Papaefthymiou, and our Executive Vice President-Business Development, George Achniotis, allocate their time between managing our business and affairs and the business and affairs of Navios Holdings, and our Chief Executive Officer is also the Chief Executive Officer of Navios Acquisition,Holdings. As such these individuals have fiduciary duties to Navios Holdings andwhich may cause them to pursue business strategies that disproportionately benefit Navios Midstream.Holdings or which otherwise are not in our best interests or those of our unitholders. While the amount of time each of them allocate between our business and the business of Navios Holdings Navios Acquisition and Navios Maritime Midstream Partners L.P. (“Navios Midstream”) varies from time to time depending on various circumstances and the respective needs of the business, such as their relative levels of strategic activities, we anticipate that each of them will allocate approximately one quarter of their time to our business.
Our officers and other individuals providing services to us or our subsidiaries may face a conflict regarding the allocation of their time between our business and the other business interests of Navios Midstream, Navios Holdings and Navios Acquisition. We intend, however, to cause our officers to devote as much time to the management of our business and affairs as is necessary for the proper conduct of our business and affairs.
Our General Partner owes a fiduciary duty to our unitholders, subject to limitations. Our General Partner is liable, as General Partner, for all of our debts (to the extent not paid from our assets), except for indebtedness or other obligations that are expresslynon-recourse to it. Whenever possible, the partnership agreement directs that we should incur indebtedness or other obligations that arenon-recourse to our General Partner.
Whenever our General Partner makes a determination or takes or declines to take an action in its individual capacity rather than in its capacity as our General Partner, it is entitled to make such determination or to take or decline to take such other action free of any fiduciary duty or obligation whatsoever to us or any limited partner, and is not required to act in good faith or pursuant to any other standard imposed by our partnership agreement or under the Marshall Islands Act or any other law. Specifically, our General Partner will be considered to be acting in its individual capacity if it exercises its call right,pre-emptive rights or registration rights, consents or withholds consent to any merger or consolidation of the partnership, appoints any directors or votes for the appointment of any director, votes or refrains from voting on amendments to our partnership agreement that require a vote of the outstanding units, voluntarily withdraws from the partnership, transfers (to the extent
permitted under our partnership agreement) or refrains from transferring its units, or general partner interest or incentive distribution rights or votes upon the dissolution of the partnership. Actions of our General Partner, which are made in its individual capacity, are made by Navios Holdings as sole member of our General Partner.Olympos Maritime Ltd.
D. Employees
Employees of the ManagerManagers provide assistance to us and our operating subsidiaries pursuant to the Management AgreementAgreements and the Administrative Services Agreement; therefore Navios Partners does not employ additional staff.Agreement.
The Manager crews itsManagers crew our vessels primarily with Ukrainian, Polish, Filipino, Russian, Indian, Georgian, Romanian and Sri LankanBulgarian officers and Filipino, Georgian, Romanian, Ethiopian, Indian and Ukrainian seamen. For these nationalities, officers and seamen are referred to the ManagerManagers by local crewing agencies. The crewing agencies handle each seaman’sseaman's training while the Manager handlesManagers handle their travel and payroll. Navios Holdings requiresThe Managers require that all of itstheir seamen have the qualifications and licenses required to comply with international regulations and shipping conventions.
The ManagerManagers also providesprovide on-shore advisory, operational and administrative support to us pursuant to service agreements. Please see “Item 7. —- Major Unitholders and Related Party Transactions”.
E. Unit Ownership
The following table sets forth certain information regarding beneficial ownership, as of March 10, 2017,April 1, 2022, of our units by each of our officers and directors and by all of our directors and officers as a group. The information is not necessarily indicative of beneficial ownership for any other purposes. Under SEC rules, a person or entity beneficially owns any units that the person or entity has the right to acquire as of May 9, 201731, 2022 (60 days after March 10, 2017)April 1, 2022) through the exercise of any unit option or other right. The percentage disclosed under “Common Units Beneficially Owned”below is based on all outstanding common units (86,564,353)(30,197,087), not including general partner units (1,766,624)(622,555). Unless otherwise indicated, each person or entity has sole voting and investment power (or shares such powers with his or her spouse) with respect to the units set forth in the following table. Information for certain holders is based on information delivered to us.
Identity of Person or Group
Common Units Owned | Percentage of Common Units Owned | ||||
Angeliki Frangou(1) | 1,550,632 | 5.1% | |||
Efstratios Desypris | * | * | |||
George Achniotis | * | * | |||
Shunji Sasada | * | * | |||
Serafeim Kriempardis | * | * | |||
Kunihide Akizawa | * | * | |||
Alexander Kalafatides | * | * | |||
Orthodoxia Zisimatou | * | * | |||
Erifili Tsironi | — | — | |||
Vasiliki Papaefthymiou | — | — | |||
All directors and officers as a group (7 persons)(2) | 1,638,455 | 5.4% |
* Less than 1%
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(1) | Excludes units owned by Navios Holdings, on the board of which |
(2) Each director, executive officer and key employee beneficially owns less than one percent of the outstanding common units, other than Angeliki Frangou.
Item 7. Major Unitholders and Related Party Transaction
A. Major Unitholders
The following table sets forth the beneficial ownership as of March 10, 2017,April 1, 2022, of our common units by each person we know to beneficially own more than 5% of the common units. The number of units beneficially owned by each person is determined under SEC rules and the information is not necessarily indicative of beneficial ownership for any other purpose. Under SEC rules, a person beneficially owns any units as to which the person has or shares voting or investment power. In addition, a person beneficially owns any units that the person or entity has the right to acquire as of May 9, 201731, 2022 (60 days after March 10, 2017)April 1, 2022) through the exercise of any unit option or other right. The percentage disclosed under “Common Units Beneficially Owned” is based on all outstanding units of 30,197,087 common units. There are also 622,555 general partner units outstanding which are not included in the ownership table below. The general partner units are held by Olympos Maritime Ltd., which represents a 2.0% ownership interest in Navios Partners based on all outstanding common units (88,330,977), which includes theand general partner units (1,766,624)units. For more information on our general partner, please read “Item 7. B. Unitholders and Related Party Transactions”.
Common Units Beneficially Owned | |||||
Number | Percentage | ||||
Name of Beneficial Owner | |||||
Navios Holdings(1)(2) | 3,183,199 | 10.5% | |||
Pilgrim Global ICAW(3) | 1,883,084 | 6.2% | |||
Angeliki Frangou(4) | 1,550,632 | 5.1% |
Common Units Beneficially Owned | ||||||||
Number | Percentage | |||||||
Name of Beneficial Owner | ||||||||
Navios Holdings(1)(2) | 15,344,310 | 17.4 | % |
The number of common units beneficially owned is based on |
(2) | Navios Holdings is a |
(3) | The number of common units beneficially owned is based on the information disclosed on the Schedule 13G filed with the SEC on February 11, 2022. |
(4) | The number of common units beneficially owned is based on the information disclosed on the Schedule 13D filed with the SEC on October 26, 2021. |
Our majority unitholders have the same voting rights as our other unitholders except as follows: each outstanding common unit is entitled to one vote on matters subject to a vote of common unitholders. However, to preserve our ability to be exempt from U.S. federal income tax under Section 883 of the Code, if at any time, any person or group owns beneficially more than 4.9% of any class of units then outstanding, any such units owned by that person or group in excess of 4.9% may not be voted. The voting rights of any such unitholders in excess of 4.9% will effectively be redistributed pro rata among the other unitholders holding less than 4.9% of the voting power of such class of units. Our General Partner, its affiliates and persons who acquired common units with the prior approval of our board of directors will not be subject to this 4.9% limitation except with respect to voting their common units in the election of the elected directors.
As of April 1, 2022, we had at least 42 common unit holders of record, 10 of which were located in the United States and held an aggregate of 25,778,769 of our common units, representing approximately 85% of our outstanding common units. However, one of the U.S. common unit holders of record is CEDE & CO., a nominee of The Depository Trust Company, which held 25,775,948 of our common units as of that date. Accordingly, we believe that the shares held by CEDE & CO. include common units beneficially owned by both holders in the United States and non-U.S. beneficial owners. We are not aware of any arrangements the operation of which may at a subsequent date result in our change of control.
B. Related Party Transactions
As of December 31, 2016,2021, there were 30,197,087 outstanding common units and all 622,555 outstanding general partnership units. Navios Holdings the sole member of our General Partner, owned 15,344,310currently beneficially owns 3,183,199 common units, which represented an 18.0% limited partnerrepresents a 10.3% ownership interest in us based on the thencurrently outstanding common and general partnership units of 30,819,642. In August 2019, Navios Holdings announced that it sold certain assets, including its ship management division and the general partnership interests in Navios Partners to an entity affiliated with the Company's Chairwoman and Chief Executive Officer. Thereafter, Olympos Maritime Ltd., an entity affiliated with our Chairwoman and Chief Executive Officer, holds the general partner interest which represents a 2.0% ownership interest in us based on all outstanding common units (20.0% including the 2.0%and general partner interest). Navios Holdings’units. Our general partner's ability, as sole member of our General Partner, to control the appointment of three of the seven members of our board of directors and to approve certain significant actions we may take, and its ownership of all of the outstanding subordinated units and its right to vote the subordinated units as a separate class on certain matters, means that Navios Holdings,our Chairwoman and Chief Executive Officer, together with itsher affiliates, has the ability to exercise influence regarding our management.
Navios Europe I
Navios Holdings, Navios Acquisition and Navios Partners will makehad made available to Navios Europe I (in each case, in proportion to their ownership interests in Navios Europe I) revolving loans up to $24.1 million to fund working capital requirements (collectively, the “Navios Revolving Loans I”). See Note 20 for the Investment in Navios Europe I and respective ownership interests.
The Navios Revolving Loans I earn a 12.7% preferred distribution and are repaid from Free Cash Flow (as defined in the loan agreement) to the fullest extent possible at the end of each quarter. There are no covenant requirements or stated maturity dates.
As ofIn December 31, 2016, Navios Partners’ portion of the outstanding amount relating to portion of the investment in Navios Europe I (5.0% of the $10.0 million) was $0.5 million, under the caption “Investment in affiliates” and the outstanding amount relating to the Navios Revolving Loans I capital was $0.8 million, under the caption “Loans receivable from affiliates.” As of each of December 31, 2016 and December 31, 2015,2018, the amount undrawn fromof funds available under the Navios Revolving Loans I was $9.1increased by $30.0 million. In February 2019, Navios Partners was required to fund the amount of $4.0 million of whichunder Navios Partners’ portion was $0.5 million.Europe I's Revolving Loan (see Note 20 — Investment in Affiliates to our consolidated financial statements, included elsewhere in this Annual Report).
On February 21, 2017,November 22, 2019, an agreement was reached to liquidate Navios Holdings has agreed to sellEurope I before its original expiring date. On November 26, 2019 a Share Purchase Agreement was entered between Navios Europe Inc. and Navios Maritime Operating LLC (a wholly owned subsidiary of Navios Partners). The transaction was completed on December 13, 2019.
As a result of the Europe I liquidation, Navios Partners acquired 100% of the stock of the five container vessels owning companies of Navios Europe I with a fair value of $56.1 million, and working capital balances of $14.4 million including cash at banks of $12.9 million, in satisfaction of its receivable balances in the amount of (i) approximately $19.0 million representing the Revolving Loan, term loan and accrued interest thereof directly owned to Navios Partners, certain loans previously funded bypresented under the captions “Investments in affiliates”, “Due/to from related parties” and “Loans receivable from affiliates”; and (ii) approximately $34.2 million representing the previously transferred rights of Navios Holdings to the Navios Europe Inc. for $27.0I's term loans and Navios Revolving Loans I (including the respective accrued receivable interest), of which $4.8 million subject to signing of definitive documentation.was presented under “Notes receivable from affiliates” and $29.4 million presented contra equity. Furthermore, Navios Partners may requirehas assumed $17.2 million of Navios Holdings, under certain conditions, to repurchaseEurope I senior loan.
Following the loans after the third anniversaryliquidation of the dateNavios Europe I, there was no balance due from Navios Europe I as of the sale based on the then outstanding balanceeach of the loans.December 31, 2021 and 2020.
Navios Europe II
Navios Holdings, Navios Acquisition and Navios Partners will makepreviously made available to Navios Europe II (in each case, in proportion to their ownership interests in Navios Europe II) revolving loans of up to $38.5$43.5 million to fund working capital requirements (collectively, the “Navios Revolving Loans II”). See Note 20 forIn March 2017, the Investment in Navios Europe II and respective ownership interests.
The Navios Revolving Loans II earn an 18.0% preferred distribution and are repaid from Free Cash Flow (as defined in the loan agreement) to the fullest extent possible at the end of each quarter. There are no covenant requirements or stated maturity dates.
As of December 31, 2016, Navios Partners’ portion of the outstanding amount relating to portion of the investment in Navios Europe II (5.0% of the $14.0 million) was $0.7 million,availability under the caption “Investment in affiliates” and the outstanding amount relating to the Navios Revolving Loans II capital is $1.2 million, under the caption “Loans receivable from affiliates.” As of December 31, 2016, the amount undrawn from the Navios Revolving Loans II was $14.1increased by $14.0 million (see Note 20 — Investment in Affiliates to our consolidated financial statements, included elsewhere in this Annual Report).
On April 21, 2020, Navios Europe II agreed with the lender to fully release the liabilities under the junior participating loan facility for $5.0 million. Navios Europe II owned seven container vessels and seven dry bulk vessels. Navios Partners had a net receivable of whichapproximately $17.3 million from Navios Partners’ portionEurope II.
As of March 31, 2020, the decline in the fair value of the investment was $0.7considered as other-than-temporary and, therefore, an aggregate loss of $6.9 million was recognized and included in the accompanying Consolidated Statements of Operations for the year ended December 31, 2020, as “Impairment of receivable in affiliated company”. The fair value of the Company’s investment was determined based on the liquidation value of Navios Europe II, including the individual fair values assigned to the assets and liabilities of Navios Europe II.
On May 14, 2020, an agreement was reached to liquidate Navios Europe II before its original expiring date. The transaction was completed on June 29, 2020.
As a result of the Europe II liquidation, Navios Partners acquired 100% of the stock of five dry bulk vessels owing companies of Navios Europe II with a fair value of $56.1 million and working capital balances of $(2.7) million. The acquisition was funded through a new credit facility (Note 11—Borrowings) and cash on hand for total of $36.1 million and the satisfaction of its receivable balances in the amount of approximately $17.3 million representing the Revolving Loan, term loan and accrued interest thereof directly owned to Navios Partners, previously presented under the captions “Amounts due from related parties” and “Loans receivable from affiliates”.
Following the liquidation of Navios Europe II, there was no balance due from Navios Europe II as of December 31, 2021 and December 31, 2020.
Navios Containers
As of December 31, 2015,2020 and 2019, Navios Partners held 11,592,276 common units, representing an ownership interest in Navios Containers of 35.7% and 33.5% respectively. Based on the amount undrawn fromCompany's evaluation of the duration and magnitude of the fair value decline for approximately twelve months as of December 31, 2019, the Company concluded that the decline in the fair value of its investment below its carrying value was not temporary and therefore, an OTTI loss of $42.6 million was recognized as of December 31, 2019 presented under the caption “Equity in net Earnings of affiliates”, in the Consolidated Statement of Operations, being the difference between the fair value of $25.0 million and the carrying value of the investment of $67.6 million. Total pre-OTTI equity method investment income of $1.1 million and $2.5 million was recognized for the years ended December 31, 2020 and 2019, respectively.
The fair value of Navios Partners' equity investment in Navios Containers was based on unadjusted quoted prices in active markets for Navios Containers' common units. The fair value of Navios Partners' equity investment in Navios Containers as at December 31, 2020 was $47.5 million compared with its carrying value of $26.2 million.
On January 4, 2021, Navios Containers and the Company announced that they entered into a definitive merger agreement under which the Company would acquire all of the publicly held common units of Navios Containers in exchange for common units of the Company. The NMCI Merger was approved by the necessary common unit holders of Navios Containers at a special meeting held on March 24, 2021. The General Partner of Navios Containers had consented to the NMCI Merger, and the Company voted the Navios Revolving Loans IIContainers’ common units it holds in favor of the Transaction. The Transaction was $23.1 million,completed on March 31, 2021. Pursuant to the NMCI Merger, Navios Partners acquired all of whichthe publicly held common units of Navios Containers through the issuance of 8,133,452 newly issued common units of Navios Partners in exchange for the publicly held common units of Navios Containers at an exchange ratio of 0.39 units of Navios Partners for each Navios Containers common unit (see Note 3 – Acquisition of Navios Containers and Navios Acquisition to our consolidated financial statements, included elsewhere in this Annual Report). Following the exercise of the Second Merger, Navios Containers merged with and into Navios Maritime Containers Sub LP, with Navios Maritime Containers Sub LP continuing as the surviving partnership, and Migen Shipmanagement Ltd, a wholly owned subsidiary of Navios Partners, became Navios Containers’ general partner.
Upon completion of the NMCI Merger on March 31, 2021, beginning from April 1, 2021, the results of operations of Navios Containers are included in Navios Partners’ portionConsolidated Statements of Operations.
Navios Acquisition
On August 25, 2021 (date of obtaining control), Navios Partners purchased 44,117,647 newly issued shares of Navios Acquisition, thereby acquiring a controlling interest of 62.4% in Navios Acquisition, and the results of operations of Navios Acquisition are included in Navios Partners’ consolidated statements of operations commencing on August 26, 2021.
On October 15, 2021, Navios Partners completed the NNA Merger and as a result thereof, Navios Acquisition became a wholly-owned subsidiary of Navios Partners. Pursuant to the terms of the NNA merger agreement, each outstanding common unit of Navios Acquisition that was $1.2 million.held by a stockholder other than Navios Partners, was converted into the right to receive 0.1275 of a common unit of Navios Partners. As a result of the NNA Merger, 3,388,226 common units of Navios Partners were issued to former public stockholders of Navios Acquisition. Pursuant to the issuance of the common units, Navios Partners issued 69,147 general partner units, resulting in net proceeds of $1.9 million (see Note 3 – Acquisition of Navios Containers and Navios Acquisition to our consolidated financial statements, included elsewhere in this Annual Report).
Share PurchaseRegistration Rights Agreements
On February 4, 2015, we completed a private placement to Navios Holdings of 1,120,54774,703 common units and 22,8681,526 general partner units, raising gross proceeds of $15.0 million.
Registration Rights Agreements
On February 4, 2015,million and in connection with thesuch private placement, as discussed above, we entered into a registration rights agreement with Navios Holdings pursuant to which we provide Navios Holdings with certain rights relating to the registration of the common units.
The Omnibus Agreement
At the closing of the IPO, we entered into the Omnibus Agreement with Navios Holdings, our General Partner and our operating subsidiary.Holdings. The following discussion describes certain provisions of the Omnibus Agreement.
Noncompetition
Under the Omnibus Agreement, Navios Holdings agreed, and caused its controlled affiliates (other than us our General Partner and our subsidiaries) to agree, not to acquire or own Panamax or Capesize drybulk carriers under charter for three or more years. This restriction does not prevent Navios Holdings or any of its controlled affiliates (other than us and our subsidiaries) from:
(1) acquiring or owning Panamax or Capesize drybulk carriers under charters for less than three years;
(2) acquiring a Panamax or Capesize drybulk carrier under charter for three or more years after the closing of the IPO if Navios Holdings offers to sell to us the vessel for fair market value or putting a Panamax or Capesize drybulk carrier that Navios Holdings owns under charter for three or more years if Navios Holdings offers to sell the vessel to us for fair market value at the time it is chartered for three or more years and, in each case, at each renewal or extension of that charter for three or more years;
(3) acquiring a Panamax or Capesize drybulk carrier under charter for three or more years as part of the acquisition of a controlling interest in a business or package of assets and owning those vessels; provided, however, that:
(a) if less than a majority of the value of the total assets or business acquired is attributable to those Panamax or Capesize drybulk carriers and related charters, as determined in good faith by the board of directors of Navios Holdings, Navios Holdings must offer to sell such Panamax or Capesize drybulk carriers and related charters to us for their fair market value plus any additional tax or other similar costs to Navios Holdings that would be required to transfer the Panamax and Capesize drybulk carriers and related charters to us separately from the acquired business; and
(b) if a majority or more of the value of the total assets or business acquired is attributable to the Panamax or Capesize drybulk carriers and related charters, as determined in good faith by the board of directors of Navios Holdings, Navios Holdings shall notify us in writing of the proposed acquisition. We shall, not later than the 15th calendar day following receipt of such notice, notify Navios Holdings if we wish to acquire such Panamax or Capesize drybulk carriers and related charters forming part of the business or package of assets in cooperation and simultaneously with Navios Holdings acquiring the non-Panamax or non-Capesize drybulk carriers and related charters forming part of that business or package of assets. If we do not notify Navios Holdings of our intent to pursue the acquisition within 15 calendar days, Navios Holdings may proceed with the acquisition as provided in (a) above; (4) acquiring a non-controlling interest in any company, business or pool of assets;
(5) acquiring or owning any Panamax or Capesize drybulk carrier and related charter if we do not fulfill our obligation, under any existing or future written agreement, to purchase such vessel in accordance with the terms of any such agreement;
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(6) acquiring or owning Panamax or Capesize drybulk carriers under charter for three or more years subject to the offers to us described in paragraphs (2) and (3) above pending our determination whether to accept such offers and pending the closing of any offers we accept;
(7) providing ship management services relating to any vessel whatsoever, including to Panamax or Capesize drybulk carriers owned by the controlled affiliates of Navios Holdings; or
(8) acquiring or owning Panamax or Capesize drybulk carriers under charter for three or more years if we have previously advised Navios Holdings that we consent to such acquisition, operation or charter.
Under the Omnibus Agreement, Navios Holdings will not be prohibited from operatingchartered-in Panamax or Capesize drybulk carriers undercharter-out contracts for three or more years, so long as immediately prior to the time such vessel is proposed to be put under suchcharter-out contract, Navios Holdings offers suchcharter-out opportunity to us in the event that (i) we have a Panamax or Capesize drybulk carrier that is available and comparable to Navios Holdings’Holdings' chartered-in vessel and (ii) it is acceptable to the charter customer.
If Navios Holdings or any of its controlled affiliates (other than us or our subsidiaries) acquires or owns Panamax or Capesize drybulk carriers pursuant to any of the exceptions described above, it may not subsequently expand that portion of its business other than pursuant to those exceptions.
In addition, under the Omnibus Agreement we agreed, and caused our subsidiaries to agree, to acquire, own, operate or charter Panamax or Capesize drybulk carriers with charters of three or more years only (any vessels that are not Panamax or Capesize drybulk carriers will in the following be referred to as the“Non-Panamax “Non-Panamax andNon-Capesize Drybulk Carriers”). This restriction will not:
(1) | prevent us or any of our subsidiaries from acquiring aNon-Panamax orNon-Capesize Drybulk Carrier and any related charters as part of the acquisition of a controlling interest in a business or package of assets and owning and operating or chartering those vessels, provided, however, that: |
(a) | if less than a majority of the value of the total assets or business acquired is attributable to aNon-Panamax orNon-Capesize Drybulk Carrier and related charter, as determined in good faith by us; we must offer to sell suchNon-Panamax orNon-Capesize Drybulk Carrier and related charter to Navios Holdings for their fair market value plus any additional tax or other similar costs to us that would be required to transfer theNon-Panamax andNon-Capesize Drybulk Carrier and related charter to Navios Holdings separately from the acquired business; and |
(b) | if a majority or more of the value of the total assets or business acquired is attributable to aNon-Panamax orNon-Capesize Drybulk Carrier and related charter, as determined in good faith by us; we shall notify Navios Holdings in writing of the proposed acquisition. Navios Holdings shall, not later than the 15th calendar day following receipt of such notice, notify us if it wishes to acquire theNon-Panamax orNon-Capesize Drybulk Carrier forming part of the business or package of assets in cooperation and simultaneously with us acquiring the Panamax or Capesize Drybulk Carrier under charter for three or more years forming part of that business or package of assets. If Navios Holdings does not notify us of its intent to pursue the acquisition within 15 calendar days, we may proceed with the acquisition as provided in (a) |
(2) | prevent us or any of our subsidiaries from owning, operating or chartering aNon-Panamax orNon-Capesize Drybulk Carrier subject to the offer to Navios Holdings described in paragraph |
(3) | prevent us or any of our subsidiaries from acquiring, operating or chartering aNon-Panamax orNon-Capesize Drybulk Carrier if Navios Holdings has previously advised us that it consents to such acquisition, operation or charter. |
If we or any of our subsidiaries owns, operates and chartersNon-Panamax orNon-Capesize Drybulk Carriers pursuant to any of the exceptions described above, neither we nor such subsidiary may subsequently expand that portion of our business other than pursuant to those exceptions.
Upon a change of control of us or our General Partner, the noncompetition provisions of the Omnibus Agreement will terminate immediately. Upon a change of control of Navios Holdings, the noncompetition provisions of the Omnibus Agreement will terminate at the time that is the later of one year following the change of control and the date on which all of our outstanding subordinated units have converted to common units; provided, however, that in no event will the noncompetition provisions of the Omnibus Agreement terminate upon a change of control of Navios Holdings prior to the date that is four years following the date of the Omnibus Agreement.
On June 9, 2009, Navios Holdings relieved Navios Partners from its obligation to purchase the Capesize vessel the Navios Bonavis upon its delivery to Navios Holdings. Navios Holdings was released from the Omnibus Agreement restrictions for two years until June 29, 2011 in connection with acquiring vessels from third parties (but not from the requirement to offer to sell to Navios Partners qualifying vessels in Navios Holdings’Holdings' existing fleet). Pursuant to our release from the Omnibus Agreement restrictions, in June 2009, we waived our rights of
first refusal with Navios Acquisition with respect to an acquisition opportunity until the earlier of: (a) the consummation of a business combination by Navios Acquisition; (b) the liquidation of Navios Acquisition; and (c) June 2011.
In addition, concurrently with the successful consummation of the initial business combination by Navios Acquisition, on May 28, 2010, because of the overlap between Navios Acquisition, Navios Holdings and us, with respect to possible acquisitions under the terms of our Omnibus Agreement, we entered into a business opportunity right of first refusal agreement which provides the types of business opportunities in the marine transportation and logistics industries, we, Navios Holdings and Navios Acquisition must share with each other.
Rights of First Offer
Under the Omnibus Agreement, we and our subsidiaries will grant to Navios Holdings a right of first offer on any proposed sale, transfer or other disposition of any of our Panamax or Capesize drybulk carriers and related charters or anyNon-Panamax orNon-Capesize Drybulk Carriers and related charters owned or acquired by us. Likewise, Navios Holdings agreed (and caused its subsidiaries to agree) to grant a similar right of first offer to us for any Panamax or Capesize drybulk carrier under charter for three or more years it might own. These rights of first offer do not apply to a (a) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the terms of any charter or other agreement with a charter party or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third-party.
Prior to engaging in any negotiation regarding any vessel disposition with respect to a Panamax or Capesize drybulk carrier under charter for three or more years with anon-affiliated third-party or anyNon-Panamax orNon-Capesize Drybulk Carrier and related charter, we or Navios Holdings, as the case may be, will deliver a written notice to the other party setting forth the material terms and conditions of the proposed transaction. During the15-day period after the delivery of such notice, we and Navios Holdings will negotiate in good faith to reach an agreement on the transaction. If we do not reach an agreement within such15-day period, we or Navios Holdings, as the case may be, will be able within the next 180 calendar days to sell, transfer, dispose orre-charter the vessel to a third party (or to agree in writing to undertake such transaction with a third party) on terms generally no less favorable to us or Navios Holdings, as the case may be, than those offered pursuant to the written notice.
Upon a change of control of us or our general partner, the right of first offer provisions of the Omnibus Agreement will terminate immediately. Upon a change of control of Navios Holdings, the right of first offer provisions of the Omnibus Agreement will terminate at the time that is the later of one year following the change of control and the date on which all of our outstanding subordinated units have converted to common units; provided, however, that in no event will the right of first offer provisions of the Omnibus Agreement terminate upon a change of control of Navios Holdings prior to the date that is four years following the date of the Omnibus Agreement.
Indemnification
Navios Holdings will also indemnify us for liabilities related to certain income tax liabilities attributable to the operation of the assets contributed to us prior to the time they were contributed.
Amendments
The Omnibus Agreement may not be amended without the prior approval of the conflicts committeeConflicts Committee of our board of directors if the proposed amendment will, in the reasonable discretion of our board of directors, adversely affect holders of our common units.
Similar Agreement with Navios Maritime Acquisition Corporation
In connection with the initial public offering of Navios Acquisition, because of the overlap between Navios Acquisition, Navios Holdings and us, with respect to possible acquisitions under the terms of our Omnibus Agreement, we had entered into a business opportunity right of first refusal agreement, which provided that, commencing on June 25, 2008 and extending until the earlier of the consummation of an initial business combination by Navios Acquisition or its liquidation, we, Navios Holdings and Navios Acquisition would share business opportunities in the marine transportation and logistics industries.
On June 9, 2009, Navios Holdings relieved Navios Partners from its obligation to purchase the Capesize vessel Navios Bonavis upon its delivery to Navios Holdings. Navios Holdings was released from the Omnibus Agreement restrictions for two years in connection with acquiring vessels from third parties until June 29, 2011 (but not from the requirement to offer to sell to Navios Partners qualifying vessels in Navios Holdings’ existing fleet). Pursuant to our release from the Omnibus Agreement restrictions, in June 2009, we had waived our rights of first refusal with Navios Acquisition with respect to an acquisition opportunity until the earlier of: (a) the consummation of a business combination by Navios Acquisition; (b) the liquidation of Navios Acquisition; and (c) June 2011. Such waiver ended with the successful consummation of the initial business combination by Navios Acquisition, on May 28, 2010, when we entered into the business opportunity right of first offer agreement.
The Acquisition Omnibus Agreement
Navios Partners entered into an omnibus agreement with Navios Acquisition and Navios Holdings (the “Acquisition Omnibus Agreement”) in connection with the closing of Navios Acquisition’sAcquisition's initial vessel acquisition, pursuant to which, among other things, Navios Holdings and Navios Partners agreed not to acquire,charter-in or own liquid shipment vessels, except for container vesselscontainerships and vessels that are primarily employed in operations in South America, without the consent of an independent committee of Navios Acquisition. In addition, Navios Acquisition, under the Acquisition Omnibus Agreement, agreed to cause its subsidiaries not to acquire, own, operate or charter drybulk carriers subject to specific exceptions. Under the Acquisition Omnibus Agreement, Navios Acquisition and its subsidiaries granted to Navios Holdings and Navios Partners, a right of first offer on any proposed sale, transfer or other disposition of any of its drybulk carriers and related charters owned or acquired by Navios Acquisition. Likewise, Navios Holdings and Navios Partners agreed to grant a similar right of first offer to Navios Acquisition for any liquid shipment vessels it might own. These rights of first offer will not apply to a (i) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the terms of any charter or other agreement with a counterparty, or (ii) merger with or into, or sale of substantially all of the assets to, an unaffiliated third party.
The Navios Midstream Omnibus Agreement
In connection with the Navios Midstream initial public offering and effective November 18, 2014, Navios Partners entered into the Omnibus Agreement with Navios Midstream, Navios Acquisition and Navios Holdings pursuant to which Navios Acquisition, Navios Holdings and Navios Partners have agreed not to acquire or own any VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers under time charters of five or more years and also providing rights of first offer on certain tanker vessels.
The Navios Containers Omnibus Agreement
In connection with the Navios Containers private placement and listing on the Norwegian over-the-counter market effective June 8, 2017, Navios Partners entered into an omnibus agreement with Navios Containers, Navios Holdings, Navios Acquisition and Navios Midstream, pursuant to which Navios Partners, Navios Holdings, Navios Acquisition and Navios Midstream have granted to Navios Containers a right of first refusal over any containerships to be sold or acquired in the future. The omnibus agreement contains significant exceptions that will allow Navios Partners, Navios Holdings, Navios Acquisition and Navios Midstream to compete with Navios Containers under specified circumstances.
Management AgreementAgreements
At the closing of the IPO, we entered into a management agreement, as amended, with the Manager, a subsidiary of Navios Holdings, pursuant to which the Manager has agreed to provide certain commercial and technical management services to us. These services are provided in a commercially reasonable manner in accordance with customary ship management practice and under our direction. The Manager provides these services to us directly but may subcontract for certain of these services with other entities, including other Navios Holdings subsidiaries.entities.
The commercial and technical management services include:
• | the commercial and technical management of the vessel: managingday-to-day vessel operations including negotiating charters and other employment contracts with respect to the vessels and monitoring payments thereunder, ensuring regulatory compliance, arranging for the vetting of vessels, procuring and arranging for port entrance and clearance, appointing counsel and negotiating the settlement of all claims in connection with the operation of each vessel, appointing adjusters and surveyors and technical consultants as necessary, and providing technical support, |
• | vessel maintenance and crewing: including supervising the maintenance and general efficiency of vessels, and ensuring the vessels are in seaworthy and good operating condition, arranging our hire of qualified officers and crew, arranging for all transportation, board and lodging of the crew, negotiating the settlement and payment of all wages, and |
• | purchasing and insurance: purchasing stores, supplies and parts for vessels, arranging insurance for vessels (including marine hull and machinery insurance, protection and indemnity insurance and war risk and oil pollution insurance). |
In October 2011,November 2017, Navios Partners extended the duration of its existing Management Agreement with the Manager until December 31, 20172022 and the fixed the rate for shipmanagementship management services of its owned fleet through December 31, 2013.2019, effective from January 1, 2018. The management fees, includingvessel operating expenses, excluding drydocking expenses were: (a) $4,650$4,225 daily rate per Ultra-Handymax vessel; (b) $4,550 daily rate per Panamax vessel; and (c) $5,650 daily rate per Capesize vessel. In each of October 2013, August 2014, February 2015 and February 2016, Navios Partners amended its existing management agreement with the Manager to fix the fees for ship management services of its owned fleet excluding drydocking expenses which are reimbursed at cost by Navios Partners at: (a) $4,100 daily rate per Ultra-Handymax vessel; (b) $4,200$4,325 daily rate per Panamax vessel; (c) $5,250 daily rate per Capesize vessel; (d) $6,700 daily rate per Container vessel of TEU 6,800; (e) $7,400 daily rate per Container vessel of more than TEU 8,000; and (f) $8,750 daily rate per very large ContainerContainers vessel of more than TEU 13,000 through December 31, 2017.13,000. Drydocking expenses under this agreement are reimbursed by Navios Partners at cost at occurrence. Effective
In August 31, 2016,2019, Navios Partners could, upon request, Navios Containers and Navios Acquisition extended the duration of their existing Management Agreements with the Managers until January 1, 2025, with an automatic renewal for an additional five years, unless earlier terminated by either party, and provides for payment of a termination fee equal to the fees charged for the full calendar year preceding the termination date by Navios Holdings, partiallyPartners, in the event the Management Agreements are terminated on or fully defer the reimbursement of dry docking and other extraordinary fees and expenses underbefore December 31, 2024.
Following a subsequent amendment to the Management Agreement on December 13, 2019, the vessel operating expenses agreed were: (a) Until December 31, 2019, a fixed daily fee of (i) $4,325 per owned Panamax Vessel, (ii) $4,225 per Ultra-Handymax Vessel, (iii) $5,250 per owned Capesize Vessel, (iv) $6,700 per owned 6,800TEU container vessel, (v) $6,100 per owned container vessel of 1,000TEU to 3,400TEU, payable on the last day of each month; (b) commencing from January 1, 2020, a later date, but not later than January 5, 2018, and if reimbursedfixed daily fee of (i) $4,450 per owned Panamax Vessel, (ii) $4,350 per Ultra-Handymax Vessel, (iii) $5,410 per owned Capesize Vessel, (iv) $6,900 per owned 6,800TEU Container Vessel, (v) $6,100 per owned container vessel of 1,000TEU to 3,400TEU, payable on a later date, such amounts would bear interest at a ratethe last day of 1% per annum over LIBOR.each month for two years (months one to twenty-four).
The Management Agreements also provide for a technical and commercial management daily fee of $50 per vessel and an annual increase of 3% of the fixed daily fee per vessel, unless otherwise agreed, commencing from January 1, 2022. Drydocking expenses are reimbursed at cost for all vessels.
Following the completion of the NMCI Merger, the fleet of Navios Containers is included in Navios Partners’ owned fleet (see Note 3 – Acquisition of Navios Containers and Navios Acquisition to our consolidated financial statements, included elsewhere in this Annual Report). As per the terms of the Navios Containers management agreement with the Manager (“the NMCI Management Agreement”), vessel operating expenses were fixed for two years commencing from January 1, 2020 at: (a) $6,215 daily rate per Containership of TEU 3,000 up to 4,999, respectively; (b) $7,780 daily rate per Containership of TEU 8,000 up to 9,999, respectively; and (c) $8,270 daily rate per Containership of TEU 10,000 up to 11,999, respectively. The agreement also provides for a technical and commercial management fee of $50 per day per vessel and an annual increase of 3% after January 1, 2022 unless agreed otherwise.
Upon acquisition of the majority of outstanding stock of Navios Acquisition, the fleet of Navios Acquisition is included in Navios Partners’ owned fleet (see Note 3 – Acquisition of Navios Containers and Navios Acquisition to our consolidated financial statements, included elsewhere in this Annual Report). As per the Navios Acquisition management agreement with Tankers Manager (the “NNA Management Agreement”), vessel operating expenses are fixed for two years commencing from January 1, 2020 at: (a) $6,825 per day per MR2 and MR1 product tanker and chemical tanker vessel; (b) $7,225 per day per LR1 product tanker vessel; and (c) $9,650 per day per VLCC. The agreement also provides for a technical and commercial management fee of $50 per day per vessel and an annual increase of 3% after January 1, 2022 for the remaining period unless agreed otherwise.
The Management Agreements may be terminated, prior to the end of its term by us upon 120 daysdays' notice if there is a change of control of the Manager,Managers, or by the ManagerManagers upon 120 daysdays' notice if there is a change of control of us or our general partner. In addition, the management agreementManagement Agreements may be terminated by us or by the ManagerManagers upon 120 daysdays' notice if:
Furthermore, at any time after the first anniversary of the management agreement,Management Agreements, the management agreementManagement Agreements may be terminated prior to the end of its term by us or by the ManagerManagers upon 365 daysdays' notice for any reason other than those described above.
In addition to the fixed daily fees payable under the management agreement,Management Agreements, the management agreement providesManagement Agreements provide that the Manager isManagers are entitled to reasonable supplementary remuneration for extraordinary fees and costs resulting from:
Under the management agreement,Management Agreements, neither we nor the ManagerManagers are liable for failure to perform any of our or its obligations, respectively, under the management agreementManagement Agreements by reason of any cause beyond our or itstheir reasonable control.
In addition, the Manager hasManagers have no liability for any loss arising in the course of the performance of the commercial and technical management services under the management agreementManagement Agreements unless and to the extent that such loss is proved to have resulted solely from the fraud, gross negligence or willful misconduct of the ManagerManagers or itstheir employees, in which case (except where such loss has resulted from the Manager’sManagers; intentional personal act or omission and with knowledge that such loss would probably result) the Manager’sManagers’ liability is limited to $3.0 million for each incident or series of related incidents.
Further, under our management agreement,Management Agreements, we have agreed to indemnify the ManagerManagers and itstheir employees and agents against all actions which may be brought against them under the management agreementManagement Agreements including, without limitation, all actions brought under the environmental laws of any jurisdiction, or otherwise relating to pollution or the environment, and against and in respect of all costs and expenses they may suffer or incur due to defending or settling such action; provided, however that such indemnity excludes any or all losses which may be caused by or due to the fraud, gross negligence or willful misconduct of the Manager or itstheir employees or agents, or any breach of the management agreementManagement Agreements by the Manager.
Administrative Services Agreement
At the closing of the IPO, we entered into the Administrative Services Agreement, as amended, with the Manager, pursuant to which the Manager has agreed to provide certain administrative management services to us. The agreementAdministrative Service Agreement expires in December 2017.on January 1, 2025 and shall be automatically renewed for a period of an additional five (5) years.
The Administrative Services Agreement may be terminated prior to the end of its term by us upon 120 daysdays' notice if there is a change of control of the Manager or by the Manager upon 120 daysdays' notice if there is a change of control of us or our General Partner. In addition, the Administrative Services Agreement may be terminated by us or by the Manager upon 120 daysdays' notice if:
Furthermore, the administrative services agreement may be terminated by us or by the Manager upon 365 daysdays' notice for any reason other than those described above.
The administrative services include:
• | bookkeeping, audit and accounting services: assistance with the maintenance of our corporate books and records, assistance with the preparation of our tax returns and arranging for the provision of audit and accounting services; |
• | legal and insurance services: arranging for the provision of legal, insurance and other professional services and maintaining our existence and good standing in necessary jurisdictions; |
• | administrative and clerical services: assistance with office space, arranging meetings for our common unitholders pursuant to the partnership agreement, arranging the provision of IT services, providing all administrative services required for subsequent debt and equity financings and attending to all other administrative matters necessary to ensure the professional management of our business; |
• | banking and financial services: providing cash management including assistance with preparation of budgets, overseeing banking services and bank accounts, arranging for the deposit of funds, negotiating loan and credit terms with lenders and monitoring and maintaining compliance therewith; |
• | advisory services: assistance in complying with United States and other relevant securities laws; |
• | client and investor relations: arranging for the provision of, advisory, clerical and investor relations services to assist and support us in our communications with our common unitholders; |
We reimburse the Manager for reasonable costs and expenses incurred in connection with the provision of these services within 15 days after the Manager submits to us an invoice for such costs and expenses, together with any supporting detail that may be reasonably required.
Under the Administrative Services Agreement, we have agreed to indemnify the Manager and its employees against all actions which may be brought against them under the Administrative Services Agreement including,
without limitation, all actions brought under the environmental laws of any jurisdiction, and against and in respect of all costs and expenses they may suffer or incur due to defending or settling such actions; provided, however that such indemnity excludes any or all losses which may be caused by or due to the fraud, gross negligence or willful misconduct of the Manager or its employees or agents.
Common Unit Purchase Agreement between Navios Partners and Amadeus Maritime S.A.
In connection with the IPO, we entered into a common unit purchase agreement with Amadeus Maritime S.A. (“Amadeus Maritime”), a corporation wholly-owned by Ms. Angeliki Frangou, our Chairman and Chief Executive Officer, pursuant to which we sold 500,000 common units to Amadeus Maritime at a price per unit equal to the public offering price.
General and Administrative Expenses
We have entered into anTotal general and administrative services agreement withexpenses charged by the Manager, pursuantManagers for each of the years ended December 31, 2021, 2020 and 2019, amounted to which$28.8 million, $13.7 million and $10.4 million, respectively.
Vessel Operating Expenses
Pursuant to the Manager has agreed toManagement Agreements the Managers provide certain administrativecommercial and technical management services to us. Navios Partners extendedPartners' vessels for a daily fee of: (a) $4,450 daily per Panamax Vessel; (b) $4,350 daily per Ultra-Handymax Vessel; (c) $5,410 daily per Capesize Vessel; (d) $6,100 daily per owned container vessel of 1,000TEU to 3,400TEU; (e) $6,215 daily rate per Containership of TEU 3,000 up to 4,999; (f) $6,900 daily per 6,800 TEU Containership; (g) $7,780 daily rate per Containership of TEU 8,000 up to 9,999; (h) $8,270 daily rate per Containership of TEU 10,000 up to 11,999; (i) $6,825 per day per MR2 and MR1 product tanker and chemical tanker vessel; (j) $7,225 per day per LR1 product tanker vessel; and (k) $9,650 per day per VLCC. The agreements also provides for a technical and commercial management fee of $50 per day per vessel and an annual increase of 3% after January 1, 2022 unless agreed otherwise.
Drydocking expenses are reimbursed at cost for all vessels.
During the duration of its existing Administrative Services Agreement with the Manager pursuant to the same terms, untilyears ended December 31, 2017. Total general2021 and administrative2020 certain extraordinary fees and costs related to vessels’ regulatory requirements, including ballast water treatment system installation and exhaust gas cleaning system installation under the Company's Management Agreements, amounted to $11.4 million and $3.4 million, respectively, and are presented under the caption “Acquisition of/ additions to vessels, net of cash acquired” in the Consolidated Statements of Cash Flows. During year ended December 31, 2021, certain extraordinary fees and costs related to Covid-19 measures, including crew related expenses, amounted to $5.8 million are presented under the caption of “Direct vessel expenses” in the Consolidated Statements of Operations. During year ended December 31, 2021, certain extraordinary fees and costs related to Covid-19 measures, including crew related expenses, amounted to $2.0 million are presented under the caption of “Other expense” in the Consolidated Statements of Operations.
Vessel operating expenses for the years ended December 31, 2016, 20152021, 2020 and 20142019, amounted to $7.8$191.4 million, $6.2$93.7 million and $6.1$68.2 million, respectively.
Please read “Item 7. B. Unitholders and Related Party Transactions. Management Fees
Pursuant to the management agreement dated November 16, 2007, which was revised in October 2009 and 2011, the Manager, provided commercial and technical management services to Navios Partners’ vesselsAgreements” for a daily fee of: (a) $4,500 daily rate per owned Ultra-Handymax vessel; (b) $4,400 daily rate per owned Panamax vessel; and (c) $5,500 daily rate per owned Capesize vessel until November 16, 2011. In October 2011, Navios Partners extendedfull description of the duration of its existing Management Agreement with the Manager until December 31, 2017 and fixed the rate for shipmanagement services of its owned fleet through December 31, 2013. The management fees, including drydocking expenses were: (a) $4,650 daily rate per Ultra-Handymax vessel; (b) $4,550 daily rate per Panamax vessel; and (c) $5,650 daily rate per Capesize vessel. In each of October 2013, August 2014, February 2015 and February 2016, Navios Partners amended its existing management agreement with the Manager to fix the fees for ship management services of its owned fleet at: (a) $4,100 daily rate per Ultra-Handymax vessel; (b) $4,200 daily rate per Panamax vessel; (c) $5,250 daily rate per Capesize vessel; (d) $6,700 daily rate per Container vessel of TEU 6,800; (e) $7,400 daily rate per Container vessel of more than TEU 8,000; and (f) $8,750 daily rate per very large Container vessel of more than TEU 13,000 through December 31, 2017.
Total management fees for the years ended December 31, 2016, 20152021, 2020 and 20142019.
Balance due from/(to) related parties: Balance due from related parties (both short and long term) as of December 31, 2021 and December 31, 2020 amounted to $59.2 million, $56.5$35.2 million and $50.4$5.0 million, respectively, of which the current receivable was $0 and $5.0 million, respectively and the long-term receivable was $35.2 million, and $0, respectively. The balance as of December 31, 2020, consisted of the receivable from the Navios Holdings Guarantee of $5.0 million. Balance due to related parties, short-term as of December 31, 2021 and December 31, 2020 amounted to $64.2 million and $36.0 million, respectively, and mainly consisted of payables to the Managers. The balances mainly consisted of administrative fees, drydocking, extraordinary fees and costs related to regulatory requirements including ballast water treatment system, other expenses, as well as fixed vessel operating expenses, in accordance with the Management Agreement.
Other
On November 15, 2012 (as amended and supplemented in March 2014)2014, December 2017 and July 2019), Navios Holdings and Navios Partners entered into the Navios Holdings Guarantee by which Navios Holdings willwould provide supplemental credit default insurance with a maximum cash payment of $20.0 million. During the year endedIn October 2020, Navios Holdings paid an amount of $5.0 million to Navios Partners. In April 2021, Navios Holdings paid an amount of $5.0 million to Navios Partners. As of December 31, 20162021 and 2015,2020, the Company submitted claimsoutstanding claim receivable amounted to $0 million and $5.0 million. The guarantee claim receivable presented under the caption “Amounts due from related parties-short term” in the Consolidated Balance Sheets as of December 31, 2020.
On March 31, 2021, Navios Partners completed the NMCI Merger. Navios Partners accounted for charterers’ defaultthe NMCI Merger “as a business combination achieved in stages”, which results in the application of the “acquisition method,” as defined under this agreementASC 805, Business Combinations. Navios Partners’ previously held equity interest in Navios Containers was remeasured to its fair value at March 31, 2021, the date the controlling interest was acquired and the resulting gain was recognized in earnings. Under the acquisition method, the fair value of the consideration paid by Navios Partners in connection with the transaction was allocated to Navios Containers’ net assets based on their estimated fair values at the date of the completion of the NMCI Merger. The excess of the fair value of the identifiable net assets acquired of $342.7 million over the total purchase price consideration of $298.6 million, resulted in a bargain purchase gain of $44.1 million. The transaction resulted in a bargain purchase gain as a result of the share price of Navios Containers trading at a discount to their net asset value (“NAV”). Upon completion of the NMCI Merger on March 31, 2021, beginning from April 1, 2021, the results of operations of Navios Containers are included in Navios Partners’ Consolidated Statements of Operations.
On August 25, 2021 (date of obtaining control), Navios Partners purchased 44,117,647 newly issued shares of Navios Acquisition, thereby acquiring a controlling interest of 62.4% in Navios Acquisition, and the results of operations of Navios Acquisition are included in Navios Partners’ consolidated statements of operations commencing on August 26, 2021.
On October 15, 2021, Navios Partners completed the NNA Merger and as a result thereof, Navios Acquisition became a wholly-owned subsidiary of Navios Partners. Each outstanding share of common stock of Navios Acquisition that was held by a stockholder other than Navios Partners was converted into the right to receive 0.1275 of a common unit of Navios Partners. As a result of the NNA Merger, 3,388,226 common units of Navios Partners were issued to former public stockholders of Navios Acquisition.
Navios Partners accounted for the control obtained “as a business combination”, which resulted in the application of the “acquisition method,” as defined under ASC 805, Business Combinations, as well as the recognition of the equity interest in Navios Acquisition not held by Navios Partners to its fair value at the date the controlling interest is acquired by Navios Partners as noncontrolling interest on the consolidated balance sheet. The excess of the fair value of Navios Acquisition’s identifiable net assets acquired of $211.6 million over the fair value of the consideration transferred of $150.0 million and the fair value of the noncontrolling interest of $57.6 million, resulted in a bargain gain upon obtaining control of $4.0 million.
The fair value of the consideration of $150.0 million has been treated as deemed contribution with an equal increase in total partner’s capital. The fair value of the noncontrolling interest was determined by using Navios Acquisition’s closing price of $2.17 as of August 25, 2021 (date of obtaining control).
General partner and Navios Holdings: In August 2019, Navios Holdings announced that it sold certain assets, including its ship management division and the general partnership interest in Navios Partners to N Shipmanagement Acquisition Corp. and related entities, affiliated with Navios Holdings’ Chairwoman and Chief Executive Officer, Angeliki Frangou.
As of December 31, 2021, there were outstanding 30,197,087 common units and 622,555 general partnership units. Navios Holdings held a 10.3% ownership interest in Navios Partners, represented by 3,183,199 common units. Olympos Maritime Ltd. held an ownership interest of 2.0% represented by all 622,555 outstanding general partner units.
Acquisition of vessels:
2021
On July 9, 2021, Navios Partners acquired the Navios Azimuth, a 2011-built Capesize vessel of 179,169 dwt, from its affiliate, Navios Holdings, for an acquisition cost of $30.0 million.
On June 30, 2021, Navios Partners acquired the Navios Ray, a 2012-built Capesize vessel of 179,515 dwt and the Navios Bonavis, a 2009-built Capesize vessel of 180,022 dwt, from its affiliate, Navios Holdings, for an aggregate purchase price of $58.0 million.
On June 4, 2021, Navios Partners acquired the Navios Koyo, a 2011-built Capesize vessel of 181,415 dwt, from its affiliate, Navios Holdings, for an acquisition cost of $28.6 million (including $0.1 million capitalized expenses).
On May 10, 2021, Navios Partners acquired the Ete N, a 2012-built Containership of 2,782 TEU, the Fleur N, a 2012-built Containership of 2,782 TEU and the Spectrum N, a 2009-built Containership of 2,546 TEU from Navios Acquisition, for an aggregate purchase price of $55.5 million.
On March 30, 2021, Navios Partners acquired the Navios Avior, a 2012-built Panamax vessel of 81,355 dwt, and the Navios Centaurus, a 2012-built Panamax vessel of 81,472 dwt, from Navios Holdings, for an acquisition cost of $39.3 million (including $0.1 million capitalized expenses), including working capital balances of $(5.8) million.
2020
On September 30, 2020, Navios Partners acquired the Navios Gem, a 2014-built Capesize vessel of 181,336 dwt and the Navios Victory, a 2014-built Panamax vessel of 77,095 dwt, from its affiliate, Navios Holdings, for a totalpurchase price of $51.0 million, including working capital balances of $(4,4) million. The acquisition was funded through a new credit facility of $33.0 million (see Note 11 — Borrowings to our consolidated financial statements, included elsewhere in this Annual Report) and the balance of $13.6 million seller’s credit by Navios Holdings was repaid on October 2, 2020, presented under the caption “Payable to affiliated company” in the Consolidated Statements of Cash Flows.
2019
On November 26, 2019, Navios Partners entered into a share purchase agreement for the acquisition of five containerships, following the liquidation of Navios Europe I. The vessels were acquired on December 13, 2019 (see Note 7 — Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report).
On November 25, 2019, Navios Partners entered into a share purchase agreement for the acquisition of three Panamax and one Ultra-Handymax drybulk vessels from an entity affiliated with its Chaiworman and CEO for $37.0 million (plus working capital adjustment) in a transaction approved by the Conflicts Committee of the Board of Directors of Navios Partners. The vessels were acquired on December 16, 2019 (see Note 7 — Vessels, net to our consolidated financial statements, included elsewhere in this Annual Report).
Navios Acquisition Credit Facility: On August 24, 2021, Navios Partners and Navios Acquisition entered into a loan agreement under which Navios Partners agreed to make available to Navios Acquisition a working capital facility of up to $45.0 million. As of the date hereof, the full amount of $9.2 millionthe facility has been drawn. The full amounts borrowed, including accrued and $3.6 million, respectively, netunpaid interest are due and payable on the date that is one year following the date hereof. The facility bears interest at the rate of applicable deductions,11.50% per annum. As of which $9.6 million and $3.8December 31, 2021, the outstanding balance of $45.0 million was recordedeliminated upon consolidation.
Loan payable to affiliated company: On March 19, 2021, Navios Acquisition entered into a secured loan agreement with a subsidiary of N Shipmanagement Acquisition Corp. (“NSM”), an entity affiliated with our Chairwoman and Chief Executive Officer, for a loan of up to $100.0 million to be used for general corporate purposes (the “NSM Loan Agreement”). The loan would be repayable in two years and bears interest at a rate of 11% per annum, payable quarterly. Navios Acquisition may elect to defer all scheduled capital and interest payments, in which case the applicable interest rate is 12.5% per annum.
In August 2021, Navios Acquisition entered into a supplemental agreement (the “Supplemental Loan Agreement”) to amend the NSM Loan Agreement. The Supplemental Loan Agreement provided for: (i) the issuance of 8,823,529 newly-issued shares of common stock of Navios Acquisition in settlement of $30.0 million of the outstanding balance of the NSM Loan Agreement; and (ii) the repayment of $35.0 million of the outstanding balance of the NSM Loan Agreement in cash as “Other income” forof the year endeddate of the Supplemental Loan Agreement and the repayment in cash on January 7, 2022 of the remainder of the outstanding balance of the NSM Loan Agreement, of approximately $33.1 million.
On December 23, 2021, the outstanding amount of $33.1 million was repaid. As of December 31, 2016 and 2015, respectively.
A. Consolidated Statements and Other Financial Information
Consolidated Financial Statements:See Item 18.
Legal Proceedings
AlthoughOn March 13, 2020, two purported holders of the Navios Conainers’s common units commenced a lawsuit in the United States District Court for the Southern District of New York captioned The Mangrove Partners Master Fund, Ltd. et al v. Navios Containers, Case No. 1:20-cv-02290-LJL. In the suit, the plaintiffs allege that Navios Containers breached its’ limited partnership agreement and the Marshall Islands Limited Partnership Act, in each case based on an alleged refusal by Navios Containers to provide to the plaintiffs certain non-public books and records of Navios Containers. On July 20, 2020, the plaintiffs amended their complaint to add Navios Containers’ CEO as a named defendant, and added two additional causes of actions; one for alleged violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and one for common law fraud, and the plaintiffs sought, among other things, damages, fees, expenses, rescission, and an order requiring Navios Containers to furnish the requested records to the plaintiffs. On September 25, 2020, the named defendants moved to dismiss the amended complaint, which resulted in plaintiffs filing a second amended complaint that further added two additional causes of actions (one for fraudulent inducement and one for negligent misrepresentation) and sought the same relief as requested in the first amended complaint. The named defendants moved to dismiss the second amended complaint on January 15, 2021, and briefing was completed on March 2, 2021. On July 13, 2021, prior to any ruling on the motion to dismiss, the parties filed with the court a stipulation of dismissal with prejudice pursuant to a confidential settlement, thereby concluding the matter.
On August 31, 2016, Hanjin Shipping Co. (“Hanjin”) filed for rehabilitation. We had two Capesize vessels chartered to Hanjin at a net rate of $29,356 per day until December 2020. In September 2016, both vessels were redelivered to our commercial management and were rechartered to third parties. We had filed claims to the Seoul Central District Court for the lost revenues in accordance with the rehabilitation process. Rehabilitation proceedings were cancelled on February 2, 2017 and Hanjin entered into liquidation on February 17, 2017. Our claims were registered in the rehabilitation proceedings on October 24, 2016 and would be assessed during the bankruptcy proceedings. In October 2020, we may, from timewere advised that the bankruptcy claim regarding vessel Navios Buena Ventura was dismissed by the bankruptcy Court. The relevant court is still assessing the claim regarding the Navios Luz. We have fully provided for these amounts in our books (see Note 2(f) — Summary of Significant Accounting Policies to time, beour consolidated financial statements, included elsewhere in this Annual Report).
We are not involved in litigation and claims arising out of our operations in the normal course of business, we are not at present party to any other legal proceedings or aware of any proceedings against us, or contemplated to be brought against us that we believe would have a material adverse effect on our business, financial position, results of operations orand liquidity.
From time to time, we may be subject to legal proceedings and claims arising out of our operations in the normal course of business. We maintain insurance policies with insurers in amounts and with coverage and deductibles as our board of directors believes are reasonable and prudent. We expect that these claims would be covered by insurance, subject to customary deductibles. Those claims, even if lacking merit, could result in the expenditure of significant financial and managerial resources.
Cash Distribution Policy
Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy
There is no guarantee that unitholders will receive quarterly distributions from us and beginningus. Beginning with the quarter ending December 31, 2016,2015, our boardBoard of directorsDirectors elected to suspend distributions on our common units. units in order to preserve cash and improve our liquidity. In March 2018, the Company’s Board of Directors announced a new distribution policy under which it paid quarterly cash distributions in the amount of $0.30 per unit, or $1.20 annually. In July 2020, the Company amended its distribution policy under which it intends to pay quarterly cash distributions in the amount of $0.05 per unit, or $0.20 annually.
Our distribution policy is subject to certain restrictions and may be changed at any time, including:
Our ability to make distributions to our unitholders depends on the performance of our subsidiaries and their ability to distribute funds to us. The ability of our subsidiaries to make distributions to us may be restricted by, among other things, the provisions of existing and future indebtedness, applicable partnership and limited liability company laws and other laws and regulations.
Quarterly Distribution
There is no guarantee that we will pay the quarterly distribution on the common units in any quarter. The amount of distributions paid under our policy and the decision to make any distribution is determined by our board of directors taking into considerationand will depend on, among other things, Navios Partners’ cash requirements as measured by market opportunities and restrictions under its credit agreements and other debt obligations and such other factors as the termsBoard of our partnership agreement.Directors may deem advisable. We are prohibited from making any distributions to unitholders if it would cause an event of default, or an event of default exists, under our existing credit facilities.
Quarterly distributions were paid by the Company through September 2015. For the quarter ended December 31, 2015, the Company’sCompany's board of directors determined to suspend payment of the Company’sCompany's quarterly distributions in order to preserve cash and improve our liquidity. TheIn March 2018, the Company's board of directors will continue to reassess the Company’sannounced a new distribution policy under which it paid quarterly cash distributions in the amount of $0.30 per unit, or $1.20 annually. In July 2020, the Company amended its distribution policy under which it intends to pay quarterly cash distributions in the amount of $0.05 per unit, or $0.20 annually.
In January 2019, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended December 31, 2018 of $0.30 per unit. The distribution was paid on February 14, 2019 to all unitholders of common and general partner units of record as of February 11, 2019. The aggregate amount of the environment changes. (See “Suspensiondeclared distribution was $3.5 million.
In April 2019, the Board of Distributions” above).Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended March 31, 2019 of $0.30 per unit. The distribution was paid on May 14, 2019 to all unitholders of common and general partner units of record as of May 10, 2019. The aggregate amount of the declared distribution was $3.4 million.
In July 2019, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended June 30, 2019 of $0.30 per unit. The distribution was paid on August 9, 2019 to all unitholders of common and general partner units of record as of August 6, 2019. The aggregate amount of the declared distribution was $3.4 million.
In October 2019, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended September 30, 2019 of $0.30 per unit. The distribution was payable on November 14, 2019 to all unitholders of common and general partner units of record as of November 7, 2019. The aggregate amount of the declared distribution was $3.4 million.
In January 2020, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended December 31, 2019 of $0.30 per unit. The distribution was payable on February 13, 2020 to all unitholders of common and general partner units of record as of February 11, 2020. The aggregate amount of the declared distribution was $3.4 million.
In April 2020, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended March 31, 2020 of $0.30 per unit. The distribution was paid on May 14, 2020 to all unitholders of common units and general partner units of record as of May 11, 2020. The aggregate amount of the declared distribution was $3.4 million.
In July 2020, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended June 30, 2020 of $0.05 per unit. The distribution was paid on August 13, 2020 to all unitholders of common units and general partner units of record as of August 10, 2020. The aggregate amount of the declared distribution was $0.6 million.
In October 2020, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended September 30, 2020 of $0.05 per unit. The distribution was paid on November 13, 2020 to all unitholders of common units and general partner units of record as of November 9, 2020. The aggregate amount of the declared distribution was $0.6 million.
In January 2021, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended December 31, 2020 of $0.05 per unit. The distribution was paid on February 12, 2021 to all unitholders of common units and general partner units of record as of February 9, 2021. The aggregate amount of the declared distribution was $0.6 million.
In April 2021, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended March 31, 2021 of $0.05 per unit. The distribution was paid on May 14, 2021 to all unitholders of common units and general partner units of record as of May 11, 2021. The aggregate amount of the declared distribution was $1.1 million.
In July 2021, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended June 30, 2021 of $0.05 per unit. The distribution was paid on August 12, 2021 to all unitholders of common units and general partner units of record as of August 9, 2021. The aggregate amount of the declared distribution was $1.4 million.
In October 2021, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended September 30, 2021 of $0.05 per unit. The distribution was paid on November 12, 2021 to all unitholders of common units and general partner units of record as of November 8, 2021. The aggregate amount of the declared distribution was $1.5 million.
In January 2022, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended December 31, 2021 of $0.05 per unit. The distribution was paid on February 11, 2022 to all unitholders of common units and general partner units of record as of February 9, 2022. The aggregate amount of the declared distribution was $1.5 million.
During the years ended December 31, 2016, 20152021, 2020 and 20142019 the aggregate amount of cash distribution paid was $0, $132.3$4.6 million, $7.9 million and $139.0$13.6 million, respectively.
Incentive Distribution Rights
Although we have suspended payments of our quarterly cash distributions, theThe following description of our incentive distribution rights reflects such rights in the event the distributions are reinstated and the indicated levels are achieved, of which there can be no assurance. Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from Operating Surplus after the minimum quarterly distribution and the target distribution levels have been achieved. Our general partnerNavios GP L.L.C. currently holds the incentive distribution rights, but may transfer these rights, separately from its general partner interest, subjectprovided the transferee agrees to restrictions inbe bound by the terms if the partnership agreement. Except for transfersAs of December 31, 2017, the holder of incentive distribution rights to an affiliatemay transfer any or another entity as part of our general partner’s merger or consolidation with or into, or sale of substantially all of its assets to such entity, the approval of a majority of our common units (excluding common units held by our general partner and its affiliates), voting separately as a class, generally is required for a transfer of the incentive distribution rights to a third party prior to December 31, 2017.Incentive Distribution Rights without unitholder approval.
The following table illustrates the percentage allocations of the additional available cash from Operating Surplus among the unitholders and our general partner and the holder of our incentive distribution rights up to the various target distribution levels. The amounts set forth under “Marginal Percentage Interest in Distributions” are the percentage interests of the unitholders and our general partner in any available cash from Operating Surplus we distribute up to and including the corresponding amount in the column “Total Quarterly Distribution Target Amount,” until available cash from Operating Surplus we distribute reaches the next target distribution level, if any. The percentage interests shown for the unitholders and our general partner for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests shown for our general partner assume that our general partner maintains its 2.0% ownership interest.
Marginal Percentage Interest in | |||||||||||||
Total Quarterly Distribution Target Amount | Common Unitholders | Incentive | General Partner | ||||||||||
Minimum Quarterly Distribution | up to $5.25 | 98 % | — | 2 % | |||||||||
First Target Distribution | up to $6.0375 | 98 % | — | 2 % | |||||||||
Second Target Distribution | above $ 6.0375 up to $6.5625 | 85 % | 13 % | 2 % | |||||||||
Third Target Distribution | above $6.5625 up to $7.875 | 75 % | 23 % | 2 % | |||||||||
Thereafter | above $7.875 | 50 % | 48 % | 2 % | |||||||||
In August 2019, Navios Holdings sold the general partner interestpartnership interests in the Company to N Shipmanagement Acquisition Corp. and assume our general partner has not transferredrelated entities, an entity affiliated with the Company's Chairwoman and Chief Executive Officer. The incentive distribution rights.rights remained with Navios GP L.L.C.
Marginal Percentage Interest in Distributions | ||||||||||
Total Quarterly Distribution Target Amount | Common Unitholders | General Partner | ||||||||
Minimum Quarterly Distribution | up to $0.35 | 98 | % | 2 | % | |||||
First Target Distribution | up to $0.4025 | 98 | % | 2 | % | |||||
Second Target Distribution | above $0.4025 up to $0.4375 | 85 | % | 15 | % | |||||
Third Target Distribution | above $0.4375 up to $0.525 | 75 | % | 25 | % | |||||
Thereafter | above $0.525 | 50 | % | 50 | % |
B. Significant Changes
No significant changes have occurred since the date of the annual financial statements included herein.
Our common units are traded on the New York Stock Exchange (or “NYSE”) under the symbol “NMM”. The following table sets forth
On March 13, 2019, we were notified by the high and lowNYSE that we were no longer in compliance with the NYSE's continued listing standards because the average closing sales prices forprice of our common units onstock over a consecutive 30 trading-day period was less than $1.00 per unit. We responded to the NYSE for eachconfirming our intent to cure this deficiency within the prescribed timeframe set out in the NYSE's Listed Company Manual. Following a 1-for-15 reverse stock split of the periods indicated:issued and outstanding common units and general partner units, effective on May 21, 2019, we cured this deficiency within the prescribed timeframe set out in the NYSE's Listed Company Manual.
Price Range | ||||||||
High | Low | |||||||
Year Ended: | ||||||||
December 31, 2016 | $ | 3.07 | $ | 0.80 | ||||
December 31, 2015 | $ | 13.89 | $ | 2.71 | ||||
December 31, 2014 | $ | 20.40 | $ | 9.67 | ||||
December 31, 2013 | $ | 19.45 | $ | 12.84 | ||||
December 31, 2012 | $ | 16.94 | $ | 11.59 | ||||
Quarter Ended: | ||||||||
December 31, 2016 | $ | 2.10 | $ | 1.18 | ||||
September 30, 2016 | $ | 1.68 | $ | 1.28 | ||||
June 30, 2016 | $ | 1.85 | $ | 1.17 | ||||
March 31, 2016 | $ | 3.07 | $ | 0.80 | ||||
December 31, 2015 | $ | 8.75 | $ | 2.71 | ||||
September 30, 2015 | $ | 11.41 | $ | 6.96 | ||||
June 30, 2015 | $ | 13.22 | $ | 10.63 | ||||
March 31, 2015 | $ | 13.89 | $ | 9.75 | ||||
Month Ended: | ||||||||
March 10, 2017 | $ | 2.48 | $ | 1.85 | ||||
February 28, 2017 | $ | 2.04 | $ | 1.59 | ||||
January 31, 2017 | $ | 1.73 | $ | 1.47 | ||||
December 31, 2016 | $ | 1.69 | $ | 1.41 | ||||
November 30, 2016 | $ | 2.10 | $ | 1.18 | ||||
October 31, 2016 | $ | 1.45 | $ | 1.28 |
Item 10. Additional Information
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
The information required to be disclosed under Item 10.B is incorporated by reference to the following sections of the prospectus included in our Registration Statement onForm F-1 filed with the SEC on November 14, 2007: “The Partnership Agreement,” “Description of the Common Units —- The Units”, “Conflicts of Interest and Fiduciary Duties”, “How we make Cash Distributions” and “Our Cash Distribution Policy and Restrictions on Distributions.”
On June 10, 2009, we executed the Second Amended and Restated Agreement of Limited Partnership of Navios Partners. The Second Amended and Restated Agreement of Limited Partnership designated a new series of subordinated units as Subordinated Series A Units (the “Series A Units”).
On January 1, 2012, in accordance with the terms of the partnership agreement, all of the then outstanding subordinated units converted into 7,621,843 shares of common units (conversion excluded the subordinated Series A units) and on June 29, 2012, the outstanding subordinated Series A units converted into 1,000,000 shares of common units.
On March 12, 2015, we executed the Third Amended and Restated Agreement of Limited Partnership of Navios Partners in order to reflect the conversion of the Subordinated Units and the Subordinated Series A Units into Common Units.
On March 19, 2018, we executed the Fourth Amended and Restated Agreement of Limited Partnership of Navios Partners in order to reflect the recent process to clarify the quorum necessary to conduct business at any adjourned meeting.
C. Material Contracts
The following is a summary of each material contract, other than material contracts entered into in the ordinary course of business, to which we or any of our subsidiaries is a party, for the two years immediately preceding the date of this Annual Report, each of which is included in the list of exhibits in Item 19. PleaseExcept as otherwise indicated, please read “Item 5. Operating and Financial Review and Prospects —- Trends and Factors Affecting Our Future Results of Operations —- Liquidity and Capital Resources — credit facilities”- Credit Facilities – Financial Liabilities” for a summary of certain contract terms.
D. Exchange controls
We are not aware of any governmental laws, decrees or regulations, including foreign exchange controls, in the Marshall Islands, Liberia, Malta, British Virgin Islands, the countries of incorporation of Navios Partners and its subsidiaries that restrict the export or import of capital, or that affect the remittance of dividends, interest or other payments tonon-resident holders of our securities.
We are not aware of any limitations on the right ofnon-resident or foreign owners to hold or vote our securities imposed by the laws of the Republic of the Marshall Islands or our Certificate of Formation and Limited Partnership Agreement.
E. Taxation of Holders
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal income tax considerations that may be relevant to beneficial owners of our common units and, unless otherwise noted in the following discussion, is the opinion of Thompson Hine LLP, our U.S. counsel, insofar as it relates to matters of U.S. federal income tax law and legal conclusions with respect to those matters. The opinion of our counsel is dependent on the accuracy of representations made by us to them, including descriptions of our operations contained herein.
This discussion is based upon provisions of the Internal Revenue Code (the “Code”), U.S. Treasury Regulations, and administrative rulings and court decisions, all as in effect or in existence on the date of this filing and all of which are subject to change or differing interpretations by the Internal Revenue Service (“IRS”) or a court, possibly with retroactive effect. Changes in these authorities may cause the tax consequences of ownership of our common units to vary substantially from the consequences described below. For example, the current U.S. Administration has set forth several tax proposals that would, if enacted, make significant changes to U.S. tax laws. Such proposals include, but are not limited to, an increase in the U.S. federal income tax for long-term capital gain for certain taxpayers with income in excess of a threshold amount. The U.S. Congress may consider, and could include, some or all of these proposals in connection with any tax legislation. It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could take effect. Unless the context otherwise requires, references in this section to “we,” “our” or “us” are references to Navios Maritime Partners L.P.
The following discussion applies only to beneficial owners of common units that own the common units as “capital assets” (generally, property held for investment purposes). The following discussion does not address all aspects of U.S. federal income taxation whichthat may be important to particular beneficial owners of common units in light of their individual circumstances, such as (i) beneficial owners of common units subject to special tax rules (e.g., banks or other financial institutions, real estate investment trusts, regulated investment companies, insurance companies, broker-dealers, traders that elect tomark-to-market for U.S. federal income tax purposes,tax-exempt organizations and retirement plans, individual retirement accounts andtax-deferred accounts, or former citizens or long-term residents of the United States) or to, beneficial owners that will hold the common units as part of a straddle, hedge, conversion, constructive sale, or other integrated transaction for U.S. federal income tax purposes, or beneficial owners that are accrual method taxpayers for U.S. federal income tax purposes and are required to accelerate the recognition of any item of gross income with respect to the common units as a result of such income being recognized on an applicable financial statement (ii) partnerships or other entities classified as partnerships for U.S. federal income tax purposes or their partners, (iii) U.S. Holders (as defined below) that have a functional currency other than the U.S. dollar or (iv) beneficial owners of common units that own 2.0% or more (by vote or value) of our common units (including beneficial owners entitled to a “participation exemption” with respect to our common units), all of whom may be subject to tax rules that differ significantly from those summarized below. If a partnership or other entity classified as a partnership for U.S. federal income tax purposes holds our common units, the tax treatment of its partners generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. If you are a partner in a partnership holding our common units, you should consult your own tax advisor regarding the tax consequences to you of the partnership’spartnership's ownership of our common units.
No ruling has been obtained or will be requested from the IRS, regarding any matter affecting us or holders of our common units. The opinions and statements made herein may be challenged by the IRS and, if so challenged, may not be sustained upon review in a court.
This discussion does not contain information regarding any state or local, estate, gift or alternative minimum tax considerations concerning the ownership or disposition of common units.
Each beneficial owner of our common units should consult its own tax advisor regarding the U.S. federal, state, local, and other tax consequences of the ownership or disposition of common units.
Election to Be Treated as a Corporation
We have elected to be treated as a corporation for U.S. federal income tax purposes. Consequently, among other things, U.S. Holders (as defined below) will not directly be subject to U.S. federal income tax on their shares of our income, but rather will be subject to U.S. federal income tax on distributions received from us and dispositions of common units as described below.
U.S. Federal Income Taxation of U.S. Holders
As used herein, the term “U.S. Holder” means a beneficial owner of our common units that:
Distributions
Subject to the discussion below of the rules applicable to a passive foreign investment company (a “PFIC”), any distributions to a U.S. Holder made by us with respect to our common units generally will constitute dividends,
which will be taxable as ordinary income or “qualified dividend income” as described in more detail below, to the extent of our current and accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will be treated first as anon-taxable return of capital to the extent of the U.S. Holder’sHolder's tax basis in its common units on adollar-for-dollar basis, and thereafter as capital gain, which will be either long-term or short-term capital gain depending upon whether the U.S. Holder held the common units for more than one year.
U.S. Holders that are corporations generally will not be entitled to claim a dividend received deduction with respect to distributions they receive from us. Dividends received with respect to the common units will be treated as foreign source income and generally will be treated as “passive category income” for U.S. foreign tax credit purposes.
Dividends received with respect to our common units by a U.S. Holder who is an individual, trust or estate (a“non-corporate “non-corporate U.S. Holder”) generally will be treated as “qualified dividend income” that is taxable to suchnon-corporate U.S. Holder at preferential capital gain tax rates, provided that: (i) subject to the possibility that our common units may be delisted by a qualifying exchange, our common units are traded on an “established securities market” in the United States (such as the NYSE where our common units are traded) and are “readily tradeable” on such an exchange; (ii) we are not a PFIC for the taxable year during which the dividend is paid or the immediately preceding taxable year (which we do not believe we are, have been or will be, as discussed below); (iii) thenon-corporate U.S. Holder has owned the common units for more than 60 days during the121-day period beginning 60 days before the date on which the common units becomeex-dividend (and has not entered into certain risk limiting transactions with respect to such common units); and (iv) thenon-corporate U.S. Holder is not under an obligation to make related payments with respect to positions in substantially similar or related property. Any dividends paid on our common units that are not eligible for these preferential rates will be taxed as ordinary income to anon-corporate U.S. Holder. In addition, a 3.8% tax may apply to certain investment income.See “Medicare Tax” below.
Special rules may apply to any amounts received in respect of our common units that are treated as “extraordinary dividends.” In general, an extraordinary dividend is a dividend with respect to a common unit that is equal to or in excess of 10.0% of a U.S. Holder’sHolder's adjusted tax basis (or fair market value upon the U.S. Holder’sHolder's election) in such common unit. In addition, extraordinary dividends include dividends received within aone-year period that, in the aggregate, equal or exceed 20.0% of a U.S. Holder’sHolder's adjusted tax basis (or fair market value) in a common unit. If we pay an “extraordinary dividend” on our common units that is treated as “qualified dividend income,” then any loss recognized by a U.S. Individual Holder from the sale or exchange of such common units will be treated as long-term capital loss to the extent of the amount of such dividend.
Sale, Exchange or Other Disposition of Common Units
Subject to the discussion of PFICs below, a U.S. Holder generally will recognize capital gain or loss upon a sale, exchange or other disposition of our common units in an amount equal to the difference between the amount realized by the U.S. Holder from such sale, exchange or other disposition and the U.S. Holder’sHolder's adjusted tax basis in such units. The U.S. Holder’sHolder's initial tax basis in the common units generally will be the U.S. Holder’sHolder's purchase price for the common units and that tax basis will be reduced (but not below zero) by the amount of any distributions on the common units that are treated asnon-taxable returns of capital (as discussed under “—Distributions”“Distributions” above). Such gain or loss will be treated as long-term capital gain or loss if the U.S. Holder’sHolder's holding period is greater than one year at the time of the sale, exchange or other disposition.
A corporate U.S. Holder’sHolder's capital gains, long-term and short-term, are taxed at ordinary income tax rates. If a corporate U.S. Holder recognizes a loss upon the disposition of our common units, such U.S. Holder is limited to using the loss to offset other capital gain. If a corporate U.S. Holder has no other capital gain in the tax year of the loss, it may carry the capital loss back three years and forward five years.
Long-term capital gains ofnon-corporate U.S. Holders are subject to the favorable tax rate of a maximum of 20%. In addition, a 3.8% tax may apply to certain investment income. See “Medicare“Medicare Tax” below. A
non-corporate U.S. Holder may deduct a capital loss resulting from a disposition of our common units to the extent of capital gains plus up to $3,000 ($1,500 for married individuals filing separate tax returns) annually and may carry forward a capital loss indefinitely.
PFIC Status and Significant Tax Consequences
In general, we will be treated as a PFIC with respect to a U.S. Holder if, for any taxable year in which the holder held our common units, either:
Income earned, or deemed earned, by us in connection with the performance of services would not constitute passive income. By contrast, rental income generally would constitute “passive income” unless we were treated as deriving our rental income in the active conduct of a trade or business under the applicable rules.
Based on our current and projected methods of operations, and an opinion of counsel, we believe that we will not be a PFIC with respect to any taxable year. Our U.S. counsel, Thompson Hine LLP, is of the opinion that (1) the income we receive from the time chartering activities and assets engaged in generating such income should not be treated as passive income or assets, respectively, and (2) so long as our income from time charters exceeds 25.0% of our gross income for each taxable year after our initial taxable year and the value of our vessels contracted under time charters exceeds 50.0% of the average value of our assets for each taxable year after our initial taxable year, we should not be a PFIC. This opinion is based on representations and projections provided to our counsel by us regarding our assets, income and charters, and its validity is conditioned on the accuracy of such representations and projections.
Our counsel’scounsel's opinion is based principally on their conclusion that, for purposes of determining whether we are a PFIC, the gross income we derive or are deemed to derive from the time chartering activities of our wholly-owned subsidiaries should constitute services income, rather than rental income. Correspondingly, such income should not constitute passive income, and the assets that we or our subsidiaries own and operate in connection with the production of such income, in particular, the vessels we or our subsidiaries own that are subject to time charters, should not constitute passive assets for purposes of determining whether we are or have been a PFIC. We expect that all of the vessels in our fleet will be engaged in time chartering activities and intend to treat our income from those activities asnon-passive income, and the vessels engaged in those activities asnon-passive assets, for PFIC purposes.
Our counsel has advised us that there is a significant amount of legal authority consisting of the Code, legislative history, IRS pronouncements and rulings supporting our position that the income from our time chartering activities constitutes services income (rather than rental income). There is, however, no direct legal authority under the PFIC rules addressing whether income from time chartering activities is services income or rental income. Moreover, in a case not interpreting the PFIC rules,Tidewater Inc. v. United States, 565 F.3d 299 (5th Cir. 2009), the Fifth Circuit held that the vessel time charters at issue generated predominantly rental income rather than services income. However, the IRS stated in an Action on Decision (AOD2010-001) that it disagrees with, and will not acquiesce to, the way that the rental versus services framework was applied to the facts in theTidewater decision, and in its discussion stated that the time charters at issue inTidewater would be treated as producing services income for PFIC purposes. The IRS’sIRS's AOD, however, is an administrative action that cannot be relied upon or otherwise cited as precedent by taxpayers.
The opinion of our counsel is not binding on the IRS or any court. Thus, while we have received an opinion of our counsel in support of our position, there is a possibility that the IRS or a court could disagree with this
position and the opinion of our counsel. In addition, although we intend to conduct our affairs in a manner to avoid being classified as a PFIC with respect to any taxable year, we cannot assure you that the nature of our operations will not change in the future.
As discussed more fully below, if we were to be treated as a PFIC for any taxable year in which a U.S. Holder owned our common units, the U.S. Holder would be subject to different taxation rules depending on whether the U.S. Holder makes an election to treat us as a “Qualified Electing Fund,” which we refer to as a “QEF election.” As an alternative to making a QEF election, the U.S. Holder may be able to make a“mark-to-market” “mark-to-market” election with respect to our common units, as discussed below. In addition, if we were treated as a PFIC for any taxable year in which a U.S. Holder owned our common units, the U.S. Holder would be required to file IRS Form 8621 with the U.S. Holder’sHolder's U.S. federal income tax return for each year to report the U.S. Holder’sHolder's ownership of such common units. In the event a U.S. Holder does not file IRS Form 8621, the statute of limitations on the assessment and collection of U.S. federal income taxes of such U.S. Holder for the related tax year will not close before the date whichthat is three years after the date on which such report is filed.
It should also be noted that, if we were treated as a PFIC for any taxable year in which a U.S. Holder owned our common units and any of ournon-U.S. subsidiaries were also a PFIC, the U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules.
Taxation of U.S. Holders Making a Timely QEF Election
If we were to be treated as a PFIC for any taxable year, and a U.S. Holder makes a timely QEF election (any such U.S. Holder, an “Electing Holder”), the Electing Holder must report for U.S. federal income tax purposes its pro rata share of our ordinary earnings and net capital gain, if any, for our taxable year that ends with or within the Electing Holder’sHolder's taxable year, regardless of whether or not the Electing Holder received any distributions from us in that year. Such income inclusions would not be eligible for the preferential tax rates applicable to “qualified dividend income.” The Electing Holder’sHolder's adjusted tax basis in our common units will be increased to reflect taxed but undistributed earnings and profits. Distributions to the Electing Holder of our earnings and profits that were previously taxed will result in a corresponding reduction in the Electing Holder’sHolder's adjusted tax basis in our common units and will not be taxed again once distributed. The Electing Holder would not, however, be entitled to a deduction for its pro rata share of any losses that we incur with respect to any year. An Electing Holder generally will recognize capital gain or loss on the sale, exchange or other disposition of our common units.
Even if a U.S. Holder makes a QEF election for one of our taxable years, if we were a PFIC for a prior taxable year during which the U.S. Holder owned our common units and for which the U.S. Holder did not make a timely QEF election, the U.S. Holder would also be subject to the more adverse rules described below under “Taxation of U.S. Holders Not Making a Timely QEF orMark-to-Market Election.” However, under certain circumstances, a U.S. Holder may be permitted to make a retroactive QEF election with respect to us for any open taxable years in the U.S. Holder’sHolder's holding period for our common units in which we are treated as a PFIC. Additionally, to the extent that any of our subsidiaries is a PFIC, a U.S. Holder’sHolder's QEF election with respect to us would not be effective with respect to the U.S. Holder’sHolder's deemed ownership of the stock of such subsidiary and a separate QEF election with respect to such subsidiary would be required.
A U.S. Holder makes a QEF election with respect to any year that we are a PFIC by filing IRS Form 8621 with the U.S. Holder’sHolder's U.S. federal income tax return. If, contrary to our expectations, we were to determine that we are treated as a PFIC for any taxable year, we would notify all U.S. Holders and would provide all necessary information to any U.S. Holder that requests such information in order to make the QEF election described above with respect to us and the relevant subsidiaries. A QEF election would not apply to any taxable year for which we are not a PFIC, but would remain in effect with respect to any subsequent taxable year for which we are a PFIC, unless the IRS consents to the revocation of the election.
Taxation of U.S. Holders Making a“Mark-to-Market” “Mark-to-Market” Election
If we were to be treated as a PFIC for any taxable year and, subject to the possibility that our common units may be delisted by a qualifying exchange, our common units were treated as “marketable stock,” then, as an alternative to making a QEF election, a U.S. Holder would be allowed to make a“mark-to-market” “mark-to-market” election with respect to our common units, provided the U.S. Holder completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the U.S. Holder generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of the U.S. Holder’sHolder's common units at the end of the taxable year over the holder’sholder's adjusted tax basis in the common units. The U.S. Holder also would be permitted an ordinary loss in respect of the excess, if any, of the U.S. Holder’sHolder's adjusted tax basis in the common units over the fair market value thereof at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of themark-to-market election. A U.S. Holder’sHolder's tax basis in the U.S. Holder’sHolder's common units would be adjusted to reflect any such income or loss recognized. Gain recognized on the sale, exchange or other disposition of our common units would be treated as ordinary income, and any loss recognized on the sale, exchange or other disposition of the common units would be treated as ordinary loss to the extent that such loss does not exceed the netmark-to-market gains previously included in income by the U.S. Holder. Amark-to-market election would not apply to our common units owned by a U.S. Holder in any taxable year during which we are not a PFIC, but would remain in effect with respect to any subsequent taxable year for which we are a PFIC, unless our common units are no longer treated as “marketable stock” or the IRS consents to the revocation of the election.
Even if a U.S. Holder makes a“mark-to-market” “mark-to-market” election for one of our taxable years, if we were a PFIC for a prior taxable during which the U.S. Holder owned our common units and for which the U.S. Holder did not make a timelymark-to-market election, the U.S. Holder would also be subject to the more adverse rules described below under “Taxation“Taxation of U.S. Holders Not Making a Timely QEF orMark-to-Market Election.”Additionally, to the extent that any of our subsidiaries is a PFIC, a“mark-to-market” “mark-to-market” election with respect to our common units would not apply to the U.S. Holder’sHolder's deemed ownership of the stock of such subsidiary.
Taxation of U.S. Holders Not Making a Timely QEF orMark-to-Market Election
If we were to be treated as a PFIC for any taxable year, a U.S. Holder who does not make either a timely QEF election or a timely“mark-to-market” “mark-to-market” election for that year (i.e., the taxable year in which the U.S. Holder’sHolder's holding period commences), whom we refer to as a“Non-Electing “Non-Electing Holder,” would be subject to special rules resulting in increased tax liability with respect to (1) any excess distribution (i.e. , the portion of any distributions received by theNon-Electing Holder on our common units in a taxable year in excess of 125.0% of the average annual distributions received by theNon-Electing Holder in the three preceding taxable years, or, if shorter, theNon-Electing Holder’s Holder's holding period for the common units), and (2) any gain realized on the sale, exchange or other disposition of our common units. Under these special rules:
If we were treated as a PFIC for any taxable year and aNon-Electing Holder who is an individual dies while owning our common units, such holder’sholder's successor generally would not receive astep-up in tax basis with respect to such common units. Additionally, to the extent that any of our subsidiaries is a PFIC, the foregoing consequences would apply to the U.S. Holder’sHolder's deemed receipt of any excess distribution on, or gain deemed realized on the disposition of, the stock of such subsidiary deemed owned by the U.S. Holder.
In January 2022, the U.S. Department of Treasury issued proposed regulations concerning PFICs. If the proposed regulations are finalized, they may affect eligibility requirements to make a QEF election or a mark-to-market election.
Controlled Foreign Corporation
Although we believe that Navios Partners was not a controlled foreign corporation (a “CFC”) as of December 31, 2021, or at any time during 2021, tax rules enacted by the 2017 Tax Cuts and Jobs Act, including the imposition of so-called “downward attribution” for purposes of determining whether a non-U.S. corporation is a CFC, may result in Navios Partners being treated as a CFC for U.S. federal income tax purposes in the future. As of December 31, 2021, Navios Holdings beneficially owned 10.5% of our common units both directly and indirectly through wholly owned subsidiaries. Through downward attribution, U.S. subsidiaries of Navios Holdings are treated as constructive owners of these equity interests for purposes of determining whether we are a CFC. If, in the future, U.S. Holders (including U.S. subsidiaries of Navios Holdings, as discussed above) that each own 10% or more of our equity (by vote or value) would own in the aggregate more than 50% of our equity (by vote or value), in each case, directly, indirectly or constructively, we would become a CFC.
The U.S. federal income tax consequences of U.S. holders who at all times own less than 10% of our equity, directly, indirectly, and constructively, should not be affected were we to become a CFC. However, were we to become a CFC, any U.S. Holder who owns 10% or more of our equity (by vote or value), directly, indirectly, or constructively (but not through downward attribution), should be subject to U.S. federal income tax on its pro rata share of our so-called “subpart F” income and should be subject to U.S. federal income tax reporting requirements. Income from our time chartering activities could constitute subpart F income if it were derived from passive rental activities. But, Thompson Hine's opinion that the income we earn from our time chartering activities should not be treated as passive income is based principally on their conclusion that such income should constitute services income, rather than rental income (see U.S. Federal Income Taxation of U.S. Holders - PFIC Status and Significant Tax Consequences). So, we believe that the income we earn from our time chartering activities should not be treated as subpart F income and thus no such U.S. Holder should be subject to U.S. federal income tax on such income, regardless of whether IRS's position that the Section 883 exemption does not apply to subpart F income is correct.
If, contrary, to our belief discussed above, the income we earn from our time chartering activities were treated as subpart F income, it is unclear whether such income would nonetheless be exempted from U.S. federal income tax for so long as we qualify for the Section 883 exemption (see Item 4.B. Business Overview - Taxation of the Partnership - The Section 883 Exemption). In this regard, the IRS has taken the position in Revenue Ruling 87-15 that the Section 883 exemption does not cause subpart F income to be exempted from U.S. federal income tax. Any U.S. Holder of Navios Partners that owns 10% or more (by vote or value), directly, indirectly, or constructively, of the equity of Navios Partners should consult its own tax advisor regarding U.S. federal tax consequences that may result from Navios Partners being treated as a CFC.
Medicare Tax
A U.S. Holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will generally be subject to a 3.8% tax on the lesser of (i) the U.S. Holder’sHolder's “net investment income” for a taxable year and (ii) the excess of the U.S. Holder’sHolder's modified adjusted gross income for such taxable year over $200,000 ($250,000 in the case of joint filers). For these purposes, “net investment income” will generally include dividends paid with respect to our common units and net gain attributable to the disposition of our common units not held in connection with certain trades or businesses, but will be reduced by any deductions properly allocable to such income or net gain.
U.S. Federal Income Taxation ofNon-U.S. Holders
A beneficial owner of our common units (other than a partnership or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) that is not a U.S. Holder is a“Non-U.S. “Non-U.S. Holder”.
Distributions
Distributions we pay to aNon-U.S. Holder will not be subject to U.S. federal income tax or withholding tax if theNon-U.S. Holder is not engaged in a U.S. trade or business. If theNon-U.S. Holder is engaged in a U.S. trade or business, our distributions will be subject to U.S. federal income tax to the extent they constitute income effectively connected with theNon-U.S. Holder’sHolder's U.S. trade or business (and a corporateNon-U.S. Holder may also be subject to U.S. federal branch profits tax). However, distributions paid to aNon-U.S. Holder who is engaged in a trade or business may be exempt from taxation under an income tax treaty if the income arising from the distribution is not attributable to a U.S. permanent establishment maintained by theNon-U.S. Holder.
Disposition of Units
In general, aNon-U.S. Holder will not be subject to U.S. federal income tax or withholding tax on any gain resulting from the disposition of our common units provided theNon-U.S. Holder is not engaged in a U.S. trade or business. ANon-U.S. Holder that is engaged in a U.S. trade or business will be subject to U.S. federal income tax in the event the gain from the disposition of units is effectively connected with the conduct of such U.S. trade or business (provided, in the case of aNon-U.S. Holder entitled to the benefits of an income tax treaty with the United States, such gain also is attributable to a U.S. permanent establishment). However, even if not engaged in a U.S. trade or business, individualNon-U.S. Holders may be subject to tax on gain resulting from the disposition of our common units if they are present in the United States for 183 days or more during the taxable year in which those units are disposed and meet certain other requirements.
Backup Withholding and Information Reporting
In general, payments to anon-corporate U.S. Holder of distributions or the proceeds of a disposition of common units may be subject to information reporting. These payments to anon-corporate U.S. Holder also may be subject to backup withholding (currently at a rate of 28%24%), if thenon-corporate U.S. Holder:
A U.S. Holder generally is required to certify its compliance with the backup withholding rules on IRSForm W-9.
Non-U.S. Holders may be required to establish their exemption from information reporting and backup withholding by certifying their status on IRSForm W-8BEN,W-8BEN-E,W-8ECI orW-8IMY, as applicable.
Backup withholding is not an additional tax. Rather, a unitholder generally may obtain a credit for any amount withheld against his liability for U.S. federal income tax (and obtain a refund of any amounts withheld in excess of such liability) by filing a U.S. federal income tax return with the IRS.
Individual U.S. Holders (and to the extent specified in applicable U.S. Treasury Regulations, certain individualNon-U.S. Holders and certain U.S. Holders that are entities) that hold “specified foreign financial assets,” including our common units, whose aggregate value exceeds $75,000 at any time during the taxable year or $50,000 on the last day of the taxable year (or such higher amounts as prescribed by applicable Treasury Regulations) are required to file a report on IRS Form 8938 with information relating to the assets for each such taxable year. Specified foreign financial assets would include, among other things, our common units, unless such common units are held in an account maintained by a U.S. “financial institution” (as defined). Substantial penalties apply to any failure to timely file IRS Form 8938, unless the failure is shown to be due to reasonable cause and not due to willful neglect. Additionally, in the event an individual U.S. Holder (and to the extent specified in applicable Treasury Regulations, an individualNon-U.S. Holder or a U.S. entity) that is required to file IRS Form 8938 does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such holder for the related tax year may not close until three years after the date that the required information is filed. U.S. Holders (including U.S. entities) andNon-U.S. Holders should consult their own tax advisors regarding their reporting obligations.
NON-UNITED STATES TAX CONSIDERATIONS
Marshall Islands Tax Consequences
The following discussion is based upon the opinion of Reeder & Simpson P.C., our counsel as to matters of the laws of the Republic of the Marshall Islands, and the current laws of the Republic of the Marshall Islands applicable to persons who do not reside in, maintain offices in or engage in business in the Republic of the Marshall Islands.
Because we and our subsidiaries do not and do not expect to conduct business or operations in the Republic of the Marshall Islands, under current Marshall Islands law you will not be subject to Marshall Islands taxation or withholding on distributions, including upon distribution treated as a return of capital, we make to you as a unitholder. In addition, you will not be subject to Marshall Islands stamp, capital gains or other taxes on the purchase, ownership or disposition of common units, and you will not be required by the Republic of the Marshall Islands to file a tax return relating to your ownership of common units.
EACH UNITHOLDER IS URGED TO CONSULT HIS OWN TAX, LEGAL AND OTHER ADVISORS REGARDING THE CONSEQUENCES OF OWNERSHIP OF COMMON UNITS UNDER THE UNITHOLDER’SUNITHOLDER'S PARTICULAR CIRCUMSTANCES.
F. Dividends and paying agents
Not applicable.
G. Statements by experts
Not applicable.
H. Documents on display
We file reports and other information with the SEC. These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the public facilities maintained by the Commission at 100 F Street, N.E., Washington, D.C. 20549, orare available from the SEC’sSEC's website http://www.sec.gov. You may obtain information on the operation of the public reference room by calling 1(800) SEC-300 and you may obtain copies at prescribed rates.
I. Subsidiary information
Not applicable.
Item 11. Quantitative and Qualitative Disclosures about Market Risks
Foreign Exchange Risk
Our functional and reporting currency is the U.S. dollar. We engage in worldwide commerce with a variety of entities. Although our operations may expose us to certain levels of foreign currency risk, our transactions are predominantly U.S. dollar denominated. Transactions in currencies other than the U.S. dollar are translated at the exchange rate in effect at the date of each transaction.
Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated are recognized. Expenses incurred in foreign currencies against which the U.S. Dollar falls in value can increase such expenses, thereby decreasing our income or vice versa if the U.S. dollar increases in value. For example, during the year endedas of December 31, 2016,2021, the value of the U.S. dollar increased by approximately 4.0% as compared to the Euro.Euro increased by approximately 8.3% compared with the respective value as of December 31, 2020.
Interest Rate Risk
BorrowingsBank borrowings under our credit facilities bear interest at a rate based on a premium over U.S. $ LIBOR. Therefore, we are exposed to the risk that our interest expense may increase if interest rates rise. For the years ended December 31, 2016, 20152021, 2020 and 2014,2019, we paid interest on our outstanding debt at a weighted average interest rate of 4.7%4.1%, 4.4%4.5% and 4.7%6.7%, respectively. A 1% increase in LIBOR would have increased our interest expense for the years ended December 31, 2016, 20152021, 2020 and 2014,2019 by $5.5$7.9 million, $6.1$4.3 million and $5.6$4.4 million, respectively.
Concentration of Credit Risk
Financial instruments, which potentially subject us to significant concentrations of credit risk, consist principally of trade accounts receivable. We closely monitor our exposure to customers for credit risk. We have policies in place to ensure that we trade with customers with an appropriate credit history.
For the year ended December 31, 2016,2021, Singapore Marine represented approximately 14.5% of our most significant counterparties were Hyundai Merchant Marine Co., Ltd., Yang Ming Marine Transport Corporation and Mediterranean Shipping Co. S.A. which accounted for approximately 29.6%, 13.0% and 11.6%, respectively, of total revenues. For the year ended December 31, 2015, our most significant counterparties were Hyundai Merchant2020, HMM, Singapore Marine Co.and Cargill represented approximately 23.4%, Ltd., Navios Corporation and Yang Ming Marine Transport Corporation, which accounted for approximately 24.0%, 17.4%19.5% and 11.4%, respectively, of our total revenues. For the year ended December 31, 2014, Navios Partners’ customers representing 10% or more of total revenues were Hyundai Merchant Marine Co.2019, HMM, Swissmarine and Cargill represented approximately 25.9%, Ltd12.3% and Navios Corporation, which accounted for 24.4% and 11.0%10.9%, respectively, of our total revenues. No other customers accounted for 10% or more of total revenuerevenues for any of the years presented. Following the termination of the credit default insurance through its third party insurer,
On November 15, 2012 (as amended and supplemented in March 2014, December 2017 and July 2019), Navios Holdings and Navios Partners entered into an agreementthe Navios Holdings Guarantee by which Navios Holdings willwould provide supplemental credit default insurance with a maximum cash payment of $20.0 million. During the year endedIn October 2020, Navios Holdings paid an amount of $5.0 million to Navios Partners. In April 2021, Navios Holdings paid an amount of $5.0 million to Navios Partners. As of December 31, 20162021 and 2015,2020, the Company submitted claims for charterers’ defaultoutstanding claim receivable amounted to $0 and $5.0 million. The guarantee claim receivable is presented under this agreement to Navios Holdings for a total amountthe caption “Amounts due from related parties-short term” in the Consolidated Balance Sheets as of $9.2 million and $3.6 million, respectively, net of applicable deductions, of which $9.6 million and $3.8 million was recorded as “Other income” for the year ended December 31, 20162020.
If we lose a charter, we may be unable to re-deploy the related vessel on terms as favorable to us due to the long-term nature of most charters and 2015, respectively.the cyclical nature of the industry or we may be forced to charter the vessel on the spot market at then market rates which may be less favorable than the charter that has been terminated. If we are unable to re-deploy a vessel for which the charter has been terminated, we will not receive any revenues from that vessel, but we may be required to pay expenses necessary to maintain the vessel in proper operating condition. If we lose a vessel, any replacement or newbuilding would not generate revenues during its construction acquisition period, and we may be unable to charter any replacement vessel on terms as favorable to us as those of the terminated charter.
Even if we successfully charter our vessels in the future, our charterers may go bankrupt or fail to perform their obligations under the charter agreements, they may delay payments or suspend payments altogether, they may terminate the charter agreements prior to the agreed-upon expiration date or they may attempt to renegotiate the terms of the charters. The permanent loss of a customer, time charter or vessel, or a decline in payments under our charters, could have a material adverse effect on our business, results of operations and financial condition and our ability to make cash distributions in the event we are unable to replace such customer, time charter or vessel.
Inflation
Inflation has had a minimal impact on vessel operating expenses, drydocking expenses and general and administrative expenses. Our management does not consider inflation to be a significant risk to direct expenses in the current and foreseeable economic environment.
Item 12. Description of Securities Other than Equity Securities
Not applicable.
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Unitholders and Use of Proceeds
None.
Item 15. Controls and Procedures
A. Disclosure Controls and Procedures
The management of Navios Partners, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation, pursuant toRule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the effectiveness of our disclosure controls and procedures as of December 31, 2016.2021. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of December 31, 2016.2021.
Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’sSEC's rules and forms and that such information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.
B. Management’sManagement's annual report on internal control over financial reporting
The management of Navios Partners is responsible for establishing and maintaining adequate internal control over financial reporting as defined inRule 13a-15(f) or15d-15(f) of the Exchange Act. Navios Partners’Partners' internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States (“GAAP”).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Navios Partners’Partners' management assessed the effectiveness of Navios Partners’Partners' internal control over financial reporting as of December 31, 2016.2021. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—IntegratedControl-Integrated Framework (2013). Based on its assessment, management concluded that, as of December 31, 2016,2021, Navios Partners’Partners' internal control over financial reporting iswas effective based on those criteria.
Navios Partners’Partners' independent registered public accounting firm has issued an attestation report on Navios Partners’Partners' internal control over financial reporting.
C. Attestation report of the registered public accounting firm
Navios Partners’Partners' independent registered public accounting firm has issued an audit report on Navios Partners’Partners' internal control over financial reporting. This report appears onPage F-2F-4 of the consolidated financial statements.
D. Changes in internal control over financial reporting
There have been no changes in internal controls over financial reporting (identified in connection with management’smanagement's evaluation of such internal controlscontrol over financial reporting) that occurred during the year covered by this annual report that have materially affected, or are reasonably likely to materially affect, Navios Partners’Partners' internal controls over financial reporting.
Item 16A. Audit Committee Financial Expert
Item 16A. Audit Committee Financial Expert |
Navios Partners’Partners' Audit Committee consists of three independent directors, Dimitris Papastefanou Gkouras,Orthodoxia Zisimatou, Serafeim Kriempardis and Lampros Theodorou.Alexander Kalafatides. The Board of Directors has determined that Serafeim Kriempardis qualifies as “an audit committee financial expert” as defined in the instructions of Item 16A ofForm 20-F. Mr. Kriempardis is independent under applicable NYSE and SEC standards.
Navios Partners has adopted a code of ethics applicable to officers, directors and employees that complies with applicable guidelines issued by the SEC. The Navios Partners Code of Corporate Conduct and Ethics is available for review on Navios Partners’Partners' website atwww.navios-mlp.com.
Item 16C. Principal Accountant Fees and Services
Audit Fees
Our principal Accountants for fiscal years 20162021 and 20152020 were Ernst & Young Hellas S.A. and PricewaterhouseCoopers S.A., respectively. The audit fees for each of the audit of the years ended December 31, 20162021 and 20152020 were $0.2$0.5 million and $0.2$0.3 million, respectively.
Audit-Related Fees
There were no audit-related fees billed in 20162021 and 2015.2020.
Tax Fees
There were no tax fees billed in 20162021 and 2015.2020.
Other Fees
There were no other fees billed in 20162021 and 2015.2020.
Audit Committee
The Audit Committee is responsible for the appointment, replacement, compensation, evaluation and oversight of the work of the independent auditors. As part of this responsibility, the audit committeeAudit Committee pre-approves the audit andnon-audit services performed by the independent auditors in order to assure that they do not impair the auditors’auditors' independence from Navios Partners. The Audit Committee has adopted a policy which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditors may bepre-approved.
The Audit Committee separatelypre-approved all engagements and fees paid to our principal accountant in 2016.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Units by the Issuer and Affiliated Purchasers
None.In January 2019, the Board of Directors of Navios Partners authorized a common unit repurchase program for up to $50.0 million of the Company's common units over a two year period. Common unit repurchases were made from time to time for cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing and amount of repurchases under the program were determined by Navios Partners' management based upon market conditions and other factors. Repurchases were made pursuant to a program adopted under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The program did not require any minimum repurchase or any specific number of common units and could have been suspended or reinstated at any time in Navios Partners' discretion and without notice. Repurchases were subject to restrictions under Navios Partners' credit facilities. As of December 31, 2021, since the commencement of the common unit repurchase program, Navios Partners repurchased and cancelled 312,952 common units, for a total cost of approximately $4.5 million. There were no repurchases during the year ended December 31, 2021, and the program expired in January 2021. The Company may in the future enact new repurchase programs if the Board of Directors deems it advisable for the Company.
Please read “Item 7. — Major Unitholders and Related Party Transactions”.
Item 16F. Change in Registrant’sRegistrant's Certifying Accountant
Not applicable.On April 23, 2021, we appointed Ernst & Young (Hellas) Certified Auditors-Accountants S.A. (“Ernst & Young”) as the Company’s independent auditor for the fiscal year ending December 31, 2021, and dismissed PricewaterhouseCoopers S.A. as our independent auditor.
Our appointment of Ernst & Young and dismissal of PricewaterhouseCoopers S.A. was approved by our audit committee.
The information required to be disclosed pursuant to this Item 16F was previously reported on Form 6-K, filed with the SEC on May 18, 2021.
Item 16G. Corporate Governance
Pursuant to an exception for foreign private issuers, we are not required to comply with the corporate governance practices followed by U.S. companies under the NYSE listing standards. However, we have voluntarily adopted all of the NYSE required practices, except we do not have (i) a majority of independent board members, (ii) a nominating/governance committee consisting of independent directors or (iii)(ii) a nominating/governance committee charter specifying the purpose and responsibilities of the nominating/governance committee. Instead, all nomination/governance decisions, other than those nominating decisions dictated by our Partnership Agreement, are currently made by a majority of our independent board members.
Item 16H. Mine Safety Disclosures
Not applicable.
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 17. Financial Statements
Not applicable.
The financial information required by this Item together with the related report of PricewaterhouseCoopers S.A.,Ernst & Young, Independent Registered Public Accounting Firm, thereon is filed as part of this annual report on PagesF-1 throughF-37. F-58.
1.1 | Certificate of Limited Partnership of Navios Maritime Partners L.P.(1) |
1.2 | Fourth Amended and Restated Agreement of Limited Partnership of Navios Maritime Partners L.P. |
| |
4.1.1 |
Amendment to Omnibus Agreement, dated as of June 29, 2009, relating to the Omnibus Agreement |
4.5 | Management Agreement |
4.5.1 | Amendment to Management Agreement, dated October 29, 2009, between Navios Maritime Partners L.P. and Navios ShipManagement Inc. relating to the Management Agreement(7) |
4.5.3 | Amendment No. 3, dated October 30, 2013, to the Management Agreement, dated November 16, 2007, between Navios Maritime Partners L.P. and Navios ShipManagement Inc. |
4.5.4 | Amendment No. 4, dated August 29, 2014, to the Management Agreement, dated November 16, 2007, between Navios Maritime Partners L.P. and Navios ShipManagement Inc. |
4.5.5 | Amendment No. 5, dated February 10, 2015, to the Management Agreement, dated November 16, 2007, between Navios Maritime Partners L.P. and Navios ShipManagement Inc. |
4.5.6 | Amendment No. 6, dated May 4, 2015, to the Management Agreement, dated November 16, 2007, between Navios Maritime Partners L.P. and Navios ShipManagement Inc. |
4.7.2 | Amendment to |
4.7.3 | Fourth Amendment to |
147 |
12.1 | Section 302 Certification of Chief Executive Officer* |
12.2 | Section 302 Certification of Chief Financial Officer* |
13.1 | Section 906 Certification of Chief Executive Officer and Chief |
15.1 | Consent of PricewaterhouseCoopers S.A.* |
15.2 | Consent of Ernst & Young (Hellas) Certified Auditors Accountants S.A* |
15.3 | Consent of Ernst & Young (Hellas) Certified Auditors Accountants S.A* |
15.4 | Consent of Ernst & Young (Hellas) Certified Auditors Accountants S.A* |
15.5 | Consolidated Financial Statements of Navios Maritime Containers Sub L.P. for the years ended December 31, 2021, December 31, 2020, and December 31, 2019* |
15.6 | Consolidated Financial Statements of Navios Maritime Acquisition Corp. for the years ended December 31, 2021, December 31, 2020, and December 31, 2019* |
101 | The following materials from the |
Balance Sheets at December 31, | |
104 | Cover page interactive data file (formatted as |
(1) | Previously filed as an exhibit to the |
(2) Previously filed as an exhibit to a the Company's Annual Report on Form 20-F for the year ended December 31, 2018 filed on April 9, 2019 and hereby incorporated by reference. |
(3) Previously filed as an exhibit to a Report on Form6-K |
(4) Previously filed as an exhibit to the |
(5) Previously filed as an exhibit to a Report on Form |
(6) Previously filed as an exhibit to a Report on Form6-K filed on |
(7) Previously filed as an exhibit to a Report on Form6-K filed on October 30, 2009 and hereby incorporated by reference. | |
(8) Previously filed as an exhibit to a Report on Form 6-K filed on October 24, 2011 and hereby incorporated by reference. | |
(9) Previously filed as an exhibit to a Report on Form 6-K filed on November 7, 2013 and hereby incorporated by reference. | |
(10) Previously filed as an exhibit to a Report on Form 6-K filed on October 30, 2014 and hereby incorporated by reference. |
(11) Previously filed as an exhibit to a Report on Form6-K filed on February |
(12) Previously filed as an exhibit to a Report on Form6-K filed on |
(14) Previously filed as an exhibit to a Report on Form |
(16) Previously filed as an exhibit to the Company’s Annual Report on Form20-F for the year ended December 31, |
(18) Previously filed as an exhibit to Navios Maritime Containers L.P.’s report on Form 6-K/A filed with the SEC on September 19, 2019 and hereby incorporated by reference to the Annual Report. |
(19) Previously filed as an exhibit to a Report on Form6-K filed by Navios Acquisition on |
(20) Previously filed as an exhibit to a Report on Form6-K filed by Navios Acquisition on |
(21) Previously filed as an exhibit to a Report on Form6-K filed by Navios Acquisition on | |
(22) Previously filed as an exhibit to a Report on Form 6-K filed by Navios Acquisition on June 9, 2016 and hereby incorporated by reference | |
(23) Previously filed as an exhibit to a Report on Form 6-K filed by Navios Acquisition on August 23, 2018 and hereby incorporated by reference | |
(24) Previously filed as an exhibit to a Report on Form 6-K filed by Navios Acquisition on September 11, 2019, and hereby incorporated by reference | |
(25) Previously filed as an exhibit to a Report on Form 6-K filed by Navios Acquisition on August 6, 2020 and hereby incorporated by reference | |
(26) Previously filed as an exhibit to a Report on Form 6-K filed on November 23, 2016 and hereby incorporated by reference. | |
(27) Previously filed as an exhibit to a Report on Form 6-K filed on June 14, 2017 and hereby incorporated by reference. | |
(28) Previously filed as an exhibit to a Report on Form 6-K filed on August 5, 2020 and hereby incorporated by reference. | |
(29) Previously filed as an exhibit to a Report on Form 6-K filed on April 9, 2021 and hereby incorporated by reference. | |
(30) Previously filed as an exhibit to a Report on Form 6-K filed on May 21, 2021 and hereby incorporated by reference. | |
(31) Previously filed as an exhibit to a Report on Form 6-K filed on May 25, 2017 and hereby incorporated by reference. | |
(32) Previously filed as an exhibit to a Report on Form 6-K filed on May 21, 2018 and hereby incorporated by reference. | |
(33) Previously filed as an exhibit to a Report on Form 6-K filed on April 11, 2019 and hereby incorporated by reference. |
150 |
(34) Previously filed as an exhibit to a Report on Form 6-K filed on August 8, 2019 and hereby incorporated by reference. |
(35) Previously filed as an exhibit to a Report on Form 6-K filed on November 25, 2019 and hereby incorporated by reference. |
(36) Previously filed as an exhibit to a Report on Form 6-K filed on January 13, 2020 and hereby incorporated by reference. |
(37) Previously filed as an exhibit to a Report on Form 6-K filed on November 18, 2020 and hereby incorporated by reference. |
(38) Previously filed as an exhibit to a Report on Form 6-K filed on August 26, 2021 and hereby incorporated by reference. |
(39) Previously filed as an exhibit to the Company’s Annual Report on Form20-F for the year ended December 31, |
(40) Previously filed as an exhibit to a Report on Form6-K filed on |
(42) Previously filed as an exhibit to a Report on Form |
(43) Previously filed as an exhibit to a Report on Form6-K filed by Navios Acquisition on November |
(44) Previously filed as an exhibit to a Report on Form6-K filed on |
(45) Previously filed as an exhibit to |
Navios Maritime Partners L.P. hereby certifies that it meets all of the requirements for filing onForm 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.* Filed herewith.
Table of Contents |
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Date: March 13, 2017
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F-4 | ||||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM – PRICEWATERHOUSECOOPERS S.A. (PCAOB ID 1387) | F-5 | |||
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, | F-6 | |||
F-7 | ||||
F-8 | ||||
F-10 | ||||
F-11 |
Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm
To the Partners and the Board of Directors and Partners of Navios Maritime Partners L.P.:
In our opinion,Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets andsheet of Navios Maritime Partners L.P. (the “Company”) as of December 31, 2021, the related consolidated statements of operations, changes in partners’ capital and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated April 12, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Table of Contents | F- 2 |
Valuation of acquired intangible assets and unfavorable lease terms in Business Combinations | |
Description of the matter | As described in Note 3 to the consolidated financial statements, on March 31, 2021 and on August 25, 2021, the Company completed the acquisitions of Navios Maritime Containers L.P. (“Navios Containers”) and Navios Maritime Acquisition Corporation (“Navios Acquisition”), respectively, which resulted in $112 million of intangible assets and $231 million of unfavorable lease terms being recognized. As discussed in Note 2(m) of the consolidated financial statements, when a vessel along with the current charter contract are acquired as part of a business combination, intangible assets and unfavorable lease terms are recorded at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows deriving from the acquired charter contracts. Auditing the valuation of intangible assets and unfavorable lease terms was complex given the judgement and estimation uncertainty involved in determining the discount rates. Significant changes in this assumption could impact the fair value of the intangible assets and unfavorable lease liabilities recognized. |
How we addressed the matter in our audit | We obtained an understanding of the Company’s valuation process, evaluated the design, and tested the operating effectiveness of the controls over management’s development of discount rates in determining the fair value of intangible assets and unfavorable lease terms. To test the discount rates applied by management, our procedures included, among others, reading the merger agreements and testing the completeness and accuracy of the data used to determine the discount rates. We evaluated the discount rates by considering the financial position of the acquirees, the cost of capital of comparable businesses and other industry factors. We involved internal valuation professionals with specialized skills and knowledge who assisted in evaluating the Company’s discount rates by comparing them to discount rates that were independently developed using publicly available data for comparable entities. We also assessed the adequacy of the disclosures about the discount rates in Notes 2(m) and 3. |
/s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A.
We have served as the Company’s auditor since 2021.
Athens, Greece
April 12, 2022
Table of Contents | F- 3 |
Report of Independent Registered Public Accounting Firm
To the Unitholders and the Board of Directors of Navios Maritime Partners L.P.
Opinion on Internal Control over Financial Reporting
We have audited Navios Maritime Partners L.P.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Navios Maritime Partners L.P. and its subsidiaries (the “Company”“Company“) at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016,2021 based on criteria establishedthe COSO criteria.
We also have audited, in Internal Control — Integrated Framework (2013) issued byaccordance with the Committee of Sponsoring Organizationsstandards of the Treadway Commission (COSO). Public Company Accounting Oversight Board (United States) (PCAOB), the 2021 consolidated financial statements of the Company and our report dated April 12, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in “Management’s annual report on internal control over financial reporting”, appearing in Item 15(b) of the Company’s 2016accompanying Management’s Annual Report onForm 20-F. Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements andan opinion on the Company’s internal control over financial reporting based on our integrated audits. audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also includedrisk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audits provideaudit provides a reasonable basis for our opinions.opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i)(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii)(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii)(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young (Hellas) Certified Auditors Accountants S.A.
Athens, Greece
April 12, 2022
Table of Contents | F- 4 |
Report of Independent Registered Public Accounting Firm
To the Partners and Board of Directors of Navios Maritime Partners L.P.
Opinion on the Financial Statements
We have audited the consolidated balance sheet of Navios Maritime Partners L.P. and its subsidiaries (the “Company”) as of December 31, 2020, and the related consolidated statements of operations, changes in partners’ capital and cash flows for each of the two years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers S.A.
Athens, Greece
March 13, 2017
We served as the Company’s auditor from 2007 to 2020.
Table of Contents | F- 5 |
NAVIOS MARITIME PARTNERS L.P. CONSOLIDATED BALANCE SHEETS (Expressed in thousands of U.S. Dollars except unit data) |
Notes | December 31, 2021 | December 31, 2020 | |||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | 4 | $ | 159,467 | $ | 19,303 | ||
Restricted cash | 4 | 9,979 | 11,425 | ||||
Accounts receivable, net | 5 | 23,774 | 16,969 | ||||
Amounts due from related parties | 2, 18 | 0 | 5,000 | ||||
Prepaid expenses and other current assets | 6 | 33,120 | 8,083 | ||||
Total current assets | 226,340 | 60,780 | |||||
Vessels, net | 7 | 2,852,570 | 1,041,138 | ||||
Deposits for vessels acquisitions | 16 | 46,335 | 0 | ||||
Other long-term assets | 11, 16 | 48,168 | 18,850 | ||||
Deferred dry dock and special survey costs, net | 69,882 | 37,045 | |||||
Investment in affiliates | 20 | 0 | 26,158 | ||||
Amounts due from related parties | 18 | 35,245 | 0 | ||||
Intangible assets | 8 | 100,422 | 2,000 | ||||
Notes receivable, net of current portion | 19 | 0 | 8,013 | ||||
Operating lease assets | 23 | 244,337 | 13,285 | ||||
Total non-current assets | 3,396,959 | 1,146,489 | |||||
Total assets | $ | 3,623,299 | $ | 1,207,269 | |||
LIABILITIES AND PARTNERS' CAPITAL | |||||||
Current liabilities | |||||||
Accounts payable | 9 | $ | 21,062 | $ | 6,299 | ||
Accrued expenses | 10 | 12,889 | 4,781 | ||||
Deferred revenue | 19 | 23,921 | 3,185 | ||||
Operating lease liabilities, current portion | 23 | 18,292 | 1,173 | ||||
Amounts due to related parties | 18 | 64,204 | 35,979 | ||||
Current portion of financial liabilities, net | 11 | 82,291 | 6,277 | ||||
Current portion of long-term debt, net | 11 | 172,846 | 195,558 | ||||
Total current liabilities | 395,505 | 253,252 | |||||
Operating lease liabilities, net | 23 | 225,512 | 11,980 | ||||
Unfavorable lease terms | 8 | 122,481 | 0 | ||||
Long-term financial liabilities, net | 11 | 465,633 | 56,481 | ||||
Long-term debt, net | 11 | 640,939 | 228,541 | ||||
Deferred revenue | 19 | 3,504 | 2,185 | ||||
Total non-current liabilities | 1,458,069 | 299,187 | |||||
Total liabilities | $ | 1,853,574 | $ | 552,439 | |||
Commitments and contingencies | 16 | 0 | 0 | ||||
Partners' capital: | |||||||
Common Unitholders (and units issued and outstanding at December 31, 2021 and December 31, 2020, respectively) | 13 | 1,743,717 | 652,013 | ||||
General Partner (and 237,822 units issued and outstanding at December 31, 2021 and December 31, 2020, respectively) | 13 | 26,008 | 2,817 | ||||
Total partners' capital | 1,769,725 | 654,830 | |||||
Total liabilities and partners' capital | $ | 3,623,299 | $ | 1,207,269 |
See notes to the consolidated financial statements
Table of Contents | F- 6 |
NAVIOS MARITIME PARTNERS L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (Expressed in thousands of U.S. Dollars except unit and per unit data) |
Notes | Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||
Time charter and voyage revenues | 2,14,17,19 | $ | 713,175 | $ | 226,771 | $ | 219,379 | |||
Time charter and voyage expenses | 2, 23 | (36,142) | (11,028) | (12,331) | ||||||
Direct vessel expenses | 2, 18 | (29,259) | (10,337) | (6,985) | ||||||
Vessel operating expenses (entirely through related parties transactions) | 2, 18 | (191,449) | (93,732) | (68,188) | ||||||
General and administrative expenses | 2, 18 | (41,461) | (24,012) | (20,984) | ||||||
Depreciation and amortization of intangible assets | 7,8 | (112,817) | (56,050) | (53,255) | ||||||
Amortization of unfavorable lease terms | 8 | 108,538 | 0 | 0 | ||||||
Gain on sale of vessels, net | 7 | 33,625 | 0 | 0 | ||||||
Vessels impairment loss | 7 | 0 | (71,577) | (36,680) | ||||||
Interest expense and finance cost, net | 11 | (42,762) | (24,159) | (45,254) | ||||||
Interest income | 18,19,20 | 859 | 639 | 6,172 | ||||||
Impairment of receivable in affiliated company | 18 | 0 | (6,900) | 0 | ||||||
Other income | 22 | 289 | 5,055 | 1,053 | ||||||
Other expense | 18, 22 | (9,738) | (4,344) | (4,990) | ||||||
Equity in net earnings/ (loss) of affiliated companies | 3, 20 | 80,839 | 1,133 | (40,071) | ||||||
Transaction costs | 3 | (10,439) | 0 | 0 | ||||||
Bargain gain | 3 | 48,015 | 0 | 0 | ||||||
Net income/ (loss) | $ | 511,273 | $ | (68,541) | $ | (62,134) | ||||
Net loss attributable to the noncontrolling interest | 4,913 | 0 | 0 | |||||||
Net income/ (loss) attributable to Navios Partners’ unitholders | $ | 516,186 | $ | (68,541) | $ | (62,134) | ||||
Net income/ (loss) attributable to Navios Partners’ unitholders | Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||
Common Unitholders | $ | 505,862 | $ | (67,173) | $ | (60,899) | ||||
General Partner | 10,324 | (1,368) | (1,235) | |||||||
Net income/ (loss) attributable to Navios Partners’ unitholders | $ | 516,186 | $ | (68,541) | $ | (62,134) | ||||
Earnings/ (losses) attributable to Navios Partners’ unitholders per unit (see Note 21): | Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||
Earnings/ (losses) attributable to Navios Partners’ unitholders per unit: | ||||||||||
Earnings/ (losses) attributable to Navios Partners’ unitholders per common unit, basic | $ | 22.36 | $ | (6.13) | $ | (5.62) | ||||
Earnings/ (losses) attributable to Navios Partners’ unitholders per common unit, diluted | $ | 22.32 | $ | (6.13) | $ | (5.62) | ||||
|
See notes to the consolidated financial statements
Table of Contents | F- 7 |
NAVIOS MARITIME PARTNERS L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of U.S. Dollars) |
Notes | Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||
OPERATING ACTIVITIES: | ||||||||||
Net income/ (loss) | $ | 511,273 | $ | (68,541) | $ | (62,134) | ||||
Adjustments to reconcile net income/ (loss) to net cash provided by operating activities: | ||||||||||
Depreciation and amortization of intangible assets | 7,8 | 112,817 | 56,050 | 53,255 | ||||||
Amortization of unfavorable lease terms | 8 | (108,538) | 0 | 0 | ||||||
Vessels impairment loss | 7 | 0 | 71,577 | 36,680 | ||||||
Navios Containers Impairment loss | 20 | 0 | 0 | 42,603 | ||||||
Impairment of receivable in affiliated company | 18 | 0 | 6,900 | 0 | ||||||
Non cash accrued interest income and amortization of deferred revenue | 19 | 460 | (1,588) | (12,638) | ||||||
Allowance for credit losses | 5 | 0 | 1,495 | 0 | ||||||
Non cash accrued interest income from receivable from affiliates | 18 | 0 | 0 | (279) | ||||||
Amortization of operating lease assets | 23 | (401) | 956 | 378 | ||||||
Amortization and write-off of deferred finance costs and discount | 3,741 | 2,141 | 10,916 | |||||||
Amortization of deferred dry dock and special survey costs | 2 | 16,143 | 10,337 | 6,916 | ||||||
Gain on sale of vessels, net | 7 | (33,625) | 0 | 0 | ||||||
Bargain gain | 3 | (48,015) | 0 | 0 | ||||||
Equity in net earnings of affiliated companies | 3, 20 | (80,839) | (1,133) | (2,532) | ||||||
Stock-based compensation | 13 | 523 | 946 | 2,018 | ||||||
Changes in operating assets and liabilities: | ||||||||||
Decrease/ (increase) in accounts receivable | 344 | (6,495) | 4,649 | |||||||
Decrease/ (increase) in prepaid expenses and other current assets | 9,770 | 3,722 | (6,262) | |||||||
Increase/ (Decrease) in accounts payable | 9 | 1,260 | (2,320) | 2,505 | ||||||
Decrease in accrued expenses | 10 | (7,736) | (1,668) | (75) | ||||||
(Decrease)/ Increase in amounts due to related parties | 18 | (14,541) | 27,505 | 0 | ||||||
Increase/ (Decrease) in deferred revenue | 17,743 | (1,310) | 213 | |||||||
(Increase)/ Decrease in amounts due from related parties | 18 | (53,420) | 20,581 | 17,528 | ||||||
Payments for dry dock and special survey costs | (49,786) | (24,021) | (22,928) | |||||||
Operating lease liabilities short and long-term | 23 | 0 | (1,048) | (418) | ||||||
Net cash provided by operating activities | 277,173 | 94,086 | 70,395 | |||||||
INVESTING ACTIVITIES: | ||||||||||
Net cash proceeds from sale of vessels | 7 | 121,080 | 8,183 | 5,978 | ||||||
Acquisition of/ additions to vessels, net of cash acquired | 7 | (217,032) | (72,417) | (21,166) | ||||||
Deposits for acquisition/ option to acquire vessel | 16 | (61,848) | (10,685) | (2,533) | ||||||
Cash acquired from business acquisitions | 3 | 42,676 | 0 | 0 | ||||||
Repayments of notes receivable | 19 | 8,872 | 4,687 | 4,687 | ||||||
Loans receivable from affiliates | 18 | 0 | 0 | (4,000) | ||||||
Payable to affiliated company | 18 | 0 | (13,622) | 0 | ||||||
Net cash used in investing activities | (106,252) | (83,854) | (17,034) | |||||||
FINANCING ACTIVITIES: | ||||||||||
Cash distributions paid | 21 | (4,615) | (7,872) | (13,550) | ||||||
Net proceeds from issuance of general partner units | 13 | 9,960 | 47 | 8 | ||||||
Net proceeds from issuance of common units | 13 | 198,495 | 2,231 | 0 | ||||||
Proceeds from long-term debt and financial liabilities | 11 | 735,276 | 79,475 | 386,530 | ||||||
Repayment of long-term debt and financial liabilities | 11 | (959,154) | (82,672) | (448,215) | ||||||
Payments of deferred finance costs | (12,165) | (1,115) | (4,688) | |||||||
Acquisition of treasury stock | 13 | 0 | 0 | (4,499) | ||||||
Net cash used in financing activities | $ | (32,203) | $ | (9,906) | $ | (84,414) | ||||
Increase/ (decrease) in cash, cash equivalents and restricted cash | 138,718 | 326 | (31,053) | |||||||
Cash, cash equivalents and restricted cash, beginning of period | 30,728 | 30,402 | 61,455 | |||||||
Cash, cash equivalents and restricted cash, end of period | $ | 169,446 | $ | 30,728 | $ | 30,402 |
See notes to the consolidated financial statements
Table of Contents | F- 8 |
NAVIOS MARITIME PARTNERS L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of U.S. Dollars) |
Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | ||||||
Supplemental disclosures of cash flow information | ||||||||
Cash interest paid | $ | 50,382 | $ | 23,717 | $ | 32,869 | ||
Non cash financing activities | ||||||||
Stock-based compensation | $ | 523 | $ | 946 | $ | 2,018 | ||
Debt assumed for the acquisition of four drybulk vessels | $ | 0 | $ | 0 | $ | (37,000) | ||
Non cash investing activities | ||||||||
Accrued interest on loan receivable from affiliates | $ | 0 | $ | 0 | $ | 281 | ||
Loans receivable from affiliates | $ | 0 | $ | (9,992) | $ | (15,205) | ||
Acquisition of vessels | $ | (5,766) | $ | 37,999 | $ | 96,461 |
See notes to the consolidated financial statements
Table of Contents | F- 9 |
NAVIOS MARITIME PARTNERS L.P. CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (Expressed in thousands of U.S. Dollars except unit data) |
Limited Partners | ||||||||||||||||
General Partner | Common Unitholders | |||||||||||||||
Units | Amount | Units | Amount | Note Receivable | Non controlling interest | Total Navios Partners' Capital | ||||||||||
Balance, December 31, 2018 | 230,006 | $ | 5,802 | 11,270,284 | $ | 800,374 | (29,423) | 0 | $ | 776,753 | ||||||
Cash distribution paid ($1.22 per unit — see Note 21) | — | (276) | — | (13,274) | 0 | 0 | (13,550) | |||||||||
Acquisition of treasury stock (see Note 13) | — | 0 | (312,952) | (4,499) |
0 | 0 | (4,499) | |||||||||
Issuance of restricted common units (see Note 13) | 518 | 8 | 29,396 | 191 | 0 | 0 | 199 | |||||||||
Stock based compensation (see Note 13) | — | 0 | — | 1,827 | 0 | 0 | 1,827 | |||||||||
Issuance of capital surplus | — | — | 1,058 | — | — | — | — | |||||||||
Cancellation of units | — | — | (107) | — | — | — | — | |||||||||
Settlement of Note Receivable following Navios Europe I liquidation (see Note 18) | — | 0 | — | 0 | 29,423 | 0 | 29,423 | |||||||||
Net loss | — | (1,235) | — | (60,899) | 0 | 0 | (62,134) | |||||||||
Balance, December 31, 2019 | 230,524 | $ | 4,299 | 10,987,679 | $ | 723,720 | 0 | 0 | $ | 728,019 | ||||||
Cash distribution paid ($0.45 per unit — see Note 21) | — | (161) | — | (7,711) | 0 | 0 | (7,872) | |||||||||
Proceeds from public offering and issuance of units, net of offering costs (see Note 13) | 7,298 | 47 | 357,508 | 2,231 | 0 | 0 | 2,278 | |||||||||
Stock based compensation (see Note 13) | — | 0 | — | 946 | 0 | 0 | 946 | |||||||||
Net loss | — | (1,368) | — | (67,173) | — | — | (68,541) | |||||||||
Balance, December 31, 2020 | 237,822 | $ | 2,817 | 11,345,187 | $ | 652,013 | 0 | 0 | $ | 654,830 | ||||||
Cash distribution paid ($0.20 per unit — see Note 21) | — | (93) | — | (4,522) | 0 | 0 | (4,615) | |||||||||
Proceeds from public offering and issuance of units, net of offering costs (see Note 13) | 149,597 | 4,156 | 7,330,222 | 198,495 | 0 | 0 | 202,651 | |||||||||
Units issued for the acquisition of Navios Containers, net of expenses (see Note 3) | 165,989 | 3,911 | 8,133,452 | 191,624 | 0 | 0 | 195,535 | |||||||||
Stock based compensation (see Note 13) | — | 0 | — | 523 | 0 | 0 | 523 | |||||||||
Deemed contribution (see Note 3) | — | 3,000 | — | 147,000 | 0 | 0 | 150,000 | |||||||||
Fair value of noncontrolling interest (see Note 3) | — | — | — | — | — | 57,635 | 57,635 | |||||||||
Net income | — | 10,324 | — | 505,862 | 0 | (4,913) | 511,273 | |||||||||
Units issued for the acquisition of Navios Acquisition (see Note 3) | 69,147 | 1,893 | 3,388,226 | 52,722 | 0 | (52,722) | 1,893 | |||||||||
Balance, December 31, 2021 | 622,555 | $ | 26,008 | 30,197,087 | $ | 1,743,717 | 0 | 0 | $ | 1,769,725 |
See notes to the consolidated financial statements
Table of Contents | F- 10 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. Dollars except unit data)
Notes | December 31, 2016 | December 31, 2015 | ||||||||||
ASSETS | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 3 | $ | 17,360 | $ | 26,750 | |||||||
Restricted cash | 3 | 7,728 | 7,789 | |||||||||
Accounts receivable, net | 4 | 10,022 | 3,999 | |||||||||
Amounts due from related parties | 18 | 19,639 | — | |||||||||
Prepaid expenses and other current assets | 5 | 1,600 | 1,297 | |||||||||
|
|
|
| |||||||||
Total current assets | 56,349 | 39,835 | ||||||||||
|
|
|
| |||||||||
Vessels, net | 6 | 1,037,206 | 1,230,049 | |||||||||
Vessel held for sale | 7 | 125,000 | — | |||||||||
Deferred drydock and special survey costs, net and other long-term assets | 21,282 | 22,232 | ||||||||||
Investment in affiliates | 20 | 1,257 | 1,315 | |||||||||
Loans receivable from affiliates | 18 | 2,422 | 1,521 | |||||||||
Intangible assets | 8 | 18,952 | 55,339 | |||||||||
Notes receivable | 19 | 6,112 | — | |||||||||
|
|
|
| |||||||||
Totalnon-current assets | 1,212,231 | 1,310,456 | ||||||||||
|
|
|
| |||||||||
Total assets | $ | 1,268,580 | $ | 1,350,291 | ||||||||
|
|
|
| |||||||||
LIABILITIES AND PARTNERS’ CAPITAL | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | 9 | $ | 3,276 | $ | 2,706 | |||||||
Accrued expenses | 10 | 4,445 | 2,516 | |||||||||
Deferred revenue | 17,198 | 4,290 | ||||||||||
Current portion of long-term debt, net | 11 | 74,031 | 23,336 | |||||||||
Amounts due to related parties | 18 | — | 8,680 | |||||||||
|
|
|
| |||||||||
Total current liabilities | 98,950 | 41,528 | ||||||||||
|
|
|
| |||||||||
Long-term debt, net | 11 | 449,745 | 574,742 | |||||||||
Amounts due to related parties | 18 | 11,105 | — | |||||||||
Deferred revenue | 19 | 28,571 | 1,806 | |||||||||
|
|
|
| |||||||||
Totalnon-current liabilities | 489,421 | 576,548 | ||||||||||
|
|
|
| |||||||||
Total liabilities | 588,371 | 618,076 | ||||||||||
|
|
|
| |||||||||
Commitments and contingencies | 16 | — | — | |||||||||
Partners’ capital: | ||||||||||||
Common Unitholders (83,323,911 and 83,079,710 units issued and outstanding at December 31, 2016 and December 31, 2015, respectively) | 13 | 677,081 | 728,046 | |||||||||
General Partner (1,700,493 and 1,695,509 units issued and outstanding at December 31, 2016 and December 31, 2015, respectively) | 13 | 3,128 | 4,169 | |||||||||
|
|
|
| |||||||||
Total partners’ capital | 680,209 | 732,215 | ||||||||||
|
|
|
| |||||||||
Total liabilities and partners’ capital | $ | 1,268,580 | $ | 1,350,291 | ||||||||
|
|
|
|
See notes to consolidated financial statements
NAVIOS MARITIME PARTNERS L.P.FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Notes | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||
Time charter and voyage revenues (includes related party revenue of $1,939, $38,809 and $27,444 for the years ended December 31, 2016, 2015 and 2014, respectively) | 14,18 | $ | 190,524 | $ | 223,676 | $ | 227,356 | |||||||||
Time charter and voyage expenses | (5,673 | ) | (7,199 | ) | (15,390 | ) | ||||||||||
Direct vessel expenses | (6,381 | ) | (4,043 | ) | (761 | ) | ||||||||||
Management fees (entirely through related parties transactions) | 18 | (59,209 | ) | (56,504 | ) | (50,359 | ) | |||||||||
General and administrative expenses | 18 | (12,351 | ) | (7,931 | ) | (7,839 | ) | |||||||||
Depreciation and amortization | 6,8 | (92,370 | ) | (75,933 | ) | (95,822 | ) | |||||||||
Vessel impairment losses | 6,7 | (27,201 | ) | — | — | |||||||||||
Loss on sale of securities | 19 | (19,435 | ) | — | — | |||||||||||
Interest expense and finance cost, net | (31,247 | ) | (31,720 | ) | (28,761 | ) | ||||||||||
Interest income | 541 | 222 | 243 | |||||||||||||
Other income | 22 | 14,523 | 5,232 | 47,935 | ||||||||||||
Other expense | (4,270 | ) | (3,995 | ) | (1,749 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Net (loss)/ income | $ | (52,549 | ) | $ | 41,805 | $ | 74,853 | |||||||||
|
|
|
|
|
|
Earnings per unit (see note 21):
Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | ||||||||||
Earnings per unit: | ||||||||||||
Common unit (basic and diluted) | $ | (0.62 | ) | $ | 0.48 | $ | 0.93 |
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. Dollars)
Notes | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | |||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||
Net (loss)/ income | $ | (52,549 | ) | $ | 41,805 | $ | 74,853 | |||||||||
Adjustments to reconcile net (loss)/ income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 6,8 | 92,370 | 75,933 | 95,822 | ||||||||||||
Vessel impairment losses | 6,7 | 27,201 | — | — | ||||||||||||
Loss on sale of securities | 19 | 19,435 | — | — | ||||||||||||
Gain on debt repayment | (2,140 | ) | — | — | ||||||||||||
Non cash accrued interest income and amortization of deferred revenue | (5,717 | ) | — | — | ||||||||||||
Amortization andwrite-off of deferred financing cost and discount | 4,003 | 3,727 | 3,091 | |||||||||||||
Amortization of deferred drydock and special survey costs | 6,381 | 4,043 | 761 | |||||||||||||
Equity in earnings of affiliates | 59 | (94 | ) | — | ||||||||||||
Equity compensation expense | 93 | — | — | |||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Net (increase)/ decrease in restricted cash | (5,286 | ) | (426 | ) | 223 | |||||||||||
(Increase)/ decrease in accounts receivable | (6,023 | ) | 9,279 | 3,020 | ||||||||||||
(Increase)/ decrease in prepaid expenses and other current assets | (303 | ) | 173 | 193 | ||||||||||||
Decrease/(increase) in other long-term assets | 61 | 20 | (9 | ) | ||||||||||||
Increase/ (decrease) in accounts payable | 570 | (1,118 | ) | 653 | ||||||||||||
Increase/ (decrease) in accrued expenses | 1,929 | (1,107 | ) | (253 | ) | |||||||||||
(Decrease)/increase in deferred revenue | (1,000 | ) | 1,786 | 1,313 | ||||||||||||
Increase in amounts due to related parties | 3,025 | 6,800 | 1,423 | |||||||||||||
Increase in amounts due from related parties | (20,089 | ) | — | — | ||||||||||||
Payments for dry dock and special survey costs | (5,493 | ) | (17,545 | ) | (9,429 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Net cash provided by operating activities | 56,527 | 123,276 | 171,661 | |||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||
Acquisition of vessels | 6 | (15,341 | ) | (147,830 | ) | (156,221 | ) | |||||||||
Deposits for acquisition of vessels, net of transfers to vessel acquisitions | 6 | — | — | (10 | ) | |||||||||||
Investment in affiliates | — | (700 | ) | — | ||||||||||||
Loans receivable from affiliates | (450 | ) | (771 | ) | (470 | ) | ||||||||||
Release of restricted cash for vessel acquisitions | — | — | 33,429 | |||||||||||||
Proceeds from sale of securities | 19 | 20,842 | — | — | ||||||||||||
|
|
|
|
|
| |||||||||||
Net cash provided by / (used in) investing activities | 5,051 | (149,301 | ) | (123,272 | ) | |||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Cash distributions paid | 21 | — | (132,306 | ) | (138,994 | ) | ||||||||||
Net proceeds from issuance of general partner units | 13 | 10 | 1,528 | 2,233 | ||||||||||||
Proceeds from issuance of common units, net of offering costs | 13 | 440 | 72,090 | 104,499 | ||||||||||||
Proceeds from long-term debt | 11 | 29,000 | 79,819 | 56,000 | ||||||||||||
Net decrease/ (increase) in restricted cash | 5,347 | (6,409 | ) | — | ||||||||||||
Repayment of long-term debt and payment of principal | 11 | (104,624 | ) | (60,696 | ) | (7,060 | ) | |||||||||
Deferred financing cost | (1,141 | ) | (746 | ) | (918 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Net cash (used in)/provided by financing activities | (70,968 | ) | (46,720 | ) | 15,760 | |||||||||||
| �� |
|
|
|
| |||||||||||
Increase/ (decrease) in cash and cash equivalents | (9,390 | ) | (72,745 | ) | 64,149 | |||||||||||
Cash and cash equivalents, beginning of period | 26,750 | 99,495 | 35,346 | |||||||||||||
|
|
|
|
|
| |||||||||||
Cash and cash equivalents, end of period | $ | 17,360 | $ | 26,750 | $ | 99,495 | ||||||||||
|
|
|
|
|
| |||||||||||
Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | ||||||||||||||
Supplemental disclosures of cash flow information | ||||||||||||||||
Cash interest paid | $ | 26,694 | $ | 26,787 | $ | 25,870 | ||||||||||
Non cash financing activities | ||||||||||||||||
Due to related parties | $ | — | $ | — | $ | 253 | ||||||||||
Acquisition of vessels | $ | — | $ | — | $ | (253 | ) | |||||||||
Equity compensation expense | $ | 93 | $ | — | $ | — | ||||||||||
Non cash investing activities | ||||||||||||||||
Notes receivable | $ | 6,112 | $ | — | $ | — | ||||||||||
Accrued interest on loan receivable from affiliates | $ | 238 | $ | — | $ | — |
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
(Expressed in thousands of U.S. Dollars except unit data)
Limited Partners | ||||||||||||||||||||
General Partner | Common Unitholders | Total Partners’ Capital | ||||||||||||||||||
Units | Units | |||||||||||||||||||
Balance December 31, 2013 | 1,449,681 | $ | 4,029 | 71,034,163 | $ | 702,478 | $ | 706,507 | ||||||||||||
Cash distribution paid | — | (4,867 | ) | — | (134,127 | ) | (138,994 | ) | ||||||||||||
Proceeds from issuance of common units, net of offering costs (see note 13) | — | — | 6,325,000 | 104,499 | 104,499 | |||||||||||||||
Net proceeds from issuance of general partner units (see note 13) | 129,082 | 2,233 | — | — | 2,233 | |||||||||||||||
Net income | — | 3,628 | — | 71,225 | 74,853 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance December 31, 2014 | 1,578,763 | $ | 5,023 | 77,359,163 | $ | 744,075 | $ | 749,098 | ||||||||||||
Cash distribution paid | — | (4,362 | ) | — | (127,944 | ) | (132,306 | ) | ||||||||||||
Proceeds from issuance of common units, net of offering costs (see note 13) | — | — | 5,720,547 | 72,090 | 72,090 | |||||||||||||||
Net proceeds from issuance of general partner units (see note 13) | 116,746 | 1,528 | — | — | 1,528 | |||||||||||||||
Net income | — | 1,980 | — | 39,825 | 41,805 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance December 31, 2015 | 1,695,509 | $ | 4,169 | 83,079,710 | $ | 728,046 | $ | 732,215 | ||||||||||||
Equity compensation expense | — | — | — | 93 | 93 | |||||||||||||||
Proceeds from public offering and issuance of common units, net of offering costs (see note 13) | — | — | 244,201 | 440 | 440 | |||||||||||||||
Net proceeds from issuance of general partner units (see note 13) | 4,984 | 10 | 10 | |||||||||||||||||
Net loss | — | (1,051 | ) | — | (51,498 | ) | (52,549 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance December 31, 2016 | 1,700,493 | $ | 3,128 | 83,323,911 | $ | 677,081 | $ | 680,209 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
NOTE 1 – DESCRIPTION OF BUSINESS
Description of business
Navios Maritime Partners L.P. (“Navios Partners” or the “Company”), is an international owner and operator of dry cargo and containertanker vessels, formed on August 7, 2007under the laws of the Republic of the Marshall Islands. Navios GP L.L.C. (theCurrently, the Company’s general partner is Olympos Maritime Ltd.(the “General Partner”), and holds a wholly owned subsidiary of Navios Maritime Holdings Inc. (“Navios Holdings”), was also formed on that date to act as the general partner of Navios Partners and received a 2.0% general partner2.0% ownership interest in Navios Partners.Partners (see Note 18 — Transactions with related parties and affiliates).
Navios Partners is engaged in the seaborne transportation services of a wide range of liquid and dry cargo commodities including crude oil, refined petroleum, chemicals, iron ore, coal, grain, fertilizer and also containers, chartering its vessels under short, medium to long-termand longer-term charters. The operations of Navios Partners are managed by Navios ShipManagementShipmanagement Inc., a subsidiary of Navios Holdings (the “Manager”), from its offices in Piraeus, Greece, Singapore and Monaco.
Pursuant to the initial public offeringNavios Tankers Management Inc. (“IPO”) on November 16, 2007, Navios Partners entered into the following agreements:
(a) a management agreementTankers Manager” and together with the Manager, (the “Management Agreement”the “Managers”), pursuant to which the Manager provides Navios Partners commercial and technical management services;
(b) an administrative services agreementare entities affiliated with the Manager (the “Administrative Services Agreement”), pursuant to which the Manager provides Navios Partners administrative services;Company’s Chairwoman and Chief Executive Officer (see Note 18 — Transactions with related parties and affiliates).
(c) an omnibus agreement with Navios Holdings (the “Omnibus Agreement”), governing, among other things, when Navios Partners and Navios Holdings may compete against each other as well as rights of first offer on certain drybulk carriers.
As of December 31, 2016,2021, there were outstanding: 83,323,911outstanding common units and 1,700,493 general partnership units. As of December 31, 2016,2021, Navios Holdings ownedheld a 20.0%% ownership interest in Navios Partners which includedand the General Partner owned a 2.0% general partner interest.2.0% ownership interest in Navios Partners.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Summary of Significant Accounting Policies
(a) Basis of presentation: The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted |
Navios Partners also consolidates entities that are determined to be variable interest entities as defined in the accounting guidance, if it determines that it is the primary beneficiary. A variable interest entity is defined as a legal entity where either (a) equity interest holders as a group lack the characteristicsUnited States of a controlling financial interest, including decision making ability and an interest in the entity’s residual risks and rewards, (b) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or (c) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Based on internal forecasts and projections that take into account reasonably possible changes in our trading performance, management believes that the Company has adequate financial resources to continue in operation and meet its financial commitments, including but not limited to capital expenditures, cash from sale of vessels and debt service obligations, for a period of at least twelve months from the date of issuance of these consolidated financial statements. Accordingly, the Company continues to adopt the going concern basis in preparing its financial statements.
Reverse Stock Split:
On April 25, 2019, the Company's unitholders approved a 1-for-15reverse stock split of the Company's outstanding common and general partner units, which was effected on May 21, 2019. The effect of the reverse stock split was to combine 15 units of outstanding common units into one new unit, with no change in authorized units or par value per unit, and to reduce the number of common units outstanding from approximately million units to approximately .0 million units. common units were issued in connection with the reverse stock split. All issued and outstanding common units contained in the financial statements, in accordance with Staff Accounting Bulletin Topic 4C, have been retroactively adjusted to reflect the reverse split for all periods presented.
(b) Principles of consolidation: The accompanying consolidated financial statements include Navios Partners' wholly owned subsidiaries incorporated under the laws of Marshall Islands, Malta, Cayman Islands and Liberia from their dates of incorporation or from the date of acquiring control, for chartered-in vessels, from the dates charter-in agreements were in effect. All significant inter-company balances and transactions have been eliminated in Navios Partners' consolidated financial statements.
Navios Partners also consolidates entities that are determined to be variable interest entities (“VIE”) as defined in the accounting guidance, if it determines that it is the primary beneficiary. A VIE is defined as a legal entity where either (i) equity interest holders as a group lack the characteristics of a controlling financial interest, including decision making ability and an interest in the entity's residual risks and rewards, (ii) the equity holders have not provided sufficient equity investment to permit the entity to finance its activities without additional subordinated financial support, or (iii) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity, their rights to receive the expected residual returns of the entity, or both and substantially all of the entity's activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.
Subsidiaries:Subsidiaries are those entities in which Navios Partners has an interest of more than one half of the voting rights or otherwise has power to govern the financial and operating policies of each subsidiary.the entity
Table of Contents | F- 11 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
The accompanying consolidated financial statements include the following entities, owned andchartered-in vessels:entities:
Summary of Significant Accounting Policies - Entities included in consolidation
Country of incorporation | Statements of operations | |||||||||
Company name | Vessel name | 2016 | 2015 | 2014 | ||||||
Libra Shipping Enterprises Corporation | Navios Libra II | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Alegria Shipping Corporation | Navios Alegria | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Felicity Shipping Corporation | Navios Felicity | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Gemini Shipping Corporation | Navios Gemini S | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Galaxy Shipping Corporation | Navios Galaxy I | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Aurora Shipping Enterprises Ltd. | Navios Hope | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Palermo Shipping S.A. | Navios Apollon | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Fantastiks Shipping Corporation | Navios Fantastiks | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Sagittarius Shipping Corporation | Navios Sagittarius | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Hyperion Enterprises Inc. | Navios Hyperion | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Chilali Corp. | Navios Aurora II | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Surf Maritime Co. | Navios Pollux | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Pandora Marine Inc. | Navios Melodia | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Customized Development S.A. | Navios Fulvia | Liberia | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Kohylia Shipmanagement S.A. | Navios Luz | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Orbiter Shipping Corp. | Navios Orbiter | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Floral Marine Ltd. | Navios Buena Ventura | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Golem Navigation Limited | Navios Soleil | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Kymata Shipping Co. | Navios Helios | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Joy Shipping Corporation | Navios Joy | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Micaela Shipping Corporation | Navios Harmony | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Pearl Shipping Corporation | Navios Sun | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/18 – 12/31 | |||||
Velvet Shipping Corporation | Navios La Paix | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/07 – 12/31 | |||||
Perigiali Navigation Limited (***) | Navios Beaufiks | Marshall Is. | 12/30 – 12/31 | — | — | |||||
Rubina Shipping Corporation | Hyundai Hongkong | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Topaz Shipping Corporation | Hyundai Singapore | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Beryl Shipping Corporation | Hyundai Tokyo | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Cheryl Shipping Corporation | Hyundai Shanghai | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Christal Shipping Corporation | Hyundai Busan | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Fairy Shipping Corporation | YM Utmost | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 8/29 – 12/31 | |||||
Limestone Shipping Corporation | YM Unity | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 10/28 – 12/31 | |||||
Dune Shipping Corp. (**) | MSC Cristina | Marshall Is. | 1/01 – 12/31 | 4/22 – 12/31 | — | |||||
Citrine Shipping Corporation | — | Marshall Is. | — | — | — | |||||
Chartered-in vessels | ||||||||||
Prosperity Shipping Corporation | Navios Prosperity | Marshall Is. | — | 1/01 – 03/05 | 1/01 – 12/31 | |||||
Aldebaran Shipping Corporation | Navios Aldebaran | Marshall Is. | — | 1/01 – 02/28 | 1/01 – 12/31 | |||||
Other | ||||||||||
JTC Shipping and Trading Ltd (*) | Holding Company | Malta | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Maritime Partners L.P. | N/A | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Maritime Operating LLC | N/A | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Partners Finance (US) Inc. | Co-Borrower | Delaware | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Partners Europe Finance Inc. | Sub-Holding Company | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 |
Statements of Operations | ||||||||||
Company name | Vessel name | Country of incorporation | 2021 | 2020 | 2019 | |||||
Libra Shipping Enterprises Corporation | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Alegria Shipping Corporation | Navios Alegria | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Felicity Shipping Corporation | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Gemini Shipping Corporation | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Galaxy Shipping Corporation(4) | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Aurora Shipping Enterprises Ltd. | Navios Hope | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Palermo Shipping S.A. | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Fantastiks Shipping Corporation(12) | Navios Fantastiks | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Sagittarius Shipping Corporation(12) | Navios Sagittarius | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Hyperion Enterprises Inc. | Navios Hyperion | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Chilali Corp. | Navios Aurora II | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Surf Maritime Co. | Navios Pollux | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Pandora Marine Inc. | Navios Melodia | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Customized Development S.A. | Navios Fulvia | Liberia | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Kohylia Shipmanagement S.A. | Navios Luz | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Orbiter Shipping Corp. | Navios Orbiter | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Floral Marine Ltd. | Navios Buena Ventura | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Golem Navigation Limited(13) | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Kymata Shipping Co. | Navios Helios | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Joy Shipping Corporation | Navios Joy | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Micaela Shipping Corporation | Navios Harmony | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Pearl Shipping Corporation | Navios Sun | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Velvet Shipping Corporation | Navios La Paix | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Perigiali Navigation Limited(12) | Navios Beaufiks | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Finian Navigation Co.(12) | Navios Ace | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Ammos Shipping Corp. | Navios Prosperity I | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Wave Shipping Corp. | Navios Libertas | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Casual Shipholding Co.(12) | Navios Sol | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Avery Shipping Company | Navios Symphony | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Coasters Ventures Ltd. | Navios Christine B | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Ianthe Maritime S.A. | Navios Aster | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Rubina Shipping Corporation | Hyundai Hongkong | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Topaz Shipping Corporation | Hyundai Singapore | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Beryl Shipping Corporation | Hyundai Tokyo | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Cheryl Shipping Corporation | Hyundai Shanghai | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Christal Shipping Corporation | Hyundai Busan | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Fairy Shipping Corporation(5) | Navios Utmost | Marshall Is. | 03/31-12/31 | — | — | |||||
Limestone Shipping Corporation(5) | Navios Unite | Marshall Is. | 03/31-12/31 | — | — | |||||
Dune Shipping Corp. | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Citrine Shipping Corporation | — | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
— | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | ||||||
Seymour Trading Limited (2) | Navios Altair I | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Goldie Services Company | Navios Symmetry | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Andromeda Shiptrade Limited | Navios Apollon I | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Esmeralda Shipping Corporation | Navios Sphera | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Triangle Shipping Corporation | Navios Mars | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Oceanus Shipping Corporation(7),(19) | Castor N | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/13 – 12/31 | |||||
Cronus Shipping Corporation(7) | Protostar N | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/13 – 12/31 | |||||
Leto Shipping Corporation(7),(17) | Esperanza N | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/13 – 12/31 | |||||
Dionysus Shipping Corporation(7),(30) | Harmony N | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/13 – 12/31 | |||||
Prometheus Shipping Corporation(7),(18) | Solar N | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/13 – 12/31 | |||||
Camelia Shipping Inc.(8) | Navios Camelia | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/16 – 12/31 | |||||
Anthos Shipping Inc.(8) | Navios Anthos | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/16 – 12/31 | |||||
Azalea Shipping Inc.(8),(1) | Navios Azalea | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/16 – 12/31 | |||||
Amaryllis Shipping Inc.(8) | Navios Amaryllis | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 12/16 – 12/31 | |||||
Zaffre Shipping Corporation(14) | Serenitas N | Marshall Is. | 1/01 – 12/31 | 6/29 – 12/31 | — | |||||
Wenge Shipping Corporation(14),(20) | Joie N | Marshall Is. | 1/01 – 12/31 | 6/29 – 12/31 | — | |||||
Sunstone Shipping Corporation(14) | Copernicus N | Marshall Is. | 1/01 – 12/31 | 6/29 – 12/31 | — | |||||
Fandango Shipping Corporation(14) | Unity N | Marshall Is. | 1/01 – 12/31 | 6/29 – 12/31 | — | |||||
Flavescent Shipping Corporation(14) | Odysseus N | Marshall Is. | 1/01 – 12/31 | 6/29 – 12/31 | — | |||||
Emery Shipping Corporation(15) | Navios Gem | Marshall Is. | 1/01 – 12/31 | 9/30 – 12/31 | — | |||||
Rondine Management Corp. (15) | Navios Victory | Marshall Is. | 1/01 – 12/31 | 9/30 – 12/31 | — | |||||
Prosperity Shipping Corporation | — | Marshall Is. | 1/01 – 12/31 | — | — | |||||
Aldebaran Shipping Corporation | — | Marshall Is. | 1/01 – 12/31 | — | — | |||||
JTC Shipping and | Holding Company | Malta | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Maritime Partners L.P. | N/A | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Maritime Operating LLC. | N/A | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Partners Finance (US) Inc. | Co-Borrower | Delaware | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Navios Partners Europe Finance Inc. | Sub-Holding Company | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Solange Shipping Ltd.(16) | Navios Avior | Marshall Is. | 03/30 – 12/31 | — | — | |||||
Mandora Shipping Ltd.(16) | Navios Centaurus | Marshall Is. | 03/30 – 12/31 | — | — | |||||
Olympia II Navigation Limited | Navios Domino | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Pingel Navigation Limited | Navios Delight | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Ebba Navigation Limited | Navios Destiny | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Clan Navigation Limited | Navios Devotion | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Sui An Navigation Limited(23) | Navios Dedication | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Bertyl Ventures Co. | Navios Azure | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Silvanus Marine Company | Navios Summer | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Anthimar Marine Inc. | Navios Amarillo | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Enplo Shipping Limited | Navios Verde | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Morven Chartering Inc. | Navios Verano | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Rodman Maritime Corp. | Navios Spring | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Isolde Shipping Inc. | Navios Indigo | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Velour Management Corp. | Navios Vermilion | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Evian Shiptrade Ltd. | Navios Amaranth | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Theros Ventures Limited | Navios Lapis | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Legato Shipholding Inc. | Navios Tempo | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Inastros Maritime Corp. | Navios Chrysalis | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Zoner Shiptrade S.A. | Navios Dorado | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Jasmer Shipholding Ltd. | Navios Nerine | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Thetida Marine Co. | Navios Magnolia | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Jaspero Shiptrade S.A. | Navios Jasmine | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Peran Maritime Inc. | Navios Felicitas | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Nefeli Navigation S.A. | Navios Unison | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Crayon Shipping Ltd | Navios Miami | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Chernava Marine Corp. | Bahamas | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Proteus Shiptrade S.A | Bermuda | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Vythos Marine Corp. | Navios Constellation | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Navios Maritime Containers Sub L.P. | Sub-Holding Company | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Navios Partners Containers Finance Inc. | Sub-Holding Company | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Boheme Navigation Company | Sub-Holding Company | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Navios Partners Containers Inc. | Sub-Holding Company | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Iliada Shipping S.A. | Operating Company | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Navios Partners evaluates its investments with equity method, for other than temporary impairment, on a quarterly basis. Consideration is given to (1) the length of time and the extent to which the fair value has been less than the carrying value, (2) the financial condition and near-term prospects and (3) the intent and ability of the Company to retain its investments for a period of time sufficient to allow for any anticipated recovery in fair value.
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Vinetree Marine Company | Operating Company | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Afros Maritime Inc. | Operating Company | Marshall Is. | 03/31 – 12/31 | — | — | |||||
Cavos Navigation Co.(9) | Navios Libra | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 1/01 – 12/31 | |||||
Perivoia Shipmanagement Co.(10) | Navios Amitie | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 9/25 – 12/31 | |||||
Pleione Management Limited(10) | Navios Star | Marshall Is. | 1/01 – 12/31 | 1/01 – 12/31 | 9/25 – 12/31 | |||||
Bato Marine Corp.(21) | TBN I | Marshall Is. | 03/05 – 12/31 | — | — | |||||
Agron Navigation Company (21) | TBN II | Marshall Is. | 03/05 – 12/31 | — | — | |||||
Teuta Maritime S.A.(22) | TBN VII | Marshall Is. | 03/05 – 12/31 | — | — | |||||
Ambracia Navigation Company(21) | TBN IV | Marshall Is. | 03/05 – 12/31 | — | — | |||||
Artala Shipping Co.(22) | TBN V | Marshall Is. | 03/05 – 12/31 | — | — | |||||
Migen Shipmanagement Ltd. | Sub-Holding Company | Marshall Is. | 03/05 – 12/31 | — | — | |||||
Bole Shipping Corporation(24) | Spectrum N | Marshall Is. | 04/28 – 12/31 | — | — | |||||
Brandeis Shipping Corporation(24) | Ete N | Marshall Is. | 05/10 – 12/31 | — | — | |||||
Buff Shipping Corporation(24) | Fleur N | Marshall Is. | 05/10 – 12/31 | — | — | |||||
Morganite Shipping Corporation(25) | TBN VI | Marshall Is. | 06/01 – 12/31 | — | — | |||||
Balder Martitime Ltd.(26) | Navios Koyo | Marshall Is. | 06/04 – 12/31 | — | — | |||||
Melpomene Shipping Corporation(27) | TBN VIII | Marshall Is. | 06/23 – 12/31 | — | — | |||||
Urania Shipping Corporation(27) | TBN IX | Marshall Is. | 06/23 – 12/31 | — | — | |||||
Terpsichore Shipping Corporation(28) | TBN X | Marshall Is. | 06/23 – 12/31 | — | — | |||||
Erato Shipping Corporation(28) | TBN XI | Marshall Is. | 06/23 – 12/31 | — | — | |||||
Lavender Shipping Corporation(12) (29) | Navios Ray | Marshall Is. | 06/30 – 12/31 | — | — | |||||
Nostos Shipmanagement Corp.(12) (29) | Navios Bonavis | Marshall Is. | 06/30 – 12/31 | — | — | |||||
Navios Maritime Acquisition Corporation | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Navios Acquisition Europe Finance Inc. | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Navios Acquisition Finance (US) Inc. | Co-Issuer of Ship Mortgage Notes | Delaware | 08/25 – 12/31 | — | — | |||||
Navios Maritime Midstream Partners GP LLC | Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Letil Navigation Ltd. | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Navios Maritime Midstream Partners Finance (US) Inc. | Sub-Holding Company | Delaware | 08/25 – 12/31 | — | — | |||||
Aegean Sea Maritime Holdings Inc. | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Amorgos Shipping Corporation | Nave Cosmos | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Andros Shipping Corporation | Nave Polaris | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Antikithira Shipping Corporation | Nave Equator | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Antiparos Shipping Corporation | Nave Atria | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Antipaxos Shipping Corporation | Nave Dorado | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Antipsara Shipping Corporation | Nave Velocity | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Crete Shipping Corporation | Nave Cetus | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Delos Shipping Corporation | Nave Photon | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Folegandros Shipping Corporation | Nave Andromeda | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Ikaria Shipping Corporation | Nave Aquila | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Ios Shipping Corporation | Nave Cielo | Cayman Islands | 08/25 – 12/31 | — | — | |||||
Iraklia Shipping Corporation | Bougainville | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Kimolos Shipping Corporation | Former Vessel- Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Kithira Shipping Corporation | Nave Orbit | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Kos Shipping Corporation | Nave Bellatrix | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Lefkada Shipping Corporation | Nave Buena Suerte | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Leros Shipping Corporation | Former Vessel- Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Mytilene Shipping Corporation | Nave Orion | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Oinousses Shipping Corporation | Nave Jupiter | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Psara Shipping Corporation | Nave Luminosity | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Rhodes Shipping Corporation | Nave Cassiopeia | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Samos Shipping Corporation | Nave Synergy | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Samothrace Shipping Corporation | Nave Pulsar | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Serifos Shipping Corporation | Nave Estella | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Sifnos Shipping Corporation | Nave Titan | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Skiathos Shipping Corporation | Nave Capella | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Skopelos Shipping Corporation | Nave Ariadne | Cayman Islands | 08/25 – 12/31 | — | — | |||||
Skyros Shipping Corporation | Nave Sextans | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Syros Shipping Corporation | Nave Alderamin | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Thera Shipping Corporation | Nave Atropos | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Tilos Shipping Corporation | Nave Spherical | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Table of Contents | F- 14 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Tinos Shipping Corporation | Nave Rigel | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Zakynthos Shipping Corporation | Nave Quasar | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Cyrus Investments Corp. | Baghdad | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Olivia Enterprises Corp. | Erbil | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Limnos Shipping Corporation | Nave Pyxis | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Thasos Shipping Corporation | Nave Equinox | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Agistri Shipping Limited | Operating Subsidiary | Malta | 08/25 – 12/31 | — | — | |||||
Paxos Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Donoussa Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Schinousa Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Alonnisos Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Makronisos Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Shinyo Loyalty Limited | Former Vessel-Owning Company | Hong Kong | 08/25 – 12/31 | — | — | |||||
Shinyo Navigator Limited | Former Vessel-Owning Company | Hong Kong | 08/25 – 12/31 | — | — | |||||
Amindra Navigation Co. | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Navios Maritime Midstream Partners L.P. | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Navios Maritime Midstream Operating LLC | Sub-Holding Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Shinyo Dream Limited | Former Vessel-Owning Company | Hong Kong | 08/25 – 12/31 | — | — | |||||
Shinyo Kannika Limited | Former Vessel-Owning Company | Hong Kong | 08/25 – 12/31 | — | — | |||||
Shinyo Kieran Limited | Nave Universe | British Virgin Islands | 08/25 – 12/31 | — | — | |||||
Shinyo Ocean Limited | Former Vessel-Owning Company | Hong Kong | 08/25 – 12/31 | — | — | |||||
Shinyo Saowalak Limited | Nave Constellation | British Virgin Islands | 08/25 – 12/31 | — | — | |||||
Sikinos Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Kerkyra Shipping Corporation | Nave Galactic | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Doxa International Corp. | Nave Electron | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Alkmene Shipping Corporation | Star N | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Aphrodite Shipping Corporation | Aurora N | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Dione Shipping Corporation | Lumen N | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Persephone Shipping Corporation | Hector N | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Rhea Shipping Corporation | Perseus | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Tzia Shipping Corporation(21) | TBN XIV | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Boysenberry Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Cadmium Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Celadon Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Cerulean Shipping Corporation | Former Vessel-Owning Company | Marshall Is. | 08/25 – 12/31 | — | — | |||||
Kleio Shipping Corporation(6) | TBN XII | Marshall Is. | 08/12 – 12/31 | — | — | |||||
Polymnia Shipping Corporation(6) | TBN XIII | Marshall Is. | 08/12 – 12/31 | — | — | |||||
Goddess Shiptrade Inc. (21) | TBN III | Marshall Is. | 08/02 – 12/31 | — | — | |||||
Navios Acquisition Merger Sub.Inc. | Merger SPV | Marshall Is. | 08/23 – 12/31 | — | — | |||||
Aramis Navigation Inc.(3) | Navios Azimuth | Marshall Is. | 07/09 – 12/31 | — | — | |||||
Thalia Shipping Corporation (6) | TBN XVII | Marshall Is. | 11/17-12/31 | — | — | |||||
Muses Shipping Corporation(6) | TBN XVIII | Marshall Is. | 11/17-12/31 | — | — | |||||
Euterpe Shipping Corporation (28) | TBN XVI | Marshall Is. | 11/17-12/31 | — | — | |||||
Calliope Shipping Corporation (28) | TBN XV | Marshall Is. | 11/17-12/31 | — | — |
Table of Contents | F- 15 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
(1) | The vessel was sold on August 13, 2021. |
(2) | The vessel was sold on October 29, 2021. |
(3) | The vessel was acquired on July 9, 2021, from Navios Holdings (see Note 7 - Vessels, net). |
(4) | The vessel was sold on April 23, 2019. |
(5) | The vessel agreed to be sold in February 2022 (see Note 24 – Subsequent events). |
(6) | Expected to be delivered by the second half of 2024. |
(7) | The vessels were acquired on December 13, 2019, following the liquidation of Navios Europe I. |
(8) | The vessels were acquired on December 16, 2019. |
(9) | The vessel was delivered on July 24, 2019 (see Note 23 - Leases). |
(10) | The vessels were delivered on May 28, 2021 and June 10, 2021 (see Note 23 - Leases). |
(11) | Not a vessel-owning subsidiary and only holds right to charter-in contracts. |
(12) | Vessels under the sale and leaseback transaction. |
(13) | The vessel was sold on December 10, 2020 (see Note 7 – Vessels, net). |
(14) | The vessels were acquired on June 29, 2020, following the liquidation of Navios Europe II (see Note 7 - Vessels, net). |
(15) | The vessels were acquired on September 30, 2020, from Navios Holdings (see Note 7 - Vessels, net). |
(16) | The vessels were acquired on March 30, 2021, from Navios Holdings (see Note 7 – Vessels, net). |
(17) | The vessel was sold on January 13, 2021(see Note 7 – Vessels, net). |
(18) | The vessel was sold on January 28, 2021 (see Note 7 – Vessels, net). |
(19) | The vessel was sold on February 10, 2021 (see Note 7 – Vessels, net). |
(20) | The vessel was sold on March 25, 2021 (see Note 7 – Vessels, net). |
(21) | Expected to be delivered by the second half of 2022. |
(22) | Expected to be delivered in the first half of 2023. |
(23) | The vessel was sold on July 31, 2021. |
(24) | The vessels were acquired on May 10, 2021 (see Note 7 – Vessels, net). |
(25) | Expected to be delivered in the first half of 2023. |
(26) | The vessel was acquired on June 4, 2021, from Navios Holdings (see Note 7 - Vessels, net). |
(27) | Expected to be delivered by the second half of 2023. |
(28) | Expected to be delivered by the first half of 2024. |
(29) | The vessel was acquired on June 30, 2021, from Navios Holdings (see Note 7 - Vessels, net). |
(30) | The vessel was sold on August 16, 2021. |
Table of Contents | F- 16 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Investments in Affiliates: Affiliates are entities over which the Company generally has between 20% and 50% of the voting rights, or over which the Company has significant influence, but it does not exercise control. Investments in these entities are accounted for under the equity method of accounting. Under this method, the Company records an investment in the stock of an affiliate at cost, and adjusts the carrying amount for its share of the earnings or losses of the affiliate subsequent to the date of investment and reports the recognized earnings or losses in income. Dividends received from an affiliate reduce the carrying amount of the investment. The Company recognizes gains and losses in earnings for the issuance of shares by its affiliates, provided that the issuance of such shares qualifies as a sale of such shares. When the Company's share of losses in an affiliate equals or exceeds its interest in the affiliate, the Company does not recognize further losses, unless the Company has incurred obligations or made payments on behalf of the affiliate. For the year ended December 31, 2020, the amount of $6,900 was recognized as impairment of receivable in affiliated company, related to the other-than-temporary impairment recognized in the Navios Partners’ receivable from Navios Europe II (see Note 20 — Investment in affiliates).
Affiliates included in the financial statements accounted for under the equity method: In the consolidated financial statements of Navios Partners, the following entities are included as affiliates and are accounted for under the equity method for such periods: (i) Navios Containers and its subsidiaries (with an ownership interest % as of December 31, 2020). Following the completion of the NMCI Merger (as defined herein), as of March 31, 2021, Navios Containers was acquired by Navios Partners and ownership was %; (ii) Navios Europe I and its subsidiaries with an ownership interest of % through the date of its liquidation on December 13, 2019; and (iii) Navios Europe II and its subsidiaries with an ownership interest of % through the date of its liquidation on June 29, 2020 (see Note 18 — Transactions with related parties and affiliates, Note 20 – Investment in affiliates and Note 3 – Acquisition of Navios Containers and Navios Acquisition).
(c)Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, management evaluates the estimates and judgments, including those related to uncompleted voyages, future drydock dates, the selection of useful lives for tangible assets and scrap value expected future cash flows from long-lived assets to support impairment tests, provisions necessary for accounts receivable, valuation of intangible assets and liabilities acquired in business combinations,provisions for legal disputes, and contingencies and the valuation estimates inherent in the deconsolidation gain. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions and/or conditions.
(d)Cash and Cash Equivalents: Cash and cash equivalents consist of cash on hand, deposits held on call with banks, and other short-term liquid investments with original maturities of three months or less.
(e)Restricted Cash: Restricted cash, at each of December 31, 2021 and December 31, 2020, included $9,979 and $6,152, respectively, which related to amounts held in retention accounts in order to service debt and interest payments, as required by certain of Navios Partners' credit facilities and financial liabilities. Also, as of December 31, 2020, restricted cash included $5,273 as cash collateral to the NIBC Credit Facility, due to the release of the Navios Soleil.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
(f)Accounts Receivable, Net: Accounts receivable includes receivables from charterers for hire, freight and demurrage billings. On January 1, 2020, the Company adopted Accounting Standards Update 2016-13, “Financial Instruments - Credit Losses” (“ASC 326”). At each balance sheet date, the Company maintains an allowance for credit losses for expected uncollectible accounts receivable ( see Note 5 - Accounts Receivable, net). Navios Partners has filed claims for lost revenues in connection with the 2016 filing by Hanjin for rehabilitation, which was later followed by entry into liquidation in 2017. In October 2020, the bankruptcy court ruled against one of the two claims filed by the Company. The Company has fully provided for these amounts in its books. The allowance for credit losses was $2,990 as of December 31, 2021 and 2020, respectively.
(g)Inventories: Inventories, which are comprised of: (i) bunkers (when applicable) on board of the vessels, valued at cost as determined on the first-in, first-out basis; and (ii) lubricants and stock provisions on board of the vessels as of the balance sheet date, valued at cost as determined on the first-in, first-out basis.
(h)Vessels, Net: Vessels are stated at historical cost, which consists of the contract price and pre-delivery costs incurred during the construction and delivery of newbuildings, including capitalized interest, and any material expenses incurred upon acquisition (improvements and delivery expenses) of second hand vessels. Vessels acquired in an asset acquisition or in a business combination are recorded at fair value. The fair value of the vessels is determined based on vessel valuations, from independent third party shipbrokers. Subsequent expenditures for major improvements and upgrades are capitalized, provided they appreciably extend the life, increase the earnings capacity or improve the efficiency or safety of the vessels. The cost and related accumulated depreciation of assets retired or sold are removed from the accounts at the time of sale or retirement and any gain or loss is included in the accompanying Consolidated Statements of Operations. Expenditures for routine maintenance and repairs are expensed as incurred.
Depreciation is computed using the straight linemethod over the useful life of the vessels, after considering the estimated residual value. Management estimates the residual values of ourthe Company’s drybulk, vesselscontainerships and tankers based on a scrap value cost of steel times the weight of the ship noted in lightweight ton (LWT)(“LWT”). Residual values are periodically reviewed and revised to recognize changes in conditions, new regulations or other reasons. Revisions of residual values affect the depreciable amount of the vessels and affectsaffect depreciation expense in the period of the revision and future periods. The management after considering current market trends forestimated scrap rates and10-year average historical scrap rates ofrate used to calculate the residual values of the Company’s vessels, estimatesvessel’s scrap value at a rateis $340per LWT as of $340 per LWT.each of December 31, 2021 and 2020.
Management estimates the useful life of drybulk and containerthe Company’s vessels to be 25 years for drybulk and tanker vessels and 30 years from the containerships, respectively from the vessel’s original construction. However, when regulations place limitations over the ability of a vessel to trade on a worldwide basis, its useful life isre-estimated to end at the date such regulations become effective. An increase in the useful life of a vessel or in its residual value would have the effect of decreasing the annual depreciation charge and extending it into later periods. A decrease in the useful life of a vessel or in its residual value would have the effect of increasing the annual depreciation charge.
(i)Assets Held for Sale: It is the Company's policy to dispose of vessels and other fixed assets when suitable opportunities occur and not necessarily to keep them until the end of their useful life. The Company classifies assets and disposal groups as being held for sale when the following criteria are met: management has committed to a plan to sell the vessel (disposal group); the asset (disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of vessels; an active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) have been initiated; the sale of the asset (disposal group) is probable and transfer of the asset (disposal group) is expected to qualify for recognition as a completed sale within one year; the asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Long-lived assets or disposal groups classified as held for sale are measured at the lower of their carrying amount or fair value less cost to sell. These vessels are not depreciated once they meet the criteria to be held for sale. No assets were classified as held for sale as of December 31, 2021 and 2020.
(j)Impairment of Long Lived Assets: Vessels, other fixed assets and other long lived assets held and used by Navios Partners are reviewed periodically for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a particular asset may not be fully recoverable. Navios Partners' management evaluates the carrying amounts and periods over which long-lived assets are depreciated to determine if events or changes in circumstances have occurred that would require modification to their carrying values or useful lives. Measurement of the impairment loss is based on the fair value of the asset. Navios Partners determines the fair value of its assets on the basis of management estimates and assumptions by making use of available market data and taking into consideration third party valuations performed on an individual vessel basis. In evaluating useful lives and carrying values of long-lived assets, certain indicators of potential impairment, are reviewed such as undiscounted projected operating cash flows, vessel sales and purchases, business plans and overall market conditions.
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Undiscounted projected net operating cash flows are determined for each asset group and compared to the carrying value of the vessel, the unamortized portion of deferred drydock and special survey costs, ballast water treatment system costs, exhaust gas cleaning system costs and other capitalized items, if any, related to the vessel and the related carrying value of the intangible assets with respect to the time charter agreement attached to that vessel or the carrying value of deposits for newbuildings. Within the shipping industry, vessels are customarily bought and sold with a charter attached. The value of the charter may be favorable or unfavorable when comparing the charter rate to the current market rates. The loss recognized either on impairment or on disposition will reflect the excess of carrying value over fair value (selling price) for the vessel asset group.
The management of the Company has considered various indicators, including but not limited to the market price of its long-lived assets, its contracted revenues and cash flows and the economic outlook. As of December 31, 2021, the Company concluded that events and circumstances did not trigger the existence of potential impairment of its vessels and the related intangible assets and that step one of the impairment analysis was not required.
As of December 31, 2020, the Company concluded that events occurred and circumstances had changed, which indicated that potential impairment of Navios Partners' long-lived assets might exist. These indicators included volatility in the charter market as well as the potential impact the current marketplace may have on the Company’s future operations. As a result, an impairment assessment of long-lived assets (step one) was performed.
The Company determined the undiscounted projected net operating cash flows for each vessel and compared it to the vessels' carrying value together with the carrying value of deferred drydock and special survey costs, ballast water treatment system costs, exhaust gas cleaning system costs and other capitalized items, if any, related to the vessel and the carrying value of the related intangible assets, if applicable. The significant factors and assumptions the Company used in the undiscounted projected net operating cash flow analysis included: determining the projected net operating cash flows by considering the charter revenues from existing time charters for the fixed fleet days (Navios Partners' remaining charter agreement rates) and an estimated daily time charter equivalent for the unfixed days (based on a combination of one-year average historical time charter rates for the first year and ten-year average historical one-year time charter rates for the remaining period), over the remaining economic life of each vessel, net of brokerage and address commissions, and excluding days of scheduled off-hires, vessel operating expenses as determined by the Management Agreements (as defined herein) in effect until December 2024 and thereafter assuming an increase of 3.0% every second year and utilization rate of 98.6% based on the fleet's historical performance.
Where the undiscounted projected net operating cash flows do not exceed the carrying value of an asset group, management proceeded to perform step two of the impairment assessment. In step two of the impairment assessment, the Company determined fair value of its vessels through a combination of a discounted cash flow analysis utilizing market participant assumptions from available market data and third-party valuations from independent ship brokers performed on an individual vessel basis. The significant factors and assumptions used by management in determining fair value of vessels included those in developing the projected net operating cash flows over the remaining economic life of each vessel and the discount rate.
During the fourth quarter of fiscal year 2020, the Company’s assessment concluded that step two of the impairment analysis was required for certain of its vessels held and used, as the undiscounted projected net operating cash flows did not exceed the carrying value. As a result, the Company recorded an impairment loss of $50,991 for four of its vessels, being the difference between the fair value and the vessels’ carrying value together with the carrying value of deferred drydock and special survey costs related to the vessels, presented under the caption “Vessels impairment loss” in the Consolidated Statements of Operations (see Note 7 — Vessels, net).
As of June 30, 2020, the Company’s assessment concluded that step two of the impairment analysis was required for three containerships held and used, as the undiscounted projected net operating cash flows did not exceed the carrying value. As a result, the Company recorded an impairment loss of $6,800 for these vessels, being the difference between the fair value and the vessels’ carrying value together with the carrying value of deferred drydock and special survey costs related to the vessels, presented under the caption “Vessels impairment loss” in the Consolidated Statements of Operations.
As of December 31, 2019, the Company’s assessment concluded that step two of the impairment analysis was required for certain of its vessels held and used, as the undiscounted projected net operating cash flows did not exceed the carrying value. As a result, the Company recorded an impairment loss of $29,335 for one vessel, being the difference between the fair value and the vessel's carrying value together with the carrying value of deferred drydock and special survey costs related to the vessel, presented under the caption “Vessels impairment loss” in the Consolidated Statements of Operations (see Note 7 — Vessels, net).
During the years ended December 31, 2020 and 2019, an impairment loss of $and $, respectively, was also recognized in connection with the committed sales of the Navios Soleil in December 2020, the Esperanza N in January 2021, the Castor N in February 2021 and the Navios Galaxy in April 2019, as the carrying amount of each asset group was not recoverable and exceeded its fair value less costs to sell (see Note 7 — Vessels, net).
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
The total impairment loss recognized amounted to $0, $71,577 and $36,680for the years ended December 31, 2021, 2020 and 2019, respectively, and is presented under the caption “Vessels impairment loss” in the Consolidated Statements of Operations.
(k)Deferred Drydock and Special Survey Costs: Navios Partners' vessels are subject to regularly scheduled drydocking and special surveys which are generally carried out every 30 or 60 months, depending on the vessels' ages to coincide with the renewal of the related certificates issued by the classification societies, unless a further extension is obtained in rare cases and under certain conditions. The cost of drydocking and special surveys are deferred and amortized over the above periods or to the next drydocking or special survey date if such date has been determined.
Costs capitalized as part of the drydocking or special survey consist principally of the actual costs incurred at the yard, and expenses relating to spare parts, paints, lubricants and services incurred solely during the drydocking or special survey period. For the years ended December 31, 2016, 20152021, 2020 and 2014,2019, the amortization expense was $6,381, $4,043 $16,143, $10,337and $761, respectively.$6,916, respectively and are presented under the caption of “Direct vessel expenses” in the Consolidated Statements of Operations.
In
(l)Deferred Finance Costs: Deferred finance costs include fees, commissions and legal expenses associated with obtaining or modifying credit facilities and financial liabilities. Deferred finance costs are presented as a deduction from the corresponding liability. These costs are amortized over the life of the related facility using the effective interest rate method, and are presented under the caption “Interest expense and finance cost, net”. Amortization and write-off of deferred finance costs, including amortization of debt discount, for each of October 2013, August 2014, February 2015the years ended December 31, 2021, 2020 and February 2016,2019 were $3,741, $2,141and $10,916, respectively.
(m)Intangible Assets and Unfavorable Lease Terms: Navios Partners' intangible assets and liabilities consist of favorable lease terms and unfavorable lease terms. When a vessel along with the current charter contract are acquired as part of a business combination, intangible assets and unfavorable lease terms are recorded at fair value. Fair value is determined by reference to market data and the discounted amount of expected future cash flows. Where charter rates are higher than market charter rates, an asset is recorded, being the difference between the acquired charter rate and the market charter rate for an equivalent vessel. Where charter rates are less than market charter rates, a liability is recorded, being the difference between the assumed charter rate and the market charter rate for an equivalent vessel. The determination of the fair value of acquired assets and assumed liabilities requires Navios Partners amendedto make significant assumptions and estimates of many variables including market charter rates, contracted charter rates, remaining duration of the charter agreements, the level of utilization of its existing Management Agreementvessels and its relevant discount rate. The use of different assumptions could result in a material change in the fair value of these items, which could have a material impact on Navios Partners' financial position and results of operations.
The amortizable value of favorable and unfavorable leases is amortized over the remaining life of the lease term and the amortization expense is included under the captions “Depreciation and amortization of intangible assets” and “Amortization of unfavorable lease terms”, respectively in the Consolidated Statements of Operations.
The amortizable value of favorable leases would be considered impaired if their carrying values could not be recovered from the future undiscounted cash flows associated with the Manager, a subsidiaryassets. As of Navios Holdings, to fixDecember 31, 2021, the fees for ship management servicesof the Company has considered various indicators and concluded that events and circumstances did not trigger the existence of potential impairment of its owned fleet at: (a) $4.10 daily rate per Ultra-Handymax vessel; (b) $4.20 daily rate per Panamax vessel; (c) $5.25 daily rate per Capesize vessel; (d) $6.70 daily rate per Container vesselintangible assets and that step one of TEU 6,800; (e) $7.40 daily rate per Container vesselthe impairment analysis was not required as described in paragraph (j) above. As of more than TEU 8,000; and (f) $8.75 daily rate per very large Container vessel of more than TEU 13,000 through December 31, 2017. Drydocking expenses under this agreement are reimbursed by2020 and 2019, the management, after considering various indicators, performed an impairment test which included intangible assets as described in paragraph (j) above. As of December 31, 2021, 2020 and 2019 there was no impairment of intangible assets.
(n)Foreign Currency Translation: Navios Partners' functional and reporting currency is the U.S. Dollar. Navios Partners engages in worldwide commerce with a variety of entities. Although, its operations may expose it to certain levels of foreign currency risk, its transactions are predominantly U.S. dollar denominated. Additionally, Navios Partners' wholly-owned vessel subsidiaries transacted a nominal amount of their operations in Euros; however, all of the subsidiaries' primary cash flows are U.S. dollar denominated. Transactions in currencies other than the functional currency are translated at costthe exchange rate in effect at occurrence. Effective from Augustthe date of each transaction. Differences in exchange rates during the period between the date a transaction denominated in a foreign currency is consummated and the date on which it is either settled or translated, are recognized in the Statements of Operations. The foreign currency gains/ (losses) recognized in the accompanying Consolidated Statements of Operations under the captions “Other income” or “Other expense”, for each of the years ended December 31, 2016, 2021, 2020 and 2019 were not material for any of these periods.
(o)Provisions: Navios Partners, could, upon requestin the ordinary course of its business, is subject to various claims, suits and complaints. Management, in consultation with internal and external advisors, will provide for a contingent loss in the financial statements if the contingency had been incurred as of the balance sheet date and the likelihood of loss was probable and the amount of the loss can be reasonably estimated. If Navios Holdings, partially or fully deferPartners has determined that the reimbursementreasonable estimate of dry dockingthe loss is a range and other extraordinary fees and expenses underthere is no best estimate within the Management Agreement to a later date, but not later than January 5, 2018, and if reimbursed on a later date, such amounts would bear interest at a raterange, Navios Partners will accrue the lower amount of 1% per annum over LIBOR.the range.
|
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Undiscounted projected net operating cash flows are determined for each vessel and compared to the vessel carrying value of the vessel and related carrying value of the intangible with respect to the time charter agreement attached to that vessel. Within the shipping industry, vessels are customarily bought and sold with a charter attached. The value of the charter may be favorable or unfavorable when comparing the charter rate to then current market rates. The loss recognized either on impairment (or on disposition) will reflect the excess of carrying value over fair value (selling price) for the vessel asset group.
During the fourth quarter of fiscal 2016, management concluded that events occurred and circumstances had changed, which indicated that potential impairment of Navios Partners’ long-lived assets may exist. These indicators included continued deterioration in the spot market, and the related impact of the current drybulk and container sector has on management’s expectation for future revenues. As a result, an impairment assessment of long-lived assets was performed.
Navios Partners, determined undiscounted projected net operating cash flows for each vessel and compared it to the vessel’s carrying value together with the carrying value of deferred drydock and special survey costs related to the vessel and the carrying value of the related intangible assets, if applicable. The significant factors and assumptions used in the undiscounted projected net operating cash flow analysis included: determining the projected net operating cash flows by considering the charter revenues from existing time charters for the fixed fleet days (Navios Partners’ remaining charter agreement rates) and an estimated daily time charter equivalent for the unfixed days (based on a combination ofone-year average historical time charter rates for the first year and10-year average historicalone-year time charter rates for the remaining period, adjusted for outliers) over the remaining economic life of each vessel, net of brokerage and address commissions and excluding days of scheduledoff-hires, management fees fixed until December 2017 and thereafter assuming an increase of 3.0% every second year and utilization rate of 98.6% based on the fleet’s historical performance. The assessment concluded that step two of the impairment analysis was not required and no impairment of vessels and the intangible assets existed as of December 31, 2016, as the undiscounted projected net operating cash flows exceeded the carrying value.
In the event that impairment would occur, the fair value of the related asset would be determined and an impairment charge would be recorded to operations calculated by comparing the asset’s carrying value to its fair value. Fair value is estimated primarily through the useManagement Agreements (as defined herein), participates in Protection and Indemnity (P&I) insurance coverage plans provided by mutual insurance societies known as P&I clubs. Under the terms of third-party valuations performed on an individual vessel basis.
Although management believes the underlying assumptions supporting this assessment are reasonable, if charter rate trends and the length of the current market downturn, vary significantly from our forecasts, managementthese plans, participants may be required to perform step twopay additional premiums (supplementary calls) to fund operating deficits incurred by the clubs (“back calls”). Obligations for back calls are accrued annually based on information provided by the P&I clubs.
(p)Segment Reporting: Navios Partners reports financial information and evaluates its operations by charter revenues and not by the length of ship employment for its customers. Navios Partners does not use discrete financial information to evaluate operating results for each type of charter or vessel type. Management does not identify expenses, profitability or other financial information by charter type. As a result, management reviews operating results solely by revenue per day and operating results of the impairment analysis in the future that could exposefleet and thus Navios Partners has determined that it operates under one reportable segment (see Note 14 — Segment information).
(q)Revenue and Expense Recognition:
Revenue from time chartering
Revenues from time chartering and bareboat chartering of vessels are accounted for as operating leases and are thus recognized on a straight line basis as the average lease revenue over the rental periods of such charter agreements, as service is performed. A time charter involves placing a vessel at the charterers' disposal for a period of time during which the charterer uses the vessel in return for the payment of a specified daily hire rate. Short period charters for less than three months are referred to material impairment charges inas spot-charters. Charters extending three months to a year are generally referred to as medium-term charters. All other charters are considered long-term. The Company has determined to recognize lease revenue as a combined single lease component for all time charters (operating leases) as the future.
As of December 31, 2016, an impairment loss of $27,201 was recognized in connection withrelated lease component and non-lease components will have the committed salesame timing and pattern of the MSC Cristinarevenue recognition of the combined single lease component. The performance obligations in a time charter contract are satisfied over term of the contract beginning when the vessel is delivered to the charterer until it is redelivered back to the Company. Under time charters, operating costs such as for crews, maintenance and insurance are typically paid by the Navios Apollon asowner of the carrying amountvessel. Revenue from time chartering and bareboat chartering of each asset group was not recoverable and exceeded its fair less costs to sell (see note 6 and note 7). The impairment loss was included under “Vessel impairment losses” in the consolidated Statements of Operations. Impairment loss recognizedvessels amounted to $27,201, $0 $669,185, $218,809 and $0 $204,920 for the years ended December 31, 2016, 20152021, 2020 and 2014,2019, respectively.
NAVIOS MARITIME PARTNERS L.P.Revenue from voyage contracts
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
The amortizable value of favorable and unfavorable leases is amortized over the remaining life of the lease term and the amortization expense is included in the statement of operations in the depreciation and amortization line item. The amortizable value of favorable leases would be considered impaired if their fair market values could not be recovered from the future undiscounted cash flows associated with the asset. Management, after considering various indicators, performed on impairment test which included intangible assets as described in paragraph (k) above. As of December 31, 2016, there was no impairment of intangible assets.
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Revenue Recognition: Revenue is recorded when services are rendered, under a signed charter agreement or other evidence of an arrangement, the price is fixed or determinable, and collection is reasonably assured. Revenue is generated from time charter of vessels.
Voyage revenues for the transportation of cargo are recognized ratably over the estimated relative transit time of each voyage. Voyage expenses are recognized as incurred. A voyage is deemed to commence when a vessel is available for loading and is deemed to end upon the completion of the discharge of the current cargo. Estimated losses on voyages are provided for in full at the time such losses become evident. Under a voyage charter, a vessel is provided for the transportation of specific goods between specific ports in return for payment of an agreed upon freight per ton of cargo. Upon adoption of ASC 606, the Company recognizes revenue ratably from port of loading to when the charterer's cargo is discharged as well as defer costs that meet the definition of “costs to fulfill a contract” and relate directly to the contract. Revenue from voyage contracts amounted to $25,199, $3,754 and $9,416 for the years ended December 31, 2021, 2020 and 2019, respectively.
Revenues from time charteringPooling arrangements
For vessels operating in pooling arrangements, the Company earns a portion of total revenues generated by the pool, net of expenses incurred by the pool. The amount allocated to each pool participant vessel, including the Company's vessels, areis determined in accordance with an agreed-upon formula, which is determined by points awarded to each vessel in the pool based on the vessel's age, design and other performance characteristics. Revenue under pooling arrangements is accounted for as variable rate operating leases on the accrual basis and is recognized when an agreement with the pool exists, price is fixed, service is provided and the collectability is reasonably assured. The allocation of such net revenue may be subject to future adjustments by the pool however, such changes are thus recognizednot expected to be material. The Company recognizes net pool revenue on a straight linemonthly and quarterly basis, as the average minimum lease revenue over the rental periods of such charter agreements, as service is performed. A time charter involves placing a vessel at the charterers’ disposal for a period of time during which the charterer useswhen the vessel has participated in return a pool during the period and the amount of pool revenue can be estimated reliably based on the pool report. Revenue from vessels operating in pooling arrangements amounted to $17,982, $4,208 and $5,043 for the payment of a specified daily hire rate. Under time charters, operating costs such as for crews, maintenanceyears ended December 31, 2021, 2020 and insurance are typically paid by the owner of the vessel.2019, respectively.
Revenue from profit-sharing
Profit-sharing revenues are calculated at an agreed percentage of the excess of the charterer’scharterer's average daily income (calculated on a quarterly or semi annual basis) over an agreed amount and accounted for on an accrual basis based on provisional amounts and for those contracts that provisional accruals cannot be made due to the nature of the profit sharesharing elements, these are accounted for on the actual cash settlement.settlement or when such revenue becomes determinable. Profit sharing revenue for the years ended December 31, 2016, 20152021, 2020 and 20142019 amounted to $(9,123)$809, $(2,559)nil and $205,nil, respectively.
0
Revenues are recorded net of address commissions. Address commissions represent a discount provided directly to the charterers based on a fixed percentage of the agreed upon charter or freight rate. Since address commissions represent a discount (sales incentive) on services rendered by the Company and no identifiable benefit is received in exchange for the consideration provided to the charterer, these commissions are presented as a reduction of revenue.
Table of Contents | F- 21 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
For vessels operatingDeferred Revenue and Cash Received in pooling arrangements,Advance: Deferred revenue primarily relates to cash received from charterers prior to it being earned and the Company earns a portion of total revenues generated bycompensation received for the pool, net of expenses incurred by the pool. The amount allocated to each pool participant vessel, including the Company’s vessels, is determined in accordance with an agreed-upon formula, which is determined by points awarded to each vesselfuture reduction in the pool based ondaily hire rates payable by Hyundai Merchant Marine Co. (“HMM”). These amounts are recognized as revenue over the vessel’s age, designvoyage or charter period.
Time Charter and other performance characteristics. Revenue under pooling arrangements is accounted for on the accrual basis and is recognized when an agreement with the pool exists, price is fixed, service is provided and the collectability is reasonably assured. Revenue for vessels operating in pooling arrangements amounted to $3,949, $0 and $0, for the years ended December 31, 2016, 2015 and 2014, respectively.
The allocation of such net revenue may be subject to future adjustments by the pool however, such changes are not expected to be material.
Time charter and voyage expenses:Voyage Expenses: Time charter and voyage expenses comprise all expenses related to each particular voyage, including time charter hire paid and voyage freight paid, bunkers, port charges, canal tolls, cargo handling, agency fees and brokerage commissions. Also included in time charter and voyage expenses are provisions for losses on time charters and voyages in progress at year-end, direct port terminal expenses and other miscellaneous expenses. Time charter expenses are expensed over the period of the time charter and voyage expenses are recognized as incurred.
Direct vessel expenses:Vessel Expenses: Direct vessel expenses comprise the amortization related to drydockdrydocking and special survey costs of certain vessels of Navios Partners’ fleet.Partners' fleet and certain extraordinary fees and costs (pursuant to the terms of the management agreements).
Management fees:Prepaid Voyage Costs: Prepaid voyage costs relate to cash paid in advance for expenses associated with voyages. These amounts are recognized as expenses over the voyage or charter period.
Vessel operating expenses: Pursuant to the amended Management Agreement, in each of October 2013, August 2014, February 2015 and February 2016,management agreement (the “Management Agreement”), the Manager, a wholly owned subsidiary of Navios Holdings, providesprovided commercial and technical management services to Navios Partners’ vessels for a daily fee of: (a) $4.10 $4.23 daily rate per Ultra-Handymax vessel; (b) $4.20 $4.33 daily rate per Panamax vessel; (c) $5.25 $5.25 daily rate per Capesize vessel; (d) $6.70 $6.70 daily rate per Container vesselContainership of TEU 6,800; (e) $7.40 $7.40 daily rate per Container vesselContainership of more than TEU 8,000;8,000 and (f) $8.75 $8.75 daily rate per very large Container vesselContainership of more than TEU 13,000 through December 2019. These fixed daily fees cover the vessels' operating expenses, other than certain extraordinary fees and costs (pursuant to the terms of the management agreements).
In August 2019, Navios Partners extended the duration of its Management Agreement with the Manager until January 1, 2025, with an automatic renewal for an additional five years, unless earlier terminated by either party. Vessel operating expenses were fixed for two years commencing from January 1, 2020 at: (a) $4.35 daily rate per Ultra-Handymax Vessel; (b) $4.45 daily rate per Panamax Vessel; (c) $5.41 daily rate per Capesize Vessel; and (d) $6.90 daily rate per 6,800 TEU Containership. The agreement also provides for a technical and commercial management fee of $0.05 per day per vessel and an annual increase of 3% after January 1, 2022 unless agreed otherwise. In December 2019, the Management Agreement was further amended to include from January 1, 2020, a $6.1 daily rate per Sub-Panamax/Panamax Containership.
Following the liquidation of Navios Europe I, Navios Partners acquired Sub-Panamax and Panamax Containerships and following the liquidation of Navios Europe II, Navios Partners acquired drybulk vessels, Panamax and Ultra-Handymax vessels. As per the Management Agreement, as amended in December 2019, vessel operating expenses are fixed for two years commencing from January 1, 2020 at $daily rate per Sub-Panamax/Panamax Containership. The agreement also provides for a technical and commercial management fee of $per day per vessel and an annual increase of % after January 1, 2022 for the remaining period unless agreed otherwise.
Following the completion of the NMCI Merger, the fleet of Navios Containers is included in Navios Partners’ owned fleet and continued to be operated by the Manager (see Note 3 – Acquisition of Navios Containers and Navios Acquisition). As per the NMCI management agreement (the “NMCI Management Agreement”), vessel operating expenses are fixed for two years commencing from January 1, 2020 at: (a) $6.22 daily rate per Containership of TEU 3,000 up to 4,999, respectively; (b) $7.78 daily rate per Containership of TEU 8,000 up to 9,999, respectively; and (c) $8.27 daily rate per Containership of TEU 10,000 up to 11,999, respectively. The agreement also provides for a technical and commercial management fee of $0.05 per day per vessel and an annual increase of 3% after January 1, 2022 unless agreed otherwise.
Upon acquisition of the majority of outstanding stock of Navios Acquisition, the fleet of Navios Acquisition is included in Navios Partners’ owned fleet and continued to be operated by Tankers Manager (see Note 3 – Acquisition of Navios Containers and Navios Acquisition). As per the Navios Acquisition management agreement with Tankers Manager (the “NNA Management Agreement” and together with the Management Agreement and the NMCI Management Agreement, the “Management Agreements”), vessel operating expenses are fixed for two years commencing from January 1, 2020 at: (a) $per day per MR2 and MR1 product tanker and chemical tanker vessel; (b) $per day per LR1 product tanker vessel; and (c) $per day per VLCC. The agreement also provides for a technical and commercial management fee of $per day per vessel, an annual increase of % after January 1, 2022 for the remaining period unless agreed otherwise.
Following completion of the Mergers, the Managers provide commercial and technical management services to Navios Partners' vessels for a daily fee of: (a) $4.45 daily per Panamax Vessel; (b) $4.35 daily per Ultra-Handymax Vessel; (c) $5.41 daily per Capesize Vessel; (d) $6.1 daily per owned container vessel of 1,300TEU to 3,400TEU; (e) $6.22 daily rate per Containership of TEU 3,000 up to 4,999; (f) $6.9 daily per 6,800 TEU Containership; (g) $7.78 daily rate per Containership of TEU 8,000 up to 9,999; (h) $8.27 daily rate per Containership of TEU 10,000 up to 11,999; (i) $6.83 per day per MR2 and MR1 product tanker and chemical tanker vessel; (j) $7.23 per day per LR1 product tanker vessel; and (k) $9.65 per day per VLCC.
The Management Agreements also provide for payment of a termination fee, equal to the fees charged for the full calendar year (for Navios Partners, Navios Containers and Navios Acquisition) preceding the termination date in the event the agreements are terminated on or before December 31, 2017. 2024.
Drydocking expenses under this agreement are reimbursed by Navios Partners at cost at occurrence.for all vessels.
During the years ended December 31, 2021 and 2020 certain extraordinary fees and costs related to vessels’ regulatory requirements, including ballast water treatment system installation and exhaust gas cleaning system installation under the Company's Management Agreements, amounted to $11,408 and $3,366, respectively, and are presented under the caption “Acquisition of/ additions to vessels, net of cash acquired” in the Consolidated Statements of Cash Flows. During year ended December 31, 2021, certain extraordinary fees and costs related to Covid-19 measures, including crew related expenses, amounted to $5,811 are presented under the caption of “Direct vessel expenses” in the Consolidated Statements of Operations. During year ended December 31, 2021, certain extraordinary fees and costs related to Covid-19 measures, including crew related expenses, amounted to $2,034 are presented under the caption of “Other expense” in the Consolidated Statements of Operations.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Vessel operating expenses for each of the years ended December 31, 2021, 2020 and 2019 amounted to $191,449, $93,732and $68,188, respectively.
General and administrative expenses: Pursuant to the Administrativeadministrative services agreement (the “Administrative Services Agreement dated November 16, 2007,Agreement”), the Manager also provides administrative services to Navios Partners, which include bookkeeping, audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client and investor relations and other. TheUnder the Administrative Services Agreement, which provide for allocable general and administrative costs, the Manager is reimbursed for reasonable costs and expenses incurred in connection with the provision of these services. In August 2019, Navios Partners extended the duration of its existing Administrative Services Agreement with the Manager pursuantuntil January 1, 2025, to be automatically renewed for another five years. The agreement also provides for payment of a termination fee, equal to the same terms, untilfees charged for the full calendar year preceding the termination date in the event the Administrative Services Agreement is terminated on or before December 31, 2017.2024.
Total general and administrative expenses charged by the Managers for each of the years ended December 31, 2021, 2020 and 2019 amounted to $, $and $, respectively.
Deferred revenue:(r) Deferred revenue primarily relatesFinancial Instruments: Financial instruments carried on the balance sheet include cash and cash equivalents, restricted cash, trade receivables and payables, other receivables and other liabilities, long-term debt and financial liabilities. The particular recognition methods applicable to cash received from charterers prior to it being earned and the compensation received for the future reductioneach class of financial instrument are disclosed in the daily hire rates payable by HMM. These amounts are recognizedapplicable significant policy description of each item, or included below as revenue over the voyage or charter period.applicable.
Prepaid voyage costs: Prepaid voyage costs relate to cash paid in advance for expenses associated with voyages. These amounts are recognized as expense over the charter period.
Inventory: Inventories, which are comprised of bunkers due to freight voyages, are valued at cost as determined on thefirst-in,first-out basis.
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Financial risk management:Risk Management: Navios Partners’Partners' activities expose it to a variety of financial risks including fluctuations in future freight rates, time charter hire rates, and fuel prices, credit and interest rates risk. Risk management is carried out under policies approved by executive management. Guidelines are established for overall risk management, as well as specific areas of operations.
Credit risk: Navios Partners closely monitors its credit exposure to customers and counter-parties for credit risk. Navios Partners has entered into the management agreementManagement Agreements with the Manager,Managers, pursuant to which the ManagerManagers agreed to provide commercial and technical management services to Navios Partners. When negotiating on behalf of Navios Partners’Partners' various vessel employment contracts, the Manager hasManagers have policies in place to ensure that it tradesthey trade with customers and counterparties with an appropriate credit history.
Financial instruments that potentially subject Navios Partners to concentrations of credit risk are accounts receivable and cash and cash equivalents. Navios Partners does not believe its exposure to credit risk is likely to have a material adverse effect on its financial position, results of operations or cash flows.
For the year ended December 31, 2016,2021, Singapore Marine Pte. Ltd (“Singapore Marine”) represented approximately 14.5% of our most significant counterparties representing 10% or more of total revenues were Hyundai Merchant Marine Co., Ltd., Yang Ming Marine Transport Corporation and Mediterranean Shipping Co. S.A. which accounted for approximately 29.6%, 13.0% and 11.6%, respectively, of total revenues. For the year ended December 31, 2015, Navios Partners’ customers representing 10% or more of total revenues were Hyundai Merchant2020 HMM, Singapore Marine Co.and Cargill represented approximately 23.4%, Ltd., Navios Corporation19.5% and Yang Ming Marine Transport Corporation, which accounted for 24.0%, 17.4% and 11.4%11.4%, respectively, of the Company’s total revenues. For the year ended December 31, 2014, Navios Partners’ customers representing 10% or more of total revenues were Hyundai Merchant Marine Co.2019 HMM, Swissmarine and Cargill represented approximately 25.9%, Ltd12.3% and Navios Corporation, which accounted for 24.4% and 11.0%10.9%, respectively, of the Company’s total revenues. No other customers accounted for 10% or more of total revenues for any of the years presented.
Liquidity Risk: Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and financial liabilities and the ability to close out market positions. Navios Partners monitors cash balances appropriately to meet working capital needs.
Foreign exchange risk:Exchange Risk: Foreign currency transactions are translated into the measurement currency rates prevailing at the dates of transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statementsConsolidated Statements of income.Operations.
(s)Cash Distribution:As per the partnership agreement, within 45 days following the end of each quarter, to the extent and as may be declared by the Board, an amount equal to 100% of Available Cash (as defined herein) with respect to such quarter shall be distributed to the partners as of the record date selected by the Board of Directors.
Available Cash: Generally means, for each fiscal quarter, all cash on hand at the end of the quarter:
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
• provide funds for distributions to the unitholders and to the general partner for any one or more of the next four quarters;
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Available Cash is a quantitative measure used in the publicly traded partnership investment community to assist in evaluating a partnership’spartnership's ability to make quarterly cash distributions. Available Cash is not required by USU.S. GAAP and should not be considered as an alternative toa substitute for net income, cash flow from operating activities and other operations or any other indicatorcash flow statement data prepared in accordance with accounting principles generally accepted in the United States or as a measure of profitability or liquidity.
Cash distributions are recorded in the Company's financial statements in the period in which they are declared. Navios Partners’ performance required by US GAAP.Partners paid $4,615, $7,872and $13,550to its unitholders of common and general partner units during the years ended December 31, 2021, 2020 and 2019, respectively.
Maintenance and Replacement Capital Expenditures:Expenditures: Maintenance and Replacementreplacement capital expenditures are those capital expenditures required to maintain over the long-term the operating capacity of or the revenue generated by Navios Partners’Partners' capital assets, and expansion capital expenditures are those capital expenditures that increase the operating capacity of or the revenue generated by the capital assets. To the extent, however, that capital expenditures associated with acquiring a new vessel increase the revenues or the operating capacity of ourthe Company’s fleet, those capital expenditures would be classified as expansion capital expenditures. As of December 31, 2016, 20152021, 2020 and 2014, Maintenance2019, maintenance and Replacementreplacement capital expenditures reserve approved by the Board of Directors was $11,899, $13,811 $83,147, $36,455and $24,047,$29,039, respectively.
Recent Accounting Pronouncements(t)Stock-based compensation: In February 2019, December 2019, December 2018 and December 2017, Navios Partners granted restricted common units to its directors and officers, which are based solely on service conditions and vest over four years each, respectively. Following the NNA Merger, Navios Partners assumed the restricted common units granted in December 2018 and December 2017 to directors and officers of Navios Acquisition, which are based solely on service conditions and vest over four years each, respectively. Upon the NNA Merger, the unvested restricted common units were after exchange on a 1 to basis. The fair value of restricted common units is determined by reference to the quoted stock price on the date of grant or the date that the grants were exchanged upon completion of the NNA Merger. Compensation expense, net of estimated forfeitures, is recognized based on a graded expense model over the vesting period. The effect of compensation expense arising from the restricted common units described above amounted to $, $and $for the years ended December 31, 2021, 2020 and 2019, respectively, and was presented under the caption “General and administrative expenses” in the Consolidated Statements of Operations. There were no restricted common units exercised, forfeited or expired during the years ended December 31, 2021, 2020 and 2019. As of December 31, 2021, restricted common units were vested, cumulatively.
In January 2017, FASB issued Accounting Standard UpdateNo. 2017-01, “Business Combinations”(u)Income Taxes: The Company is a Marshall Islands Corporation. Pursuant to clarifyvarious treaties and the definition of a business withUnited States Internal Revenue Code, the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. Under current implementation guidance the existence of an integrated set of acquired activities (inputs and processesCompany believes that generate outputs) constitutes an acquisition of business. This ASU provides a screen to determine when a set of assets and activities does not constitute a business. The screen requires that when substantially all its operations are exempt from income taxes in the Marshall Islands and the United States of America. Under the laws of Marshall Islands, Malta, Cayman Islands, Liberia, British Virgin Islands and Hong Kong, the countries of the vessel-owning subsidiaries' incorporation and vessels' registration, the vessel-owning subsidiaries are subject to registration and tonnage taxes which have been included in vessel operating expenses in the accompanying Consolidated Statements of Operations.
(w)Guarantees: An asset for the fair value of a right undertaken in issuing the gross assets acquired (or disposed of)guarantee is concentrated in a single identifiable asset or a grouprecognized. The recognition of similar identifiable assets, the setfair value is not required for certain guarantees such as the parent's guarantee of a business. This update is effective for public entities with reporting periods beginning after December 15, 2017, including interim periods withinsubsidiary's debt to a third party or guarantees on product warranties. For those years. The amendments of this ASU should be applied prospectively on or afterguarantees excluded from the effective date. Early adoption is permitted, including adoption in an interim period 1) for transactions for whichabove guidance requiring the acquisition date occurs before the issuance date or effective datefair value recognition of the ASU, only whenasset, financial statement disclosures of their terms are made.
On November 15, 2012 (as amended and supplemented in March 2014, December 2017 and July 2019), Navios Holdings and Navios Partners entered into an agreement (the “Navios Holdings Guarantee”) by which Navios Holdings would provide supplemental credit default insurance with a maximum cash payment of $. In October 2020, Navios Holdings paid an amount of $ to Navios Partners. In April 2021, Navios Holdings paid an amount of $to Navios Partners. As of December 31, 2021 and 2020, the transaction has not been reportedoutstanding claim receivable amounted to $and $, respectively. The guarantee claim receivable is presented under the caption “Amounts due from related parties” under current assets in financial statements that have been issued or made available for issuance and 2) for transactions in which a subsidiary is deconsolidated or a groupthe Consolidated Balance Sheets as of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements.December 31, 2020.
In January 2017, FASB issued Accounting Standard UpdateNo. 2017-03 “Accounting Changes and Error Corrections (Topic 250) and Investments-Equity Method and Joint Ventures (Topic 323).” The ASU amends the Codification for SEC staff announcements made at recent Emerging Issues Task Force (EITF) meetings. The
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
SEC guidance that specifically relates(x)Leases: Vessel leases where Navios Partners is regarded as the lessor are classified as either operating leases or sales type/ direct financing leases, based on an assessment of the terms of the lease.
For charters classified as finance leases the minimum lease payments are recorded as the gross investment in the lease. The difference between the gross investment in the lease and the sum of the present values of the two components of the gross investment is recorded as unearned income which is amortized to our Consolidate Financial Statement wasincome over the lease term as finance lease interest income to produce a constant periodic rate of return on the net investment in the lease. For charters classified as operating leases where Navios Partners is regarded as the lessor, (see Note 2(q) — Summary of Significant Accounting Policies).
In cases of lease agreements where the Company acts as the lessee, the Company recognizes a right-of-use asset and a corresponding lease liability on the consolidated balance sheet. After lease commencement, the Company measures the lease liability for an operating lease at the present value of the remaining lease payments using the discount rate determined at lease commencement. The right-of-use asset is subsequently measured at the amount of the remeasured lease liability, adjusted for the remaining balance of any lease incentives received, any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term and any unamortized initial direct costs. Any changes made to leased assets to customize it for a particular use or need of the lessee are capitalized as leasehold improvements. Amounts attributable to leasehold improvements are presented separately from the September 2016 meeting, whererelated right-of-use asset. In cases of Navios Acquisition’s lease agreements at the SEC staff expressed their expectations aboutdate of obtaining control, the extent of disclosures registrants should make aboutCompany measured the effectslease liability at the present value of the remaining lease payments as if these lease agreements were a new FASB guidancelease of the Company at the date of obtaining control. For finance leases, interest expense is determined using the effective interest method and amortization on the right-of-use asset is recognized on a straight line basis over the lease term. For charters classified as well as any amendments issued prior to adoption,operating leases, lease expense is recognized on revenue (ASU2014-09), leases (ASU2016-02)a straight line basis over the rental periods of such charter agreements. The expense is included under the caption “Time charter and credit losses on financial instruments (ASU2016-13)voyage expenses” in accordance with SAB Topic 11.M. Registrants are required to disclose the effect that recently issued accounting standards will have on their financial statements when adopted in a future period. Consolidated Statement of Operations.
In cases where a registrant cannot reasonably estimateof sale and leaseback transactions, if the impacttransfer of the adoption,asset to the lessor does not qualify as a sale, then additional qualitative disclosures should be considered. The ASU incorporates these SEC staff views into ASC 250the transaction constitutes a failed sale and adds referencesleaseback and is accounted for as a financing transaction. For a sale to that guidance inhave occurred, the transition paragraphs of eachcontrol of the three new standards. The adoptionasset would need to be transferred to the buyer, and the buyer would need to obtain substantially all the benefits from the use of this new accounting guidance did not have a material effect on the Company’s Consolidated Financial Statements.asset.
In November 2016, FASB issued Accounting Standards UpdateNo. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. This update addresses the classification and presentation ofOperating lease assets used by Navios Partners are reviewed periodically for potential impairment whenever events or changes in restricted cash oncircumstances indicate that the statement of cash flows under Topic 230, Statement of Cash Flows. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements.
In August 2016, FASB issued Accounting Standards UpdateNo. 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements.
In March 2016, FASB issued Accounting Standards UpdateNo. 2016-09, “Compensation – Stock Compensation (Topic 718)”, which simplifies several aspects of accounting for share-based compensation including the tax consequences, classification of awards as equity or liabilities, forfeitures and classification on the statement of cash flows. This update is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted. The adoption of this new accounting guidance didcarrying amount may not have a material effect on the Company’s Consolidated Financial Statements.
In February 2016, FASB issued Accounting Standards UpdateNo. 2016-02, “Leases (Topic 842)”(“ASU 2016-02”). ASU2016-02 will apply to both types of leases – capital (or finance) leases and operating leases. According to the new Accounting Standard, lessees will be required to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU 2016 – 02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements and footnotes disclosures.
In January 2016, FASB issued Accounting Standards UpdateNo. 2016-01, “Financial Instruments – Overall (Subtopic825-10) – Recognition andfully recoverable. Measurement of Financial Assets and Financial Liabilities”. The amendments in this update require an entity (i) to measure equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) at fair value with changes in fair value recognized in net income; (ii) to perform a qualitative assessment to identify impairment in equity investments without readily determinable fair values; (iii) to present separately in other comprehensive incomeloss is based on the fair value of the asset. Navios Partners determines the fair value of its assets based on management estimates and assumptions by making use of available market data. In evaluating carrying values of operating lease assets, certain indicators of potential impairment are reviewed, such as undiscounted projected operating cash flows, business plans and overall market conditions.
Undiscounted projected net operating cash flows are determined for each asset group and compared to the carrying value of the operating lease asset and the carrying value of deposits for the option to acquire a liability resulting from a changevessel including expenses and interest. If step two of the impairment analysis is required, the analysis includes the use of the discounted cash flow which comprises various assumptions, including the Company’s weighted average cost-of capital (“WACC”).
As of December 31, 2021, the management of the Company has considered various indicators, and concluded that events and circumstances did not trigger the existence of potential impairment of its operating lease assets and that step one of the impairment analysis was not required.
As of December 31, 2020, the management concluded that events occurred and circumstances had changed, which indicated that potential impairment of Navios Partners’ operating lease assets might exist. These indicators included volatility in the instrument-specific credit risk; and (iv) to present separately financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables)charter market as well as the potential impact the current marketplace may have on the balance sheet. Company’s future operations As a result, an impairment assessment of operating lease assets (step one) was performed.
The amendments also eliminateCompany determined undiscounted projected net operating cash flows for each chartered-in vessel and compared it to operating lease asset’s carrying value together with the requirement,carrying value of deposits for the option to acquire a vessel including expenses and interest. The significant factors and assumptions used in the undiscounted projected net operating cash flow analysis included: determining the projected net operating cash flows by considering the charter revenues from existing time charters for the fixed fleet days (the Company’s remaining charter agreement rates) and an estimated daily time charter equivalent for the unfixed days (based on three-year average historical time charter rates) over the remaining lease term, net of brokerage and address commissions excluding days of scheduled off-hires (for the bareboat chartered-in vessels), vessel operating expenses in accordance with the terms of Management Agreements (assuming an annual increase of 3.0% every second year for the bareboat chartered-in vessels).
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
As of December 31, 2020 and 2019, the Company’s impairment assessments indicated that the undiscounted projected net operating cash flows determined for each asset group exceeded their carrying value. The impairment assessments performed as of December 31, 2020 and 2019 did not result in impairment charges.
public business entities,(y)Financial Instruments and Fair Value: Guidance on Fair Value Measurements provides a fair value hierarchy that prioritizes the inputs to disclose the methods and significant assumptionsvaluation techniques used to estimatemeasure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurements) and the lowest priority to unobservable inputs (Level III measurements). A financial instrument's level within the fair value of financial instruments measured at amortized costhierarchy is based on the balance sheetlowest level of any input that is significant to the fair value measurement. In determining the appropriate levels, the Company performs a detailed analysis of the assets and clarifyliabilities that an entityare subject to guidance on Fair Value Measurements.
(z)Recent Accounting Pronouncements:
In July 2021, the FASB issued ASU 2021-05, Lease (Topic 842): Lessors—Certain Leases with Variable Lease Payments (“ASU 2021-05”). The guidance in ASU 2021-05 amends the lease classification requirements for the lessors under certain leases containing variable payments to align with practice under ASC 840. The lessor should evaluate the needclassify and account for a valuation allowancelease with variable lease payments that do not depend on a deferred tax asset related toavailable-for-sale securitiesreference index or a rate as an operating lease if both of the following criteria are met: 1) the lease would have been classified as a sales-type lease or a direct financing lease in combinationaccordance with the entity’s other deferred tax assets. For public business entities,classification criteria in ASC 842-10-25-2 through 25-3; and 2) the update islessor would have otherwise recognized a day-one loss. The amendments in ASU 2021-05 are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.2021, with early adoption permitted. The Company is currently evaluating the impact of adoption of this new standard is not expected to have a material impact on the Company’s results of operations,consolidated and combined financial position or cash flows.statements and related disclosures.
In August 2014, FASB issuedMarch 2020, the Financial Accounting Standards UpdateBoard issued ASU No. 2014-15, “Presentation of Financial Statements-Going Concern (Subtopic205-40)2020-04, “Reference Rate Reform (Topic 848): Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern”. This standard requires management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. Before this new standard, no accounting guidance existed for management on when and how to assess or disclose going concern uncertainties. The amendments are effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The adoption Facilitation of the new standard is notEffects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”).” ASU 2020-04 provides temporary optional expedients and exceptions to the guidance in U.S. GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to have a material impact on Navios Partners’ results of operations, financial position or cash flows.
alternative reference rates. In May 2014, FASB issued Accounting Standards UpdateNo. 2014-09, “Revenue from Contracts with Customers”, clarifyingJanuary 2021, the method used to determine the timing and requirements for revenue recognition on the statements of income. Under the new standard, an entity must identify the performance obligations in a contract, the transaction price and allocate the price to specific performance obligations to recognize the revenue when the obligation is completed. The amendments in this update also require disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flow arising from contracts. The new accounting guidance is effective for interim and annual periods beginning after December 15, 2016. In August 2015, FASB issued Accounting Standard UpdateNo. 2015-14 (“ASU”) 2021-01 (Topic 848), which deferredamends and clarifies the existing accounting standard issued in March 2020 (“ASU”) 2020-04 for Reference Rate Reform. Reference rates such as LIBOR, are widely used in a broad range of financial instruments and other agreements. The ASU permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities under way in global financial markets (the “discounting transition”). The ASU 2020-04 is effective date of ASU2014-09for adoption at any time between March 12, 2020 and December 31, 2022, for all entities by one year. The standard will beand the ASU 2021-01 is effective for publicall entities for annual reporting periods beginning afteras of January 7, 2021 through December 15, 2017 and interim periods therein. The Company is currently assessing the impact that adopting this new accounting guidance will have its consolidated financial statements.
NOTE 3 – CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
December 31, 2016 | December 31, 2015 | |||||||
Cash on hand and at banks | $ | 17,360 | $ | 26,332 | ||||
Short-term deposits and highly liquid funds | — | 418 | ||||||
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| |||||
Total cash and cash equivalents | $ | 17,360 | $ | 26,750 | ||||
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Short-term deposits and highly liquid funds relate to amounts held in banks for general financing purposes.31, 2022. As of December 31, 2016,2021, the Company has not made any contract modifications to replace the reference rate in any of its agreements and will continue to evaluate the effects of this standard on its consolidated financial position, results of operations, and cash flows.
NOTE 3 – ACQUISITION OF NAVIOS CONTAINERS AND NAVIOS ACQUISITION
Acquisition of Navios Containers and Navios Acquisition
ACQUISITION OF NAVIOS CONTAINERS
On March 31, 2021, Navios Partners did not hold moneycompleted the merger (the “NMCI Merger”) contemplated by the Agreement and Plan of Merger (the “NMCI Merger Agreement”), dated as of , by and amongst Navios Partners, its direct wholly-owned subsidiary NMM Merger Sub LLC (“Merger Sub”), Navios Maritime Containers L.P. (“Navios Containers”) and Navios Maritime Containers GP LLC, Navios Containers’ general partner. Pursuant to the NMCI Merger Agreement, Merger Sub merged with and into Navios Containers, with Navios Containers continuing as the surviving partnership. As a result of the NMCI Merger, Navios Containers became a wholly-owned subsidiary of Navios Partners. Pursuant to the terms of the NMCI Merger Agreement, each outstanding common unit of Navios Containers that was held by a unitholder other than Navios Partners, Navios Containers and their respective subsidiaries was converted into the right to receive of a common unit of Navios Partners. Following the exercise of the optional second merger (“Second Merger”), Navios Containers merged with and into Navios Maritime Containers Sub LP, with Navios Maritime Containers Sub LP continuing as the surviving partnership, and Migen Shipmanagement Ltd, a wholly owned subsidiary of Navios Partners, became Navios Containers’ general partner.
Navios Partners accounted for the NMCI Merger “as a business combination achieved in stages”, which results in the application of the “acquisition method,” as defined under ASC 805, Business Combinations. Navios Partners’ previously held equity interest in Navios Containers was remeasured to its fair value at March 31, 2021, the date the controlling interest was acquired and the resulting gain was recognized in earnings. Under the acquisition method, the fair value of the consideration paid by Navios Partners in connection with the transaction was allocated to Navios Containers’ net assets based on their estimated fair values at the date of the completion of the NMCI Merger. The excess of the fair value of the identifiable net assets acquired of $over the total purchase price consideration of $, resulted in a bargain purchase gain of $. The transaction resulted in a bargain purchase gain as a result of the share price of Navios Containers trading at a discount to their net asset value (“NAV”). The fair value of the vessels was determined based on vessel valuations, obtained from independent third party shipbrokers, which are among other things, based on recent sales and purchase transactions of similar vessels. The fair value of the unfavorable lease terms (intangible liabilities) was determined by reference to market funds with durationdata and the discounted amount of less than three months. expected future cash flows. The key assumptions that were used in the discounted cash flow analysis were as follows: (i) the contracted charter rate of the acquired charter over the remaining lease term compared to (ii) the current market charter rates for a similar contract and (iii) discounted using the Company’s relevant discount factor of %.
As of DecemberMarch 31, 2015,2021, Navios Partners previously held money market fundsinterest of $418% in Navios Containers was remeasured to a fair value of $, determined using the closing price per common unit of $9.23 of NMCI as of the closing date of the NMCI merger, resulting in revaluation gain of $which along with durationthe equity gain of less than three months.
Cash deposits and cash equivalents in excess$from the operations of amounts covered by government-provided insurance are exposedNavios Containers upon the closing date aggregate to lossa gain on acquisition of control in the eventamount ofnon-performance by financial institutions. $and is presented in, “Equity in net earnings of affiliated companies”, in the accompanying Consolidated Statement of Operations. The acquisition of the remaining interest of % through the issuance of newly issued common units in Navios Partners does maintain cash deposits and equivalents in excesswas recorded at a fair value of government-provided insurance limits. Navios Partners also reduces exposure to credit risk by dealing with$on the basis of common units issued at a diversified groupclosing price per common unit of major financial institutions.$as of the closing date of the NMCI Merger.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Restricted cash, atUpon completion of the NMCI Merger on March 31, 2021, beginning from April 1, 2021, the results of operations of Navios Containers are included in Navios Partners’ Consolidated Statements of Operations. Total time charter and voyage revenues and net income of Navios Containers for the period from April 1, 2021 to December 31, 2016,2021 included $2,228, which relatedin the Consolidated Statement of Operations amounted to amounts held$168,322 and $182,479, respectively.
Transaction costs amounted to $and have been expensed in retention accounts as required by certainthe Consolidated Statement of Operations under the caption “Transaction costs” in the accompanying Consolidated Statements of Operations.
The following table summarizes the consideration exchanged and the fair value of assets acquired and liabilities assumed on March 31, 2021:
Acquisition of Navios Containers - Schedule of recognized identified assets acquired and liabilities
Purchase price: | ||
Fair value of previously held interest (35.7%) | $ | 106,997 |
Equity issuance (8,133,452 Navios Partners units * $23.56) | 191,624 | |
Total purchase price | 298,621 | |
Fair value of assets acquired and liabilities assumed: | ||
Vessels | 770,981 | |
Current assets (including cash of $10,282) | 29,033 | |
Unfavorable lease terms | (224,490) | |
Long term debt and financial liabilities assumed (including current portion) | (227,434) | |
Current liabilities | (5,416) | |
Fair value of net assets acquired | 342,674 | |
Bargain gain | $ | 44,053 |
The acquired intangible, listed below, as determined at the acquisition date and are amortized under the straight line method over the period indicated below:
Acquisition of Navios Containers - Lease Future Amortization Income
Within One Year | Year Two | Year Three | Year Four | Year Five | Year Six | Total | ||||||||||
Time charters with unfavorable lease terms | $ | (126,710) | (52,501) | (20,431) | (12,462) | (11,445) | (941) | $ | (224,490) |
Intangible liabilities subject to amortization are amortized using straight line method over their estimated useful lives to their estimated residual value of zero.
The following is a summary of the acquired identifiable intangible liability:
Acquisition of Navios Containers - Acquired finite lived intangible
Amount | ||
Description | ||
Unfavorable lease terms | $ | (224,490) |
ACQUISITION OF NAVIOS ACQUISITION
On (date of obtaining control), Navios Partners purchased newly issued shares of Navios Acquisition, thereby acquiring a controlling interest of % in Navios Acquisition, and the results of operations of Navios Acquisition are included in Navios Partners’ credit facilitiesconsolidated statements of operations commencing on August 26, 2021.
On October 15, 2021, Navios Partners completed the merger with Navios Acquisition (the “NNA Merger” and an amounttogether with the NMCI Merger, the “Mergers”) and as a result thereof, Navios Acquisition became a wholly-owned subsidiary of $5,500Navios Partners. Each outstanding share of common stock of Navios Acquisition that was held as securityby a stockholder other than Navios Partners was converted into the right to receive of a common unit of Navios Partners. As a result of the NNA Merger, 3,388,226 common units of Navios Partners were issued to former public stockholders of Navios Acquisition.
Navios Partners accounted for the control obtained “as a business combination”, which resulted in the formapplication of a letterthe “acquisition method,” as defined under ASC 805, Business Combinations, as well as the recognition of guarantee, relatingthe equity interest in Navios Acquisition not held by Navios Partners to its fair value at the charteringdate the controlling interest is acquired by Navios Partners as noncontrolling interest on the consolidated balance sheet. The excess of a vessel. Restricted cash, at December 31, 2015 included $7,789, which related to amounts held in retention accounts as required by certainthe fair value of Navios Partners’ credit facilities.
NOTE 4 – ACCOUNTS RECEIVABLE, NET
Accounts receivable consistAcquisition’s identifiable net assets acquired of $over the fair value of the following:
December 31, 2016 | December 31, 2015 | |||||||
Accounts receivable | $ | 10,022 | $ | 3,999 | ||||
Less: Provision for doubtful receivables | — | — | ||||||
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Accounts receivable, net | $ | 10,022 | $ | 3,999 | ||||
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Charges to provisions for doubtful accounts are summarized as follows:
Allowance for doubtful receivables | Balance at beginning of period | Charges to costs and expenses | Amount utilized | Balance at end of period | ||||||||||||
Year ended December 31, 2016 | $ | — | $ | — | $ | — | $ | — | ||||||||
Year ended December 31, 2015 | $ | (49 | ) | $ | — | $ | 49 | $ | — | |||||||
Year ended December 31, 2014 | $ | (613 | ) | $ | — | $ | 564 | $ | (49 | ) |
NOTE 5 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses consideration transferred of $and other current assets consistthe fair value of the following:
December 31, 2016 | December 31, 2015 | |||||||
Prepaid voyage costs | $ | 27 | $ | 137 | ||||
Inventory | 220 | 1,160 | ||||||
Other | 1,353 | — | ||||||
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Total prepaid expenses and other current assets | $ | 1,600 | $ | 1,297 | ||||
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Inventories, which are comprisednoncontrolling interest of bunkers due to freight voyages, are valued at cost as determined on thefirst-in,first-out basis. As$, resulted in a bargain gain upon obtaining control of December 31, 2016, the amount of $1,353 represents the advances for working capital purposes for certain charter contracts.$.
NOTE 6 – VESSELS, NET
Vessels | Cost | Accumulated Depreciation | Net Book Value | |||||||||
Balance December 31, 2014 | $ | 1,358,348 | $ | (218,922 | ) | $ | 1,139,426 | |||||
Additions | 147,840 | (57,217 | ) | 90,623 | ||||||||
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Balance December 31, 2015 | $ | 1,506,188 | $ | (276,139 | ) | $ | 1,230,049 | |||||
Additions | 15,341 | (55,983 | ) | (40,642 | ) | |||||||
Vessel impairment losses | (42,231 | ) | 15,030 | (27,201 | ) | |||||||
Transfer to vessel held for sale (see Note 7) | (125,000 | ) | — | (125,000 | ) | |||||||
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Balance December 31, 2016 | $ | 1,354,298 | $ | (317,092 | ) | $ | 1,037,206 | |||||
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
To date, for eachThe fair value of the consideration of $has been treated as deemed contribution with an equal increase in total partner’s capital. The fair value of the noncontrolling interest was determined by using the Navios Acquisition’s closing price of $as of August 25, 2021 (date of obtaining control). The fair value of the vessels purchasedwas determined based on vessel valuations, obtained from independent third party shipbrokers, which are among other things, based on recent sales and purchase transactions of similar vessels. The fair value of the favorable and unfavorable lease terms (intangible assets and liabilities) were determined by reference to market data and the discounted amount of expected future cash flows. The key assumptions that were used in the discounted cash flow analysis were as follows: (i) the contracted charter rate of the acquired charter over the remaining lease term compared to (ii) the current market charter rates for a similar contract and (iii) discounted using the Company’s relevant discount factor of %.
Total time charter and voyage revenues and net loss of Navios Acquisition for the period from August 26, 2021 to December 31, 2021 included in the Consolidated Statement of Operations amounted to $ and $ , respectively.
Transaction costs amounted to $presented under the caption “Transaction costs” in the accompanying Consolidated Statements of Operations.
The following table summarizes the fair value of the consideration transferred the fair value of assets acquired and liabilities assumed and the fair value of the noncontrolling interest in Navios Acquisition assumed on August 25, 2021:
Acquisition of Navios Acquisition - Schedule of recognized identified assets acquired and liabilities
Purchase consideration: | ||
Fair value of the consideration | $ | 150,000 |
Fair value of noncontrolling interest (37.6%) | 57,635 | |
Total purchase consideration | 207,635 | |
Fair value of Navios Acquisition’s assets acquired and liabilities assumed: | ||
Vessels | 1,003,040 | |
Other long-term assets | 27,291 | |
Operating lease assets | 128,619 | |
Current assets (including cash and restricted cash of $32,394) | 64,180 | |
Favorable lease terms | 112,139 | |
Unfavorable lease terms | (6,529) | |
Long term debt and financial liabilities assumed (including current portion) | (811,608) | |
Operating lease liabilities (including current portion) | (128,619) | |
Current liabilities | (176,916) | |
Fair value of Navios Acquisition’s net assets | 211,597 | |
Bargain gain upon obtaining control | $ | 3,962 |
The intangible assets and liabilities, listed below, as determined at the date of obtaining control and are amortized under the straight line method over the period indicated below:
Acquisition of Navios Acquisition - Lease Future Amortization Income
Within One Year | Year Two | Year Three | Year Four | Year Five | Year Six and thereafter | Total | ||||||||||
Time charters with favorable lease terms | $ | 24,398 | 18,232 | 18,156 | 17,702 | 11,182 | 22,469 | $ | 112,139 | |||||||
Time charters with unfavorable lease terms | $ | (4,672) | (1,857) | 0 | 0 | 0 | 0 | $ | (6,529) |
Intangible assets and liabilities subject to amortization are amortized using straight line method over their estimated useful lives to their estimated residual value of zero.
The following is a summary of the identifiable intangible asset and liability at the date of obtaining control:
Acquisition of Navios Acquisition - Acquired finite lived intangible
Amount | ||
Description | ||
Favorable lease terms | $ | 112,139 |
Unfavorable lease terms | $ | (6,529) |
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
If the acquisitions of Navios Containers and Navios Acquisition had been consummated as of January 1, 2020, Navios Partners’ pro-forma revenues and net income for the year ended December 31, 2021 would have been $and $, respectively, and for the year ended December 31, 2020 would have been $and $, respectively. These pro-forma results do not include non-recurring items directly related to the business combinations as follows: (a) the gain on remeasurement of the previously held interest on Navios Containers and the equity gain from the operations of Navios Containers upon the closing date in the amount of $; (b) the total bargain gain in the amount of $; and (c) the transaction costs related to the Mergers in the amount of $11,169. The pro forma results are for comparative purposes only and do not purport to be indicative of the results that would have actually been obtained if the acquisition of Navios Containers and the consolidation of Navios Acquisition had occurred at the beginning of the period presented. In addition, these results are not intended to be a projection of future results and do not reflect any synergies that might be achieved from the combined operations.
NOTE 4 – CASH AND CASH EQUIVALENTS
Cash and cash equivalents
Cash and cash equivalentsconsist of the following:
December 31, 2021 | December 31, 2020 | ||||
Cash and cash equivalents | $ | 159,467 | $ | 19,303 | |
Restricted cash | 9,979 | 11,425 | |||
Total cash and cash equivalents and restricted cash | $ | 169,446 | $ | 30,728 |
As of December 31, 2021 and December 31, 2020, restricted cash amounted to $9,979and $11,425, respectively and relates to amounts held in retention accounts in order to service debt and interest payments, as required by certain of the Company’s credit facilities and financial liabilities.
Cash deposits and cash equivalents in excess of amounts covered by government-provided insurance are exposed to loss in the event of non-performance by financial institutions. Navios Partners does maintain cash deposits and equivalents in excess of government-provided insurance limits. Navios Partners also minimizes exposure to credit risk by dealing with a diversified group of major financial institutions.
NOTE 5 – ACCOUNTS RECEIVABLE, NET
Accounts receivable, net
Accounts receivable consisted of the following:
Accounts Receivable, net - Lessen by Provision for Doubtful Accounts
December 31, 2021 | December 31, 2020 | ||||
Accounts receivable | $ | 26,764 | $ | 19,959 | |
Less: Provision for credit losses | (2,990) | (2,990) | |||
Accounts receivable, net | $ | 23,774 | $ | 16,969 |
Charges to provisions for credit lossesare summarized as follows: Accounts Receivable, net - Changes to provisions for credit losses
Allowance for credit losses | Balance at beginning of period | Charges to costs and expenses | Amount utilized | Balance at end of period | |||||||
Year ended December 31, 2021 | $ | (2,990) | $ | 0 | $ | 0 | $ | (2,990) | |||
Year ended December 31, 2020 | $ | (1,495) | $ | (1,495) | $ | 0 | $ | (2,990) | |||
Year ended December 31, 2019 | $ | (1,495) | $ | 0 | $ | 0 | $ | (1,495) |
Concentration of credit risk with respect to accounts receivable is limited due to the Company's large number of customers, who are internationally dispersed and have a variety of end markets in which they sell. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Company's trade receivables.For the year ended December 31, 2021, one customer accounted for 14.5% of the Company’s total revenues. For the year ended December 31, 2020, three customers accounted for 23.4%, 19.5% and 11.4%, respectively, of the Company’s total revenues and for the year ended December 31, 2019, three customers accounted for 25.9%, 12.3% and 10.9%, respectively, of the Company’s total revenues.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
NOTE 6 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
Prepaid expenses and other current assets
Prepaid Expenses And Other Current Assets
December 31, 2021 | December 31, 2020 | ||||
Prepaid voyage costs | $ | 2,829 | $ | 284 | |
Inventories | 21,072 | 6,267 | |||
Claims receivable | 5,568 | 633 | |||
Other | 3,651 | 899 | |||
Total prepaid expenses and other current assets | $ | 33,120 | $ | 8,083 |
Inventories are comprised of bunkers, lubricants and stores remaining on board as of December 31, 2021.
Claims receivable mainly represent claims against vessels' insurance underwriters in respect of damages arising from accidents or other insured risks, as well as claims under charter contracts.
NOTE 7 – VESSELS, NET
Vessels, net
Vessels, net
Vessels | Cost | Accumulated Depreciation | Net Book Value | |||||
Balance December 31, 2018 | $ | 1,360,231 | $ | (316,981) | $ | 1,043,250 | ||
Additions/ (Depreciation) | 113,391 | (52,088) | 61,303 | |||||
Disposals | (5,696) | 81 | (5,615) | |||||
Vessels impairment loss | (97,170) | 60,490 | (36,680) | |||||
Balance December 31, 2019 | $ | 1,370,756 | $ | (308,498) | $ | 1,062,258 | ||
Additions/ (Depreciation) | 110,416 | (54,884) | 55,532 | |||||
Disposals | (5,233) | 158 | (5,075) | |||||
Vessels impairment loss | (161,199) | 89,622 | (71,577) | |||||
Balance December 31, 2020 | $ | 1,314,740 | $ | (273,602) | $ | 1,041,138 | ||
Additions/ (Depreciation) | 1,996,820 | (98,739) | 1,898,081 | |||||
Disposals | (90,933) | 4,284 | (86,649) | |||||
Balance December 31, 2021 | $ | 3,220,627 | $ | (368,057) | $ | 2,852,570 |
During the years ended December 31, 2021 and 2020, the Company capitalized certain extraordinary fees and costs related to vessels' regulatory requirements, including ballast water treatment system installation and exhaust gas cleaning system installation, amounted to $11,408 and $3,366, respectively, and are presented under the caption “Acquisition of/ additions to vessels, net of cash acquired” in the Consolidated Statements of Cash Flows (see Note 18 — Transactions with related parties and affiliates).
Acquisition of Vessels
2021
Upon acquisition of the majority of outstanding stock of Navios Acquisition and the completion of the NMCI Merger, the fleets of Navios Acquisition and Navios Containers were included in Navios Partners’ owned fleet (see Note 3 – Acquisition of Navios Containers and Navios Acquisition).
On July 9, 2021, Navios Partners acquired the Navios Azimuth, a -built vessel of dwt, from its affiliate, Navios Holdings, for an acquisition cost of $(including $ capitalized expenses) (see Note 18 – Transactions with related parties and affiliates).
On June 30, 2021, Navios Partners acquired the Navios Ray, a -built vessel of dwt and the Navios Bonavis, a -built vessel of dwt, from its affiliate, Navios Holdings, for an aggregate purchase price of $(see Note 18 — Transactions with related parties and affiliates).
On June 4, 2021, Navios Partners acquired the Navios Koyo, a -built vessel of dwt, from its affiliate, Navios Holdings, for an acquisition cost of $(including $ capitalized expenses) (see Note 18 — Transactions with related parties and affiliates).
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
On May 10, 2021, Navios Partners acquired the Ete N, a -built of TEU, the Fleur N, a -built of TEU and the Spectrum N, a -built of TEU from Navios Acquisition, for an aggregate purchase price of $(see Note 18 — Transactions with related parties and affiliates).
On March 30, 2021, Navios Partners acquired the Navios Avior, a built vessel of dwt, and the Navios Centaurus, a built vessel of dwt, from its affiliate, Navios Holdings, for an acquisition cost of $(including $capitalized expenses), including working capital balances of $(5,766) (see Note 18 — Transactions with related parties and affiliates).
The acquisition of the individual vessels from Navios Holdings (except for the vessel acquisitionNavios Koyo) and Navios Acquisition was effected through the acquisition of all of the capital stock of the respective vessel-owning companies, which held the ownership and other contractual rights and obligations related to each of the acquired vessels, including the vessel and acharter-out contract.vessels. Management accounted for each acquisition as an asset acquisition. Atacquisition under ASC 805.
2020
On September 30, 2020, Navios Partners acquired the transaction date,Navios Gem, a -built vessel of dwt and the Navios Victory, a -built vessel of dwt, from its affiliate, Navios Holdings, for a purchase price approximated theof $(see Note 18 — Transactions with related parties and affiliates).
On June 29, 2020, Navios Partners acquired five drybulk vessels, three Panamax and two Ultra-Handymax, for a fair value of $56,050 in total, following the assets acquired, which was determined based on a combinationliquidation of methodologies including discounted cash flow analysesNavios Europe II (see Note 18 — Transactions with related parties and independent valuation analyses. The consideration paid, for each of these transactions, was allocated between the intangible assets (favorable lease term) and the vessel value.affiliates).
Acquisition of vessels2019
2016
On December 30, 2016,16, 2019, Navios Partners acquired 4drybulk vessels, from an entity affiliated with the Company's Chairwoman and CEO, for a fair value of $40,379, in total, through bank financing of $37,000 (see Note 18 — Transactions with related parties and affiliates).
On December 13, 2019, Navios Partners acquired three Sub-Panamax and two Panamax Containerships for a fair value of $56,083, in total, following the liquidation of Navios Europe I (see Note 18 — Transactions with related parties and affiliates).
Sale of Vessels
2021
On October 29, 2021, Navios Partners sold the Navios Altair I, a -built Panamax vessel of dwt, to an unrelated third party for a net sales price of $. The aggregate net carrying amount of the Navios Beaufiks, a 2004-Japanese-built Capesize vessel, including the remaining carrying balance of 180,310 dwt, for an acquisitiondry-dock and special survey cost of $15,341.$, amounted to $as at the date of the sale.
2015
On April 22, 2015,August 16, 2021, Navios Partners acquired fromsold the Harmony N, a 2006-built Containership of 2,824 TEU, to an unrelated third party for a net sales price of $28,420.
On August 13, 2021, Navios Partners sold the MSC Cristina,Navios Azalea, a 2011 South Korean-built Container-built Panamax vessel of 13,100 TEU, for an acquisition cost of $147,840, of which $14,802 relatesdwt, to vessel deposits paid and transferred during the year.
2014
On October 28, 2014, Navios Partners acquired from an unrelated third party for a net sales price of $. The aggregate net carrying amount of the YM Unity, a 2006-built Container vessel, including the remaining carrying balance of 8,204 TEU, for an acquisitiondry-dock and special survey cost of $59,095.$, amounted to $as at the date of the sale.
On August 29, 2014,July 31, 2021, Navios Partners acquired fromsold the Navios Dedication, a -built Containership of TEU to an unrelated third party for a net sales price of $.
On March 25, 2021, the YM Utmost,Company sold the Joie N, a 2006-built Container2011-built Ultra-Handymax vessel of 8,204 TEU, for an acquisition cost of $59,092.
On January 18, 2014, Navios Partners acquired from56,557 dwt, to an unrelated third party, for a net sales price of $8,190.
On February 10, 2021, the Navios Sun,Company sold the Castor N, a 2005-built Panamax vessel2007-built Containership of 76,619 dwt, for an acquisition cost of $16,176, of which $1,583 was transferred from vessel deposits.
On January 7, 2014, Navios Partners acquired from3,091 TEU to an unrelated third party for a net sales price of $8,869.
On January 28, 2021, the Company sold the Solar N, a 2006-built Containership of 3,398 TEU to an unrelated third party for a net sales price of $11,074.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
On January 13, 2021, the Company sold the Esperanza N, a 2008-built Containership of 2,007 TEU to an unrelated third party for a net sales price of $4,559.
Following the sale of the vessels during the year ended December 31, 2021, the aggregate net amount of $33,625, was presented under the caption “Gain on sale of vessels, net” in the Consolidated Statements of Operations.
2020
On December 10, 2020, Navios Partners sold the Navios La Paix,Soleil to an unrelated third party for a 2014-built Ultra-Handymaxnet sales price of $. The aggregate net carrying amount of the vessel, including the remaining carrying balance of 61,485 dwt, for an acquisitiondry dock and special survey cost of $28,478,$, amounted to $as at the date of which $5,688sale. Following the impairment loss of $, recognized as of December 31, 2020, no loss on sale occurred upon the sale of the vessel.
2019
On April 23, 2019, Navios Partners sold the Navios Galaxy I to an unrelated third party, for a net sales price of $. Following the impairment loss of $recognized as of March 31, 2019, no loss on sale occurred upon the sale of the vessel.
Vessels impairment loss
2021
As of December 31, 2021, events and circumstances did not trigger the existence of potential impairment of the vessels, mainly due to the market improvement. As a result, there was transferred from vessel deposits.no impairment charge for the year ended December 31, 2021.
Vessel impairment losses2020
On January 9, 2017,In November 2020, Navios Partners entered into a Memorandum of Agreement with an unrelated third party for the disposalsale of the Navios ApollonCastor N for a net salesales price of $4,750.$8,869. The vessel iswas subject to an existing time charter with an unrelated charterer and was not immediately available for sale and therefore, did not qualify as an asset held for sale as of December 31, 2016.2020. As of December 31, 2016,2020, the Company had a current expectation that the vessel would be sold before the end of its previously estimated useful life, and as a result performed an impairment test of the specific asset group. An impairment loss of $10,008 $2,026 has been recognized under the line item “Vesselcaption “Vessels impairment losses”loss” in the Consolidated Statements of Operations.
In October 2020, Navios Partners entered into a Memorandum of Agreement with an unrelated third party for the sale of the Esperanza N for a net sales price of $4,559. The vessel was subject to an existing time charter with an unrelated charterer and was not immediately available for sale and therefore, did not qualify as an asset held for sale as of December 31, 2020. As of September 30, 2020, the Company had a current expectation that the vessel would be sold before the end of its previously estimated useful life, and as a result performed an impairment test of the specific asset group. An impairment loss of $1,780 has been recognized under the caption “Vessels impairment loss” in the Consolidated Statements of Operations as of December 31, 2020. The vessel was sold on January 13, 2021.
2019
On March 21, 2019, Navios Partners entered into a Memorandum of Agreement with an unrelated third party for the sale of the Navios Galaxy I for a net sales price of $. The vessel was subject to an existing time charter with an unrelated charterer and was not immediately available for sale and therefore, did not qualify as an asset held for sale as of March 31, 2019. As of March 31, 2019, the Company had a current expectation that the vessel would be sold before the end of its previously estimated useful life, and as a result performed an impairment test of the specific asset group. An impairment loss of $has been recognized under the caption “Vessels impairment loss” in the Consolidated Statements of Operations as of December 31, 2019. The vessel was sold on April 23, 2019.
NOTE 8 – INTANGIBLE ASSETS AND LIABILITIES
Intangible assets and liabilities
Intangible assets as of December 31, 2021 and December 31, 2020 consisted of the following:
Intangible Assets and Liabilities - Intangible assets, Favorable Lease
Cost | Accumulated Amortization | Net Book Value | ||||||
Favorable lease terms December 31, 2018 | $ | 83,716 | $ | (79,384) | $ | 4,332 | ||
Additions/ (Amortization) | 0 | (1,166) | (1,166) | |||||
Favorable lease terms December 31, 2019 | $ | 83,716 | $ | (80,550) | $ | 3,166 | ||
Additions/ (Amortization) | 0 | (1,166) | (1,166) | |||||
Favorable lease terms December 31, 2020 | $ | 83,716 | $ | (81,716) | $ | 2,000 | ||
Additions/ (Amortization) | 112,138 | (13,716) | 98,422 | |||||
Favorable lease terms December 31, 2021 | $ | 195,854 | $ | (95,432) | $ | 100,422 |
Table of Contents | F- 32 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
NOTE 7 – VESSEL HELD FOR SALE
During June 2016, Navios Partners entered into a Memorandum of Agreement with an unrelated third party, for the disposal of the MSC Cristina. The vessel was subject to an existing time charter and management had committed to a plan to sell the vessel to the current charterer prior to June 2017.
As of December 31, 2016, the vessel has been classified as held for sale as the relevant criteria for the classification were met and, therefore, it is presented in the consolidated balance sheets at its fair value less cost to sell totaling $125,000. An impairment loss of $17,193 for the vessel held for sale, is included under “Vessel impairment losses” in the consolidated Statements of Operations. The vessel was sold in January 2017 and proceeds from the sale of the vessel were used to fully repay the outstanding amount of the April 2015 credit facility and the June 2016 credit facility (see Note 23).
NOTE 8 – INTANGIBLE ASSETS
Intangible assets as of December 31, 2016 and 2015 consisted of the following:
Cost | Accumulated Amortization | Net Book Value | ||||||||||
Favorable lease terms December 31, 2014 | $ | 158,987 | $ | (84,932 | ) | $ | 74,055 | |||||
Additions | — | (18,716 | ) | (18,716 | ) | |||||||
Write-off | (31,199 | ) | 31,199 | — | ||||||||
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Favorable lease terms December 31, 2015 | $ | 127,788 | $ | (72,449 | ) | $ | 55,339 | |||||
Additions | — | (15,861 | ) | (15,861 | ) | |||||||
Accelerated amortization | (44,072 | ) | 23,546 | (20,526 | ) | |||||||
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Favorable lease terms December 31, 2016 | $ | 83,716 | $ | (64,764 | ) | $ | 18,952 | |||||
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Amortization expense of favorable lease terms for each of the years ended December 31, 2016, 20152021, 2020 and 20142019 is presented in the following table:
Intangible Assets and Liabilities - Amortization of Favorable Lease Terms
Year Ended | Year Ended | |||||||||||||||||||
December 31, 2016 | December 31, 2015 | December 31, 2014 | December 31, 2021 | December 31, 2020 | December 31, 2019 | |||||||||||||||
Favorable lease terms | $ | (15,861 | ) | $ | (18,716 | ) | $ | (23,287 | ) | $ | (13,716) | $ | (1,166) | $ | (1,166) | |||||
Acceleration of favorable lease terms | (20,526 | ) | — | (22,063 | ) | |||||||||||||||
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| ||||||||||||||||||
Total | $ | (36,387 | ) | $ | (18,716 | ) | $ | (45,350 | ) | $ | (13,716) | $ | (1,166) | $ | (1,166) | |||||
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The aggregate amortization of the intangibles as offor the years ending December 31, is estimated to be as follows:
Intangible Assets and Liabilities - Aggregate Amortizations of Intangible Assets
Year | Amount | |||
2017 | $ | 10,871 | ||
2018 | 3,748 | |||
2019 | 1,166 | |||
2020 | 1,166 | |||
2021 | 1,166 | |||
2022 and thereafter | 835 | |||
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$ | 18,952 | |||
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Year | Amount | |
2022 | $ | 21,836 |
2023 | 18,156 | |
2024 | 18,120 | |
2025 | 14,251 | |
2026 and thereafter | 28,059 | |
Total | $ | 100,422 |
Intangible assets subject to amortization are amortized using straight linemethod over their estimated useful lives to their estimated residual value of zero. The weighted average useful lives are 6.1 years for the remaining favorable lease terms, at inception. 0
Intangible liabilities as of December 31, 2021 and December 31, 2020 consisted of the following:
Intangible Assets and Liabilities - Intangible Assets, Unfavorable Lease
Cost | Accumulated Amortization | Net Book Value | ||||||
Unfavorable lease terms December 31, 2020 | $ | 0 | $ | 0 | $ | 0 | ||
Additions/ (Amortization) | 231,019 | (108,538) | 122,481 | |||||
Unfavorable lease terms December 31, 2021 | $ | 231,019 | $ | (108,538) | $ | 122,481 |
Amortization income of unfavorable lease terms for each of the years ended December 31, 2021, 2020 and 2019 is presented in the following table:
Intangible Assets and Liabilities - Amortization of Unfavorable Lease Terms
Year Ended | ||||||||
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||
Unfavorable lease terms | $ | 108,538 | $ | 0 | $ | 0 | ||
Total | $ | 108,538 | $ | 0 | $ | 0 |
The aggregate amortization of the intangible liabilities for the 12-month periods ending December 31 is estimated to be as follows:
Intangible Assets and Liabilities - Aggregate Amortization of Intangible Liabilities
Year | Amount | |
2022 | $ | 68,142 |
2023 | 25,889 | |
2024 | 13,184 | |
2025 | 11,680 | |
2026 and thereafter | 3,586 | |
Total | $ | 122,481 |
Intangible liabilities subject to amortization are amortized using straight line method over their estimated useful lives to their estimated residual value of zero. The weighted average useful lives are 2.7 years for the remaining unfavorable lease terms. 0
Table of Contents | F- 33 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
As of December 31, 2016, Navios Partners accelerated $20,526 of amortization of the Navios Luz and the Navios Buena Ventura favorable lease intangibles due to a change in their useful life following the termination of the Charter Party and earlyre-delivery of the vessels from Hanjin Shipping Co. on September 13, 2016.
As of December 31, 2015, acquisition cost and accumulated amortization, each amounting to $31,199, waswritten-off as the intangible asset associated with the favorable lease that was fully amortized for the Navios Fulvia.
During the year ended December 31, 2014, Navios Partners’ accelerated $22,010 of amortization of the Navios Pollux favorable lease intangible due to a change in its useful life following the termination of the credit default insurance policy (Refer to Note 22 “Other Income” for further details). The additional amount of $53 of accelerated amortization incurred through December 31, 2014, related to the expiration of the intangible assets associated with two vessels of our fleet.
Intangible assets subject to amortization are amortized using straight line method over their estimated useful lives to their estimated residual value of zero. The weighted average remaining useful lives are 10.0 years for favorable lease terms charter out.
NOTE 9 – ACCOUNTS PAYABLE
Accounts payable
Accounts payable as of December 31, 20162021 and 20152020 consisted of the following:
Accounts payable
December 31, 2016 | December 31, 2015 | December 31, 2021 | December 31, 2020 | ||||||||||
Creditors | $ | 766 | $ | 329 | $ | 10,614 | $ | 2,684 | |||||
Brokers | 1,796 | 2,112 | 6,828 | 2,786 | |||||||||
Insurances | 35 | 149 | |||||||||||
Professional and legal fees | 679 | 116 | 3,620 | 829 | |||||||||
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Total accounts payable | $ | 3,276 | $ | 2,706 | $ | 21,062 | $ | 6,299 | |||||
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NOTE 10 – ACCRUED EXPENSES
Accrued expenses
Accrued expenses as of December 31, 20162021 and 20152020 consisted of the following:
Accrued expenses
December 31, 2016 | December 31, 2015 | December 31, 2021 | December 31, 2020 | ||||||||||
Accrued voyage expenses | $ | 1,526 | $ | 1,411 | $ | 5,666 | $ | 1,436 | |||||
Accrued loan interest | 700 | 864 | 3,329 | 1,738 | |||||||||
Accrued legal and professional fees | 2,219 | 241 | 3,894 | 1,607 | |||||||||
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Total accrued expenses | $ | 4,445 | $ | 2,516 | $ | 12,889 | $ | 4,781 | |||||
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Included
As of December 31, 2021 and December 31, 2020, the amount of $320 and $630, respectively, was included in accrued legal and professional fees is the amount of $1,650 that was authorized and approved by the compensation committeeCompensation Committee of Navios Partners in December 20162021 and for which all service conditions have been met as of December 31, 2016. The compensation committee of Navios Partners also authorized and approved an additional $1,650 payment2020 to the directors and/orand officers of the Company, subject to fulfillment of certain service conditions in 2017.that were provided and completed as of December 31, 2021, and as of December 31, 2020, respectively. The total amount of $ 1,650, $0 5,738, $4,970 and $0 has been$4,645 was recorded in general and administrative expenses in the consolidated Statementsstatements of Operationsoperations for the years ended December 31, 2021, 2020 and 2019, respectively, and comprised of compensation authorized to the directors and officers of the Company.
NOTE 11 – BORROWINGS
Borrowings
Borrowings as of December 31, 2021 and December 31, 2020 consisted of the following:
Borrowings
December 31, 2021 | December 31, 2020 | ||||
Credit facilities | $ | 825,267 | $ | 427,287 | |
Financial liabilities | 549,178 | 63,882 | |||
Total borrowings | $ | 1,374,445 | $ | 491,169 | |
Less: Current portion of long-term borrowings, net | (255,137) | (201,835) | |||
Less: Deferred finance costs, net | (12,736) | (4,312) | |||
Long-term borrowings, net | $ | 1,106,572 | $ | 285,022 |
As of December 31, 2021, the total borrowings, net of deferred finance costs under the Navios Partners' credit facilities were $1,361,709.
Term Loan B Facility:On March 14, 2017, Navios Partners completed the issuance of a $405,000 Term Loan B Facility. The Term Loan B Facility bore an interest rate of LIBOR plus 500 bps, it was set to mature on September 14, 2020and was repayable in equal quarterly installments of 1.25% of the initial principal amount. Navios Partners used the net proceeds of the Term Loan B Facility to: (i) refinance a Term Loan B Facility existing at the time; and (ii) pay fees and expenses related to the Term Loan B. On August 10, 2017, Navios Partners completed the issuance of a $53,000 add-on to the Term Loan B Facility. The add-on to the Term Loan B Facility bore the same terms as the Term Loan B Facility. Navios Partners used the net proceeds to partially finance the acquisition of three vessels.
During the year ended December 31, 2016, 20152018, 4drybulk vessels were released from security of the Term Loan B Facility and 2014 respectively.in exchange, five drybulk vessels and $2,000 in cash substituted the released vessels, as collateral to the Term Loan B Facility. In April and May 2019, Navios Partners prepaid $73,478 and released 5vessels from the collateral package of the Term Loan B Facility. In August 2019, Navios Partners prepaid $85,500 and released 5vessels from the collateral package of the Term Loan B Facility. On October 10, 2019, Navios Partners fully prepaid the Term Loan B Credit Facility's outstanding balance of $253.8 million initially repayable on September 14, 2020. Following the prepayments, an amount of $1,973 and $4,101 was written off from the deferred fees and discount, respectively, and presented under the caption “Interest expense and finance costs” in the Consolidated Statement of Operations.
Table of Contents | F- 34 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
NOTE 11 – BORROWINGS
Borrowings as of December 31, 2016 and 2015 consisted of the following:
December 31, 2016 | December 31, 2015 | |||||||
Term Loan B facility | $ | 386,292 | $ | 411,292 | ||||
Credit facilities | 141,805 | 194,569 | ||||||
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| |||||
Total borrowings | $ | 528,097 | $ | 605,861 | ||||
Less: Long-term unamortized discount | (1,471 | ) | (2,464 | ) | ||||
Less: Current portion of long-term debt, net | (74,031 | ) | (23,336 | ) | ||||
Less: Deferred financing costs, net | (2,850 | ) | (5,319 | ) | ||||
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| |||||
Long-term debt, net | $ | 449,745 | $ | 574,742 | ||||
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As December 31, 2016, the total borrowings, net under the Navios Partners’ credit facilities were $523,776.
Term Loan B Credit Facility: In June 2013, Navios Partners completed the issuance of the $250,000 Term Loan B facility. The Term Loan B facility bears an interest rate of LIBOR plus 425 basis points (“bps”) and has a five-year term with 1.0% amortization profile and was issued at 98.0%.
On October 31, 2013 and November 1, 2013, Navios Partners completed the issuance of a $189,500add-on to its existing Term Loan B facility. Theadd-on to the Term Loan B facility bears the same terms as Term Loan B facility. Navios Partners used the net proceeds to partially finance the acquisition of five Container vessels.
During 2015 and 2016, Navios Partners prepaid $21,000 and $25,000, respectively, of the Term Loan B facility. These prepayments were fully applied to the balloon payment. Following the prepayment of March 2015 and May 2016, an amount of $256 and $187, respectively, waswritten-off from the deferred finance fees.
The Term Loan B facility is secured by first priority mortgages covering certain vessels owned by subsidiaries of Navios Partners, in addition to other collateral, and is guaranteed by each subsidiary of Navios Partners. On March 31, 2016, YM Unity was added as collateral to the Term Loan B facility. On November 14, 2016, six dry cargo vessels were added as collateral to the Term Loan B facility and a Capesize vessel has been added upon delivery in December 2016 in exchange for $13,500, held in the escrow account. Upon delivery of Navios Beaufiks, the amount of $13,500 was released and the vessel was added as collateral to the Term Loan B facility.
The Term Loan B Agreement requires maintenance of a loan to value ratio of 0.8 to 1.0, and other restrictive covenants customary for facilities of this type (subject to negotiated exceptions and baskets), including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Term Loan B Agreement also provides for customary events of default, prepayment and cure provisions.
As of December 31, 2016, the outstanding balance of the Term Loan B facility including theadd-on was $384,821, net of discount of $1,471, and it is repayable with a final payment of $386,292, in June 2018.
ABN AMROBNP PARIBAS Credit Facilities: On September 22, 2014,June 26, 2017, Navios Partners entered into a credit facility with ABN AMRO Bank N.V. (the “September 2014 Credit Facility”)BNP PARIBAS of up to $56,000 (divided$32,000 (divided into two 2tranches) in order to partially finance a portion of the purchase price payable in connection with the acquisition of the YM UtmostNavios Ace and the YM Unity. The September 2014 Credit Facility bears interest at LIBOR plus 300 bps per annum. During 2015,Navios Sol.On June 28, 2017, the first tranche of credit facility of $17,000 was drawn. On July 18, 2017, the second tranche of credit facility of $15,000 was drawn. On December 13, 2018, Navios Partners prepaid $21,312.repaid the outstanding balance of the first tranche in the amount of $15,070. Following this prepayment,repayment, an amount of $314 $117 waswritten-off from the deferred finance fees.
On April 28, 2021, Navios Partners entered into new credit facility with BNP PARIBAS for a total amount of $40,000 to refinance the existing credit facility dated June 26, 2017, as amended on April 9, 2019 and to finance the acquisition of two 2012 built 2,782 TEU containerships.On May 10, 2021, the full amount of the credit facility was drawn. As of December 31, 2021, the remaining outstanding balance was $37,143 and is repayable in 14equal consecutive quarterly installments of $1,429 each, with a final balloon payment of $17,140 to be repaid on the last repayment date. The facility matures in the second quarter of 2025and bears interest at LIBOR plus 285 bps per annum.
DVB Credit Facilities: On July 31, 2018, Navios Partners entered into a credit facility with DVB Bank S.E. of up to $44,000 (divided into 2tranches) in order to finance the acquisition of the Navios Sphera and the Navios Mars.The amounts of $17,500 and $26,500 were drawn on August 30, 2018. Pursuant to the supplemental letter dated March 30, 2021, the repayment was amended. As of December 31, 2021, the remaining outstanding balance of the DVB credit facility was $33,633 and is repayable in 4consecutive quarterly installments of $798 each, with a final balloon payment of $30,443 to be repaid on the last repayment date. The facility matures in the fourth quarter 2022and bears interest at LIBOR plus 290 bps per annum.
On February 12, 2019, Navios Partners entered into a credit facility with DVB Bank S.E. of up to $66,000 (divided into 4tranches) in order to refinance the DVB credit facility dated June 28, 2017 and three capesize vessels previously included in the Term Loan B collateral package. On April 15, 2019, Navios Partners drew the two tranches of $15,675 each. On October 10, 2019, Navios Partners drew the two additional tranches of $14,820 each. Pursuant to the supplemental letter dated March 30, 2021, as of December 31, 2021 the remaining outstanding balance of the facility was $41,593 and is repayable in 5consecutive quarterly installments of $1,859 each, with a final balloon payment of $32,297, to be repaid on the last repayment date. The facility matures in the first quarter of 2023and bears interest at LIBOR plus 260 bps per annum.
HCOB Credit Facilities: On September 26, 2019, Navios Partners entered into a new credit facility with Hamburg Commercial Bank AG of up to $140,000 in order to refinance eight drybulk vessels and five Containerships, previously included in the Term Loan B collateral package.On October 10, 2019, the amount of $140,000 of credit facility was drawn. The facility matured in the third quarter of 2021and bore interest at LIBOR plus 320 bps per annum. In June 2021, the outstanding balance of the loan amounting to $107,750 was prepaid and refinanced.
On May 11, 2021, Navios Partners entered into a new credit facility with Hamburg Commercial Bank for a total amount of up to $160,000, in order to: (i) refinance its existing HCOB credit facility dated September 26, 2019; (ii) refinance the existing facility of one dry bulk vessel; and (iii) to partially finance the acquisition of one dry bulk vessel.On June 8, 2021, the full amount of the credit facility was drawn. In October 2021, following the sale of one 2006-built panamax vessel, the amount of $3,836 was prepaid. Following the partial prepayment, as of December 31, 2021, the outstanding balance of the credit facility was $143,820 and is repayable in 6consecutive quarterly installments of $6,094 each and 8consecutive quarterly installments of $3,656 each, with a final balloon payment of $78,004 to be repaid on the last repayment date. The facility matures in the second quarter of 2025, bears interest at LIBOR plus 310 bps per annum.
Table of Contents | F- 35 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Hellenic Bank Credit Facility:On March 31, 2016,June 25, 2020, the YM Unity Company entered into a new credit facility with Hellenic Bank Public Company Limited in order to partially refinance the ABN credit facility dated December 12, 2019, relating to four of the containerships acquired from Navios Europe I, of up to $17,000. In the first quarter of 2021, following the sale of a 2006-built Containership of 3,398 TEU and a 2007-built Containership of 3,091 TEU, an aggregate amount of $7,893 was released and dischargedprepaid. On April 23, 2021, Navios Partners extended the credit facility with Hellenic Bank Public Company Limited dated June 25, 2020 for an amount of $8,850 in order to partially finance the acquisition of one containership from its obligations and liabilities under the September 2014 Credit Facility. Navios Acquisition.On April 28, 2021, the amount of $8,850 was drawn. In August 2021, following the sale of one 2006-built containership of 2,824 TEU, the amount of $3,998 was prepaid. In October 2021, an additional amount of $468 was prepaid. As of December 31, 2021, the remaining outstanding balance was $10,094 and is repayable in 2consecutive quarterly installments of $858 each, 2consecutive quarterly installments of $437 each, 7consecutive quarterly installments of approximately $296 each and 1 2016,quarterly installment of approximately $437 with a final balloon payment of $4,993 to be repaid on the last repayment date. The credit facility matures in the fourth quarter of 2024and bears interest at LIBOR plus a marginranging from 300 bps to 350 bps per annum.
Nordea/Skandinaviska Enskilda/NIBC Credit Facilities: On March 26, 2018, Navios Partners fullyentered into a new credit facility with Nordea Bank AB, Skandinaviska Enskilda BanKen AB and NIBC Bank N.V. of up to $14,300 (divided into 2tranches) in order to partially finance the acquisition of the Navios Symmetry and the Navios Altair I.On May 18, 2018, the first tranche of the credit facility of $7,150 was drawn. On June 1, 2018 the second tranche of the March 2018 credit facility of $7,150 was drawn. On December 13, 2018, Navios Partners repaid the outstanding balance of $28,357the second tranche in the amount of the facility with ABN AMRO Bank N.V.$6,554. Following this repayment, an amount of $340 $95 waswritten-off from the deferred finance fees. As of December 31, 2016, there2021, the outstanding balance of the credit facility was no outstanding amount under this facility.$2,978 and is repayable in 6equal consecutive quarterly installments of $298 each, with a final balloon payment of $1,190 to be repaid on the last repayment date. The facility matures in the second quarter of 2023and bears interest at LIBOR plus 300 bps per annum.
On June 23, 2016,December 28, 2018, Navios Partners entered into a new credit facility with ABN AMRONIBC Bank N.V. (the “June 2016 Credit Facility”) of up to $30,000$28,500 (divided into 3tranches) in order to be used forrefinance three Ultra-Handymax vessels, previously included in the general corporate purposesTerm Loan B collateral package. On May 8, 2019, the first tranche of the Borrower. The June 2016 Credit Facility bore interest at LIBOR plus 400 bps per annum. The final maturity date credit facility of $11,915 was January 30, 2017.drawn. On October 10, 2019, the two remaining tranches of the credit facility of $13,475 in total were drawn. Following an amendment in December 2020, 1Ultra-Handymax vessel was released from security of the credit facility and one other Handymax vessel was collateralized. As of December 31, 20162021, the outstanding balance of the credit facility was $29,000. On January 12, 2017, Navios Partners fully repaid the June 2016 Credit Facility.
Commerzbank/DVB Credit Facility:On March 27, 2015, Navios Partners prepaid $2,346 of the July 2012 Credit facility $18,873 and the prepayment was applied to 2015 installments. On January 8, 2016, Navios Partners prepaid the 2016 installments in the amount of $16,235 of the July 2012 Credit facility. On November 10, 2016, Navios Partners prepaid $28,052 in cash for the settlement of a nominal amount of $30,192 of the July 2012 Credit facility achieving a $2,140 gain on debt repayment. The prepayments of 2016 of this facility were accounted for as debt modification in accordance with ASC470Debt. Following these prepayments, an amount of $161 waswritten-off from the deferred finance fees. As of December 31, 2016, the outstanding balance of the July 2012 Credit facility was $41,855, and it wasis repayable in one 8consecutive quarterly installment of $1,600 and four quarterly installments of $2,100,$751 each, with a final balloon payment of $31,855$12,862 to be repaid on the last repayment date. The final maturity date is November 30, 2017.facility matures in the fourth quarter of 2023and bears interest at LIBOR plus 275 bps per annum.
HSHABN Credit Facility:Facilities: On April 16, 2015, Navios Partners, through certain of its wholly-owned subsidiaries,December 12, 2019, the Company entered into a term loannew credit facility agreementwith ABN Amro Bank N.V. of up to $164,000 (divided into two tranches) with HSH Nordbank AG (the “April 2015 Credit Facility”), $23,500 in order to finance a portion of the purchase price payable in connection with the acquisition of the MSC Cristina and one more super-post-panamax 13,100 TEUfive container vessel. vessels from Navios Europe I which had subsequently been refinanced from Hellenic Bank Public Company Limited in June 2020.On September 30, 2015,2020, the Company entered into a second tranchesupplemental agreement with ABN Amro Bank N.V., to extend the terms of April 2015 Credit Facilitythe then outstanding balance. The credit facility matured in the second quarter of $83,000 was cancelled. As of December 31, 2016,2021and bore interest at LIBOR plus 400 bps per annum up to February 28, 2021 and 600 bps per annum up to maturity date. In January 13, 2021, the outstanding balance of the April 2015loan amounting to $3,369 wasfully repaid.
On June 26, 2020, the Company entered into a new credit facility with ABN Amro Bank N.V. of up to $32,200 in order to finance the acquisition of the five drybulk vessels acquired from Navios Europe II.In March 2021, following the sale of one 2011-built Ultra-Handymax vessel of 56,557 dwt, the amount of $4,581 was prepaid. The facility matured in the second quarter of 2021and bore interest at LIBOR plus 400 bps per annum up to December 31, 2020 and 425 bps per annum up to maturity date. In June 2021, the outstanding balance of the loan amounting to $21,525 was prepaid and refinanced.
DORY Credit FacilityFacility: On December 16, 2019, the Company entered into a credit facility with Dory Funding DAC of up to $37,000 in order to finance the acquisition of four drybulk vessels.The facility was $70,950 scheduled to mature in the third quarter of 2022and bore interest at LIBOR plus 475 bps per annum for the first twelve-month period after the utilization date, 600 bps for the following twelve-month period and 700 bps for the period commencing 24 months after the utilization date through the termination date. On January 25, 2021, an amount of $9,500 was repaid under the facility for the release of one handymax vessel. In June 2021, the outstanding balance of the loan amounting to $24,975 was prepaid and refinanced.
NBG Credit Facility: On June 17, 2021, Navios Partners entered into a new credit facility with National Bank of Greece for a total amount of up to $43,000, in order to refinance the existing credit facilities of six dry bulk vessels.On June 18, 2021, the full amount was drawn. In August 2021, following the sale of one 2005-built Panamax vessel of 74,759 dwt, the amount of $6,019 was prepaid. As of December 31, 2021, the remaining outstanding balance was $34,401 and is repayable in 22 equal 2consecutive quarterly installments of $1,478,$1,290 each followed by 16 consecutive quarterly installments of $1,075 each, together with a final balloon payment of $38,431$14,620 to be paid on the last repayment date. The final maturity date was April 20, 2022. The April 2015 Credit Facility borefacility matures in the second quarter of 2026and bears interest at LIBOR plus 275 300 bps per annum. On January 12, 2017, Navios Partners fully repaid the April 2015 Credit Facility.
The Navios Holdings Credit Facility: In May 2015, Navios Partners entered into a term loan facility with Navios Holdings of up to $60,000 (the “Navios Holdings Credit Facility”). The Navios Holdings Credit Facility has a margin of LIBOR plus 300 bps. The final maturity date was January 2, 2017. In April 2016, the Company drew $21,000 from the Navios Holdings Credit Facility, which was fully repaid during April 2016. Following this prepayment, an amount of $600 was written off from the deferred finance fees. As of December 31, 2016, there was no outstanding amount under this facility.
Amounts drawn under the July 2012 Credit Facility are secured by first preferred mortgages on certain Navios Partners’ vessels and other collateral and are guaranteed by the respective vessel-owning subsidiary. Amounts drawn under the September 2014 Credit Facility, the April 2015 Credit Facility and the June 2016 Credit Facility are secured by first preferred mortgages on certain Navios Partners’ vessels and other collateral and are guaranteed by Navios Partners. The July 2012 Credit Facility, the September 2014 Credit Facility, the April 2015 Credit Facility and the June 2016 Credit Facility contain a number of restrictive covenants that prohibit or limit Navios Partners from, among other things: incurring or guaranteeing indebtedness; entering into affiliate
Table of Contents | F- 36 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
DNB BANK ASA Credit Facilities: On April 5, 2019, Navios Partners entered into a new credit facility with DNB Bank ASA of up to $40,000 (divided into 2tranches) in order to refinance two Capesize vessels, previously included in the Term Loan B collateral package. On October 10, 2019, the two tranches of the credit facility of $34,350 were drawn. The facility was scheduled to mature in the second quarter of 2024and bore interest at LIBOR plus 275 bps per annum. In December 2021, the outstanding balance of the loan amounting to $26,710 was prepaid and refinanced and the vessels were released from the facility.
On August 19, 2021, Navios Partners entered into a new credit facility with DNB Bank ASA for a total amount of up to $18,000, in order to finance part of the acquisition cost of the Navios Azimuth.On August 20, 2021, the full amount was drawn. As of December 31, 2021, the remaining outstanding balance was $17,360 and is repayable in 19 consecutive quarterly installments of $640 each together with a final balloon payment of $5,200 to be paid on the last repayment date. The facility matures in the third quarter of 2026and bears interest at LIBOR plus 285 bps per annum.
On December 13, 2021, Navios Partners entered into a new sustainability linked credit facility with DNB Bank ASA of up to $72,710for the refinancing of the existing credit facilities of three tanker vessels and two dry bulk vessels.On December 15, 2021, the full amount was drawn. As of December 31, 2021, the total outstanding balance was $72,710 and is repayable in 19 consecutive quarterly installments of $2,230 each following a final balloon payment of $30,340 to be paid on the last repayment date. The facility matures in the fourth quarter of 2026and bears interest at LIBOR plus a margin (ranging from 270 bps to 280 bps per annum depending on the emission efficiency ratio of the vessels as defined in the loan agreement).
CACIB Credit Facilities: On July 4, 2019, Navios Partners entered into a new credit facility with Credit Agricole Corporate and Investment Bank (“CACIB”) of up to $52,800 (divided into 4tranches) in order to refinance three Capesize vessels and one Panamax vessel, previously included in the Term Loan B collateral package.In August 2019, the three tranches of the credit facility of $36,516, in total were drawn. In October 2019, the fourth tranche of the credit facility of $16,284 was drawn. On August 23, 2021, Navios Partners prepaid $11,404 of the credit facility and released 1 vessel from the collateral package of the credit facility. The Company entered into a new sale and leaseback agreement of $15,000 for the released vessel (see also Financial Liabilities below). As of December 31, 2021, the remaining outstanding balance of the credit facility was $26,496 and is repayable in 7consecutive six-month installments of $2,300 each, with a final balloon payment of $10,396 to be repaid on the last repayment date. The facility matures in the second quarter of 2025and bears interest at LIBOR plus 275 bps per annum.
On September 28, 2020, the Company entered into a credit facility with CACIB, of up to $33,000 in order to finance the acquisition of the two drybulk vessels acquired from Navios Holdings.The facility was drawn in full on September 30, 2020 and bore interest at LIBOR plus 325 bps per annum. In March 30, 2021, the outstanding balance of the loan amounting to $32,150 was prepaid and refinanced.
On March 23, 2021, Navios Partners entered into a new credit facility with CACIB of $58,000 in order to refinance the CACIB credit facility dated September 28, 2020 and to partially finance the acquisition of the Navios Centaurus and the Navios Avior. On March 30, 2021, the full amount was drawn. As of December 31, 2021, the remaining outstanding balance was $52,400 is repayable in 17 consecutive quarterly installments of $1,600 each, together with a final balloon payment of $25,200 to be repaid on the last repayment date. The credit facility matures in the first quarter of 2026 and bears interest at LIBOR plus 300 bps per annum.
Upon completion of the NMCI Merger, Navios Partners assumed the following credit facilities:
ABN AMRO BANK N.V Facility: On December 3, 2018, Navios Containers entered into a facility agreement with ABN AMRO for an amount of up to $50,000 divided into 2tranches: (i) the first tranche is for an amount of up to $41,200 in order to refinance the outstanding debt of four containerships and to partially finance the acquisition of one containership; and (ii) the second tranche is for an amount of up to $8,800 in order to partially finance the acquisition of one containership.This loan bears interest at a rate of LIBOR plus 350 bps. Navios Containers drew the entire amount under this facility, net of the loan’s discount of $500 in the fourth quarter of 2018. On June 28, 2019, Navios Containers entered into a supplemental agreement with ABN AMRO, under which Navios Containers made a partial prepayment of the loan in the aggregate amount of $9,400 and 2containerships were released from the facility. In December 2021, following an additional supplemental agreement with the ABN AMRO, the Company made a partial prepayment of the loan in the aggregate amount of $2,000 and 3containerships were released from the facility. As of December 31, 2021, the remaining outstanding balance of the credit facility was $13,050 and is repayable in 4equal consecutive quarterly installments of $750 each, with a final balloon payment of $10,050 to be repaid on the last repayment date. The facility matures in the fourth quarter of 2022and bears interest at LIBOR plus 350 bps per annum.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
BNP Paribas Facility: On June 26, 2019, Navios Containers entered into a facility agreement with BNP Paribas for an amount of up to $54,000 to refinance the existing facilities of seven containerships. On June 27, 2019, Navios Containers drew $48,750 net of loan’s discount of $405. As of December 31, 2021, the remaining outstanding balance of the credit facility was $30,469 and is repayable in 10equal consecutive quarterly installments of approximately $1,693 each, with a final balloon payment of $13,542 to be repaid on the last repayment date. The loan bears interest at a rate of LIBOR plus 300 bps and matures in the second quarter of 2024.
Upon acquisition of the majority of outstanding stock of Navios Acquisition, Navios Partners assumed the following credit facilities:
8 1/8% First Priority Ship Mortgages:Navios Acquisition funded the approximately $aggregate redemption price with net proceeds from (i) the sale by Navios Acquisition pursuant to the NNA Merger (in reliance on the exemption from registration provided for under Section 4(a)(2) of the Securities Act) of shares of Navios Acquisition common stock to Navios Partners for an aggregate purchase price of $, and borrowings under the Hamburg Commercial Bank AG facility dated in August 2021 and BNP Paribas S.A. Bank facility dated in August 2021. The Ship Mortgage Notes were redeemed in full on .
DVB Bank S.E. and Credit Agricole Corporate and Investment Bank: On , Navios Acquisition entered into a loan agreement with DVB Bank SE and Credit Agricole Corporate and Investment Bank of up to $(divided into tranches of $each) Each tranche of the facility was repayable in installments of $each with a final balloon payment of $to be repaid on the last repayment date. The repayment started three months after the delivery of the respective vessel and bore interest at a rate of On , the outstanding balance of the loan amounting to $was prepaid and refinanced.
BNP Paribas S.A. Bank Facilities: On , Navios Acquisition, through certain of its wholly owned subsidiaries, entered into a term loan facility agreement of up to $with BNP Paribas, as agent and the lenders named therein, The credit facility was repayable in equal consecutive installments in the amount of $each, with a final balloon payment of $repaid on the last repayment date. The loan matured in . The loan bore interest at plus bps per annum. In December 2021, the outstanding balance of the loan amounting to $was fully repaid.
In , Navios Acquisition, entered into a loan facility agreement of up to $with BNP Paribas, Pursuant to an amendment in December 2021, . Following the amendment, as of December 31, 2021, the remaining outstanding balance of the credit facility was $and is repayable in equal consecutive installments in the amount of $each, with a final balloon payment of $to be repaid on the last repayment date. The facility matures in the and bears interest at plus bps per annum.
Hamburg Commercial Bank AG Facilities: In , Navios Acquisition entered into a loan facility for an amount of $The facility was repayable in equal consecutive installments of $each, with a final balloon payment of the balance to be repaid on the last repayment date. The facility was scheduled to mature in and bore interest at plus bps per annum. In , the outstanding balance of the loan amounting to $was prepaid and refinanced.
In , Navios Acquisition entered into a loan agreement with Hamburg Commercial Bank AG of up to $in order The facility was repayable in installments of $each with a final balloon payment of $repayable on the last repayment date. The facility was expected to mature in and bore interest at plus bps per annum. In October 2020, Navios Acquisition extended the maturity date of the loan to . The remaining balance of the facility was repayable in installments of $each with a final balloon payment of $repayable on the last repayment date and bore interest at plus bps per annum. In , the outstanding balance of the loan amounting to $was prepaid and refinanced.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
In , Navios Acquisition entered into a loan agreement with Hamburg Commercial Bank AG of $Pursuant to an amendment in December 2021, Following the amendment and as of December 31, 2021, the remaining outstanding balance of the credit facility was $and is repayable in ten installments of $each, and four installments of $each, with a final balloon payment of $, to be repaid on the last repayment date. The facility matures in and bears interest at plus bps per annum.
Eurobank S.A: In , Navios Acquisition entered into a loan agreement with Eurobank S.A. of $As of December 31, 2021, the remaining outstanding balance of the credit facility was $and is repayable in installments of $each with a final balloon payment of $repayable on the last repayment date. The facility matures in the and bears interest at plus bps per annum.
Financial Liabilities
In December 2018, the Company entered into two sale and leaseback agreements of $in total, with unrelated third parties for the Navios Fantastiks and the Navios Beaufiks. Navios Partners has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transfer of the vessels was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under the sale and leaseback agreements as a financial liability. Navios Partners is obligated to make 69 and 60 consecutive monthly payments, respectively, of approximately $and $each, respectively, commencing in December 2018. As of December 31, 2021, the outstanding balance under the sale and leaseback agreements of the Navios Fantastiks and the Navios Beaufiks was $in total. The agreements mature in the and , respectively, with a purchase obligation of $per vessel on the last repayment date.
On April 5, 2019, the Company entered into a new sale and leaseback agreement of $, with unrelated third parties for the Navios Sol, a -built vessel of dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. On April 11, 2019, the amount of $was drawn. Navios Partners is obligated to make 120 consecutive monthly payments of approximately $each that commenced in April 2019. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Sol was $. The agreement matures in the , with a purchase obligation of $on the last repayment date.
On June 7, 2019, the Company entered into a new sale and leaseback agreement of $, with unrelated third parties for the Navios Sagittarius, a -built vessel of dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. On June 28, 2019, the amount of $was drawn. Navios Partners is obligated to make 36 consecutive monthly payments of approximately $each that commenced in June 2019. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Sagittarius was $. The agreement matures in the , with a purchase obligation of $on the last repayment date.
On July 2, 2019, the Company entered into a new sale and leaseback agreement of $, with unrelated third parties for the Navios Ace, a -built vessel of dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. On July 24, 2019, the amount of $was drawn. Navios Partners is obligated to make 132 consecutive monthly payments of approximately $each that commenced in July 2019. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Ace was $. The agreement matures in the , with a purchase obligation of $on the last repayment date.
In June 2021, the Company entered into a new sale and leaseback agreement of $15,000, with unrelated third parties for the Navios Bonavis, a - built vessel of dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. On June 28, 2021, the amount of $was drawn. Navios Partners is obligated to make 72 consecutive monthly payments of approximately $that commenced in June 2021. The agreement matures in the , with a purchase obligation of $on the last repayment date. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Bonavis was $.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
In June 2021, the Company entered into a new sale and leaseback agreement of $18,500, with unrelated third parties for the Navios Ray, a -built vessel of dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. On June 28, 2021, the amount of $was drawn. Navios Partners is obligated to make 108 consecutive monthly payments of approximately $each that commenced in June 2021. The agreement matures in the , with a purchase obligation of $on the last repayment date. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Ray was $.
On August 16, 2021, the Company entered into a new sale and leaseback agreement of $with an unrelated third party for the Navios Pollux, a -built vessel of dwt. Navios Partners has a purchase obligation to acquire the vessel at the end of the lease term and under ASC 842-40, the transfer of the vessel was determined to be a failed sale. In accordance with ASC 842-40, the Company did not derecognize the respective vessel from its balance sheet and accounted for the amount received under the sale and leaseback agreement as a financial liability. On August 25, 2021, the amount of $was drawn. Navios Partners is obligated to make 72 consecutive monthly payments of approximately $each that commenced in August 2021. The agreement matures in the , with a purchase obligation of $on the last repayment date. As of December 31, 2021, the outstanding balance under the sale and leaseback agreement of the Navios Pollux was $.
Upon completion of the NMCI Merger, Navios Partners assumed the following financial liabilities:
On May 25, 2018, Navios Containers entered into a $119,000 sale and leaseback transaction with unrelated third parties in order to refinance the outstanding balance of the existing facilities of 18 containerships.Navios Containers has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transfer of the vessels was determined to be a failed sale. In accordance with ASC 842-40, Navios Containers did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under the sale and leaseback transaction as a financial liability. On June 29, 2018, Navios Containers completed the sale and leaseback of the first six vessels for $37,500. On July 27, 2018 and on August 29, 2018, Navios Containers completed the sale and leaseback of four additional vessels for $26,000. On November 9, 2018, Navios Containers completed the sale and leaseback of four additional vessels for $. Navios Containers did not proceed with the sale and leaseback transaction of the four remaining vessels. In July 2021, following the sale of one 2008-built container vessel of 4,250 TEU, the amount of $4,778 was prepaid. Following the prepayment, Navios Containers is obligated to make 28monthly payments in respect of all 13 vessels ranging from $254 to $797 each. Navios Containers also has an obligation to purchase the vessels at the end of the fifth year for $41,850. As of December 31, 2021, the outstanding balance under this sale and leaseback transaction was $57,135.
On March 11, 2020, Navios Containers completed a $119,060 sale and leaseback transaction with unrelated third parties to refinance the existing credit facilities of two 8,204 TEU containerships and two 10,000 TEU containerships.Navios Containers has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transfer of the vessels was determined to be a failed sale. In accordance with ASC 842-40, Navios Containers did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under the sale and leaseback transaction as a financial liability. Navios Containers drew the entire amount on March 13, 2020, net of discount of $1,191. Navios Containers also has an obligation at maturity to purchase: (i) the two 10,000 TEU containerships for $25,500 in the aggregate; and (ii) the two 8,204 TEU containerships for $18,000 in the aggregate. The sale and leaseback agreement: (i) is repayable in 28quarterly installments of $2,010 each, in the aggregate, matures in March 2027and bears interest at LIBOR plus 310 bps per annum for the two 10,000 TEU containerships; and (ii) is repayable in 20quarterly installments of: (a) $16.0 per day, in the aggregate, for the first eight installments; and (b) $6.9 per day, in the aggregate, for the remaining 12 installments, matures in March 2025and bears interest at LIBOR plus 335 bps per annum for the two 8,204 TEU containerships. As of December 31, 2021, the outstanding balance under this sale and leaseback transaction was $94,747.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Upon acquisition of the majority of outstanding stock of Navios Acquisition, Navios Partners assumed the following financial liabilities:
On , Navios Acquisition entered into a $sale and leaseback agreement with unrelated third parties to refinance the outstanding balance of the existing facility on . Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was accounted for as a failed sale. In accordance with ASC 842-40 the Company did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under sale and lease back agreement as a financial liability. In April 2018, the Company drew $under this agreement. The agreement will be repayable in equal consecutive installments of approximately $each, with a repurchase obligation of $on the last repayment date. The sale and leaseback agreement matures in and bears interest at plus bps per annum. As of December 31, 2021, the outstanding balance under this agreement was $.
In , Navios Acquisition entered into sale and leaseback agreements with unrelated third parties for $in order . Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale. Following a prepayment made in April 2021, the agreements will be repayable in equal consecutive installments of $each, followed by one quarterly installment of $ , with a purchase obligation of $to be repaid on the last repayment date. The sale and leaseback agreements mature in respectively, and bear interest at plus bps per annum. As of December 31, 2021, the outstanding balance under these agreements was $.
In , Navios Acquisition entered into an additional sale and leaseback agreement of $, with unrelated third parties in order to refinance . Navios Acquisition has a purchase option in place and an assessment has been performed indicating that the likelihood of the vessel remaining in the property of the lessor at the end of the lease term is remote. In such a case, the buyer-lessor does not obtain control of the vessel and under ASC 842-40, the transaction was determined to be a failed sale. Navios Acquisition is obligated to make consecutive payments of approximately $, commencing as of August 2019, with a purchase obligation of $to be repaid on the last repayment date. The agreement matures in and bears interest at plus an implied margin of bps per annum. As of December 31, 2021, the outstanding balance under this agreement was $.
In , Navios Acquisition entered into additional sale and leaseback agreements with unrelated third parties for $in order to refinance . Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale. Following a prepayment made in April 2021, the agreements will be repaid through periods ranging from four to seven years in consecutive installments of up to $each, with a purchase obligation of $to be repaid on the last repayment date. The agreements mature in and bear interest at per annum, depending on the vessel financed. As of December 31, 2021, the outstanding balance under this agreement was $.
In , Navios Acquisition entered into sale and leaseback agreements with unrelated third parties for $in order to refinance . Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale. The agreements will be repaid through periods ranging from three to eight years in consecutive installments of up to $each, with a repurchase obligation of up to $in total. The sale and leaseback arrangements bear interest at per annum, depending on the vessel financed. As of December 31, 2021, the outstanding balance under these agreements was $.
In , Navios Acquisition entered into sale and leaseback agreements with unrelated third parties for $in order to refinance . Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale. Following a prepayment made in April 2021, the agreements will be repaid through periods ranging from four to seven years in consecutive installments of up to $each, with a repurchase obligation of up to $in total. The sale and leaseback arrangements bear interest at per annum, depending on vessel financed. As of December 31, 2021, the outstanding balance under the agreements was $.
As of December 31, 2021, the security deposits under certain sale and leaseback agreements were $10,078, and are presented under “Other long-term assets” in the Consolidated Balance Sheets.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Amounts drawn of the credit facilities are secured by first preferred mortgages on certain Navios Partners’ vessels and other collateral and are guaranteed by the respective vessel-owning subsidiaries. The credit facilities and certain financial liabilities contain a number of restrictive covenants that prohibit or limit Navios Partners from, among other things: incurring or guaranteeing indebtedness; entering into affiliate transactions; charging, pledging or encumbering the vessels; changing the flag, class, management or ownership of Navios Partners’ vessels; changing the commercial and technical management of Navios Partners’ vessels; selling or changing the beneficial ownership or control of Navios Partners’ vessels; not maintaining Navios Holdings’ (or its affiliates), Angeliki Frangou’s or their affiliates’ ownership in Navios Partners of at least 15.0%5.0%; and subordinating the obligations under the credit facilities to any general and administrative costs relating to the vessels, including the fixed daily fee payable under the management agreement.Management Agreements.
The July 2012 Credit Facility, the September 2014 Credit Facility, the April 2015 Credit FacilityCompany’s credit facilities and the June 2016 Credit Facilitycertain financial liabilities also require compliance with a number of financial covenants, including: (i) maintain a required security amount ranging over 105% to 140%; (ii) minimum free consolidated liquidity in an amount equal to $500 per owned vessel and a number of $15,000vessels as at December 31, 2016defined in the Company’s credit facilities and at least the higher of $20,000 and the aggregate of interest and principal falling due during the previous six months all the other times;financial liabilities; (iii) maintain a ratio of EBITDA to interest expense of at least 2.00:1.00; (iv) maintain a ratio of total liabilities or total debt to total assets (as defined in ourthe Company’s credit facilities) ranging offrom less than 0.75 or 0.80:1.00;to 0.80; and (v) maintain a minimum net worth ranging from $30,000 to $135,000 for the periods prior to any distributions by the Company. $135,000.
It is an event of default under the credit facilities and certain financial liabilities if such covenants are not complied with in accordance with the terms and subject to the prepaymentprepayments or cure provisionprovisions of each facility.the facilities.
As of December 31, 2016,2021, Navios Partners was in compliance with the financial covenants and/or the prepaymentprepayments and/or the cure provisions, as applicable, in each of its credit facilities.facilities and certain financial liabilities.
The annualized weighted average interest rates of the Company’s total borrowings were 4.1%, 4.5% and 6.7% for the years ended December 31, 2021, 2020 and 2019, respectively.
The maturity table below reflects the gross principal payments due under itsfor the next five years and thereafter of all borrowings of Navios Partners outstanding as of December 31, 2021, based on the repayment schedules of the respective credit facilities for the12-month periods ended December 31:and financial liabilities (as described above).
Year | Amount | |||
2017 | $ | 76,767 | ||
2018 | 392,204 | |||
2019 | 5,913 | |||
2020 | 5,913 | |||
2021 | 5,913 | |||
2022 and thereafter | 41,387 | |||
|
| |||
$ | 528,097 | |||
|
|
Borrowings - Maturities of Long Term Debt
Year | Amount | |
2022 | $ | 260,200 |
2023 | 284,903 | |
2024 | 224,023 | |
2025 | 328,527 | |
2026 | 162,121 | |
2027 and thereafter | 114,671 | |
Total | $ | 1,374,445 |
NOTE 12 – FAIR VALUE OF FINANCIAL INSTRUMENTSFair value of financial instruments
The carrying value amounts of many of Navios Partners’Partners' financial instruments, including cash and cash equivalents, restricted cash, accounts receivable and accounts payable and amounts due to related parties approximate their fair value due primarily to the short-term maturity of the related instruments.
Fair value of financial instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents and restricted cash:equivalents: The carrying amounts reported in the consolidated balance sheetsConsolidated Balance Sheets for interest bearing deposits and money market funds approximate their fair value because of the short maturity of these investments.
Other long-term debt, net:Restricted Cash: The carrying amounts reported in the Consolidated Balance Sheets for interest bearing deposits approximate their fair value because of the short maturity of these investments.
Amounts due from related parties, short-term: The book value has been adjusted to reflectcarrying amount of due from related parties, short-term reported in the net presentation of deferred financing costs. The outstanding balance of floating rate loans continues to approximateConsolidated Balance Sheets approximates its fair value excludingdue to the effectshort-term nature of any deferred finance costs.
Amounts due from related parties, long-term: The carrying amount of due from related parties long-term reported in the balance sheet approximates its fair value due to the long-term nature of these receivables.
Notes receivable, net of current portion: The carrying amount of the fixed rate notes receivable approximates its fair value.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Term Loan B facility:Amounts due to related parties, short-term: The carrying amount of due to related parties, short-term reported in the Consolidated Balance Sheets approximates its fair value due to the short-term nature of the Company’s debt is estimated based on currently available debt with similar contract terms, interest rate and remaining maturities, as well as taking into account our creditworthiness. these payables.
Long-term borrowings, including current portion, net: The book value has been adjusted to reflect the net presentation of deferred finance costs.
Due The outstanding balance of the floating rate loans and financial liabilities continues to related parties, short-term: The carrying amount of due to related parties, short-term reported in the balance sheet approximatesapproximate its fair value, due toexcluding the short-term natureeffect of these payables.any deferred finance costs.
Due to related parties, long-term: The carrying amount of due to related parties, long-term reported in the balance sheet approximates its fair value due to the long-term nature of these payables.
Due from related parties: The carrying amount of due from related parties reported in the balance sheet approximates its fair value.
The estimated fair values of the Navios Partners’Partners' financial instruments are as follows:
Fair value of financial instruments
December 31, 2016 | December 31, 2015 | |||||||||||||||
Book Value | Fair Value | Book Value | Fair Value | |||||||||||||
Cash and cash equivalents | $ | 17,360 | $ | 17,360 | $ | 26,750 | $ | 26,750 | ||||||||
Restricted cash | $ | 7,728 | $ | 7,728 | $ | 7,789 | $ | 7,789 | ||||||||
Loans receivable from affiliates | $ | 2,422 | $ | 2,422 | $ | 1,521 | $ | 1,521 | ||||||||
Amounts due to related parties, short-term | $ | — | $ | — | $ | (8,680 | ) | $ | (8,680 | ) | ||||||
Amounts due to related parties, long-term | $ | 11,105 | $ | 11,105 | $ | — | $ | — | ||||||||
Amounts due from related parties | $ | 19,639 | $ | 19,639 | $ | — | $ | — | ||||||||
Term Loan B facility, net | $ | (382,653 | ) | $ | (360,700 | ) | $ | (404,977 | ) | $ | (406,410 | ) | ||||
Other long-term debt, net | $ | (141,124 | ) | $ | (141,805 | ) | $ | (193,102 | ) | $ | (194,569 | ) | ||||
Notes receivable | $ | 6,112 | $ | 6,112 | $ | — | $ | — |
December 31, 2021 | December 31, 2020 | ||||||||||
Book Value | Fair Value | Book Value | Fair Value | ||||||||
Cash and cash equivalents | $ | 159,467 | $ | 159,467 | $ | 19,303 | $ | 19,303 | |||
Restricted cash | $ | 9,979 | $ | 9,979 | $ | 11,425 | $ | 11,425 | |||
Amounts due from related parties, short-term | $ | 0 | $ | 0 | $ | 5,000 | $ | 5,000 | |||
Amounts due from related parties, long-term | $ | 35,245 | $ | 35,245 | $ | 0 | $ | 0 | |||
Amounts due to related parties, short-term | $ | (64,204) | $ | (64,204) | $ | (35,979) | $ | (35,979) | |||
Notes receivable, net of current portion | $ | 0 | $ | 0 | $ | 8,013 | $ | 8,013 | |||
Long-term borrowings, including current portion, net | $ | (1,361,709) | $ | (1,374,445) | $ | (486,857) | $ | (491,169) |
Fair Value Measurements
The estimated fair value of ourthe Company’s financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, are as follows:
Level I: Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets that we havethe Company has the ability to access. Valuation of these items does not entail a significant amount of judgment.
Level II: Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III: Inputs that are unobservable. The Company did not use any Level 3III inputs as of December 31, 20162021 and December 31, 2015.2020.
Fair Value Measurements at December 31, 2016 | ||||||||||||||||
Total | Level I | Level II | Level III | |||||||||||||
Cash and cash equivalents | $ | 17,360 | $ | 17,360 | $ | — | $ | — | ||||||||
Restricted cash | $ | 7,728 | $ | 7,728 | $ | — | $ | — | ||||||||
Loans receivable from affiliates | $ | 2,422 | $ | — | $ | 2,422 | $ | — | ||||||||
Amounts due to related parties, long-term | $ | 11,105 | $ | 11,105 | $ | — | $ | — | ||||||||
Term Loan B facility, net(1) | $ | (360,700 | ) | $ | — | $ | (360,700 | ) | $ | — | ||||||
Other long-term debt, net(1) | $ | (141,805 | ) | $ | — | $ | (141,805 | ) | $ | — | ||||||
Notes receivable(2) | $ | 6,112 | $ | — | $ | 6,112 | $ | — |
Fair value measurements on a Nonrecurring Basis
Fair Value Measurements as at December 31, 2021 | |||||||||||
Total | Level I | Level II | Level III | ||||||||
Cash and cash equivalents | $ | 159,467 | $ | 159,467 | $ | — | $ | — | |||
Restricted cash | $ | 9,979 | $ | 9,979 | $ | — | $ | — | |||
Amounts due from related parties, long-term | $ | 35,245 | $ | — | $ | 35,245 | $ | — | |||
Amounts due to related parties, short-term | $ | (64,204) | $ | — | $ | (64,204) | $ | — | |||
Long-term borrowings, net (1) | $ | (1,374,445) | $ | — | $ | (1,374,445) | $ | — | |||
Fair Value Measurements as at December 31, 2020 | |||||||||||
Total | Level I | Level II | Level III | ||||||||
Cash and cash equivalents | $ | 19,303 | $ | 19,303 | $ | — | $ | — | |||
Restricted cash | $ | 11,425 | $ | 11,425 | $ | — | $ | — | |||
Amounts due from related parties, short-term | $ | 5,000 | $ | — | $ | 5,000 | $ | — | |||
Notes receivable, net of current portion(2) | $ | 8,013 | $ | — | $ | 8,013 | $ | — | |||
Amounts due to related parties, long-term | $ | (35,979) | $ | — | $ | (35,979) | $ | — | |||
Long-term borrowings, net(1) | $ | (491,169) | $ | — | $ | (491,169) | $ | — |
(1) The fair value of the Company's debt is estimated based on currently available debt with similar contract terms, interest rate and remaining maturities as well as taking into account its creditworthiness.
(2) The fair value is estimated based on currently available information on the Company's counterparty with similar contract terms, interest rate and remaining maturities.
As of December 31, 2021, there were no assets measured at fair value on a non-recurring basis.
As of December 31, 2020, the Company’s assets measured at fair value on a non-recurring basis were:
Fair Value Measurements as at December 31, 2020 | |||||||||||
Total | Level I | Level II | Level III | ||||||||
Vessels, net | $ | 62,789 | $ | 13,428 | $ | 49,361 | $ | — |
Table of Contents | F- 43 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
The estimated fair value of our financial instruments that are measured at fair value on anon-recurring basis, categorized based upon the fair value hierarchy, are as follows:
Fair Value Measurements at December 31, 2016 | ||||||||||||||||
Total | Level I | Level II | Level III | |||||||||||||
Vessel held for sale | $ | 125,000 | $ | — | $ | 125,000 | $ | — | ||||||||
Vessels, net (for Navios Apollon) | $ | 4,750 | $ | — | $ | 4,750 | $ | — |
Fair Value Measurements at December 31, 2015 | ||||||||||||||||
Total | Level I | Level II | Level III | |||||||||||||
Cash and cash equivalents | $ | 26,750 | $ | 26,750 | $ | — | $ | — | ||||||||
Restricted cash | $ | 7,789 | $ | 7,789 | $ | — | $ | — | ||||||||
Loans receivable from affiliates | $ | 1,521 | $ | — | $ | 1,521 | $ | — | ||||||||
Term Loan B facility, net(1) | $ | (406,410 | ) | $ | — | $ | (406,410 | ) | $ | — | ||||||
Other long-term debt, net(1) | $ | (194,569 | ) | $ | — | $ | (194,569 | ) | $ | — |
NOTE 13 – ISSUANCE OF UNITS
Issuance of units
On May 21, 2021, Navios Partners entered into a new Continuous Offering Program Sales Agreement (“$110.0m Sales Agreement”) for the issuance and sale from time to time through its agent common units having an aggregate offering price of up to $110,000. As of December 31, 2021, since the commencement of the $110.0m Sales Agreement, Navios Partners has issued units and received net proceeds of $103,691. No additional sales will be made under this program. Pursuant to the issuance of the common units, Navios Partners issued general partnership units to its General Partner in order to maintain its 2.0% ownership interest. The net proceeds from the issuance of the general partnership units were approximately $2,172.
On April 9, 2021, Navios Partners entered into a Continuous Offering Program Sales Agreement (“$75.0m Sales Agreement”) for the issuance and sale from time to time through its agent common units having an aggregate offering price of up to $75,000. As of December 31, 2021, since the commencement of the $75.0m Sales Agreement, Navios Partners has issued units and received net proceeds of $73,117. No additional sales will be made under this program. Pursuant to the issuance of the common units, Navios Partners issued general partnership units to its General Partner in order to maintain its 2.0% ownership interest. The net proceeds from the issuance of the general partnership units were approximately $1,530.
On November 18, 2016, Navios Partners entered into a Continuous Offering Program Sales Agreement pursuant to which Navios Partners may issuefor the issuance and sellsale from time to time through its agent common units representing limited partner interests having an aggregate offering price of up to $25,000. During the year ended$25,000. An amended Sales Agreement was entered into on August 3, 2020. As of December 31, 2016,2021, since the commencement of sales pursuant to the amended Sales Agreement, Navios Partners has issued 244,201 common units and received net proceeds of $440.$23,918. No additional sales will be made under this program. Pursuant to the issuance of the common units, Navios Partners issued 4,984 general partnership units to its general partner in order to maintain its 2.0% general partner interest.ownership interest. The net proceeds from the issuance of the general partnership units were $10.$501.
On February 11, 2015,Pursuant to the terms of the NMCI Merger Agreement, each outstanding common unit of Navios Containers that was held by a unitholder other than Navios Partners, completed its public offeringNavios Containers and their respective subsidiaries was converted into the right to receive of 4,000,000a common unit of Navios Partners. As a result of the NMCI Merger, common units at $13.09 per unit and raised gross proceeds of approximately $52,360Navios Partners were issued to fund its fleet expansion. Theformer public unitholders of Navios Containers. Pursuant to the issuance of the common units, Navios Partners issued 165,989 general partner units, resulting in net proceeds of this offering, including the underwriting discount$3,911 (see Note 3 – Acquisition of Navios Containers and excluding offering costs of $216 were approximately $50,120. Navios Acquisition).
Pursuant to this offering,the terms of the NNA merger agreement, each outstanding common unit of Navios Containers that was held by a stockholder other than Navios Partners, was converted into the right to receive of a common unit of Navios Partners. As a result of the NNA Merger, common units of Navios Partners were issued to former public stockholders of Navios Acquisition. Pursuant to the issuance of the common units, Navios Partners issued 81,633 69,147 general partner units, resulting in net proceeds of $1,893 (see Note 3 – Acquisition of Navios Containers and Navios Acquisition).
On April 25, 2019, Navios Partners announced that its Board of Directors had approved 1-for-15reverse stock split of its issued and outstanding shares of common units and general partner units. The reverse stock split was effective on May 21, 2019 and the common units commenced trading on such date on a split adjusted basis.
In January 2019, the Board of Directors of Navios Partners authorized a common unit repurchase program for up to $50,000 of the Company's common units over a two year period. The program does not require any minimum repurchase or any specific number of common units and may be suspended or reinstated at any time in Navios Partners' discretion and without notice. Repurchases were subject to restrictions under Navios Partners' credit facilities. As of December 31, 2021, since the commencement of the common unit repurchase program, Navios Partners had repurchased and cancelled common units on a split adjusted basis, for a total cost of approximately $4,499. There were no repurchases during the year ended December 31, 2021, and the program expired in January 2021.
In December 2019, Navios Partners authorized the granting of restricted common units, which were issued on December 18, 2019, to its directors and officers, which are based solely on service conditions and vest over four years. The effect of compensation expense arising from the restricted common units described above amounted to $, $and $for the years ended December 31, 2021, 2020 and 2019, and was presented under the caption “General and administrative expenses” in the Consolidated Statements of Operations. There were no restricted common units exercised, forfeited or expired during the years ended December 31, 2021 and 2020.
In February 2019, Navios Partners authorized the granting of 25,396 restricted common units, which were issued on February 1, 2019, to its directors and officers, which are based solely on service conditions and vest over four years. The fair value of restricted common units was determined by reference to the quoted stock price on the date of grant. Compensation expense, net of estimated forfeitures, is recognized based on a graded expense model over the vesting period. Navios Partners also issued general partnership units to its general partner. Thepartner for net proceeds of $8. The effect of compensation expense arising from the issuancerestricted common units described above for the years ended December 31, 2021, 2020 and 2019, amounted to $, $and to $respectively, and was presented under the caption “General and administrative expenses” in the Consolidated Statements of Operations. There were no restricted common units exercised, forfeited or expired during each of the general partnership units were $1,069. On the same date,years ended December 31, 2021, 2020 and 2019.
In December 2018, Navios Partners completedauthorized the exercisegranting of the option previously granted to the underwriters in connection with the offering and issued 600,000 additionalrestricted common units, at the public offering price less the underwriting discount. As a result of the exercise of the option,which were issued on December 24, 2018, to its directors and officers, which are based solely on service conditions and vest over four years. Navios Partners raised additional gross proceeds of $7,854 and net proceeds, including the underwriting discount, of approximately $7,518 andalso issued 12,245 additional general partnership units to its general partner. Thepartner for net proceeds of $27. The effect of compensation expense arising from the issuancerestricted common units described above amounted to $, $and $for the years ended December 31, 2021, 2020 and 2019 respectively, and was presented under the caption “General and administrative expenses” in the Consolidated Statements of Operations. There were no restricted common units exercised, forfeited or expired during each of the years ended December 31, 2021, 2020 and 2019.
In December 2017, Navios Partners authorized the granting of restricted common units, which were issued on January 11, 2018, to its directors and officers, which are based solely on service conditions and vest over four years. The fair value of the restricted common units was determined by reference to the quoted common unit price on the date of grant. Compensation expense, net of estimated forfeitures, is recognized when it is probable that the performance criteria will be met based on a graded expense model over the vesting period. Navios Partners also issued general partnership units were $160. In addition, Navios Partners completed a private placement of 1,120,547 common units and 22,868to its general partner units at $13.09 per unit to Navios Holdings, raising additional gross proceeds of $14,967.
Navios Holdings currently owns a 19.4% interest in Navios Partners, which includes the 2.0% interest through Navios Partners’ general partner which Navios Holdings owns and controls.
On February 14, 2014, Navios Partners completed its public offering of 5,500,000 common units at $17.30 per unit and raised gross proceeds of approximately $95,150 to fund its fleet expansion. Thefor net proceeds of this$64. The effect of compensation expense arising from the restricted common units described above amounted to $, $and $for the years ended December 31, 2021, 2020 and 2019, respectively, and was presented under the caption “General and administrative expenses” in the Consolidated Statements of Operations. There were no restricted common units exercised, forfeited or expired during each of the years ended December 31, 2021, 2020 and 2019.
Table of Contents | F- 44 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
offering, includingThe effect of compensation expense arising from the underwriting discountrestricted common units granted in December 2016, amounted to $ for the year ended December 31, 2019 and excluding offering costswas presented under the caption “General and administrative expenses” in the Consolidated Statements of $306 were approximately $91,135. Pursuant to this offering,Operations.
Following the NNA Merger, Navios Partners assumed the following granded restricted common units:
In December 2018, Navios Acquisition authorized and issued 112,245 general partnership unitsin the aggregate restricted shares of common stock to its general partner.directors and officers. These awards of restricted common stock are based on service conditions only and vest over . The fair value of restricted common units was determined by reference to the quoted stock price on the date of grant or the date that the grants were exchanged upon completion of the NNA Merger. Compensation expense, net proceedsof estimated forfeitures, is recognized based on a graded expense model over the vesting period. Upon the NNA Merger, the unvested restricted common units were after exchange on a 1 to basis. The effect of compensation expense arising from the issuancerestricted common units described above for the year ended December 31, 2021 amounted to $, and was presented under the caption “General and administrative expenses” in the Consolidated Statements of Operations. There were no restricted common units exercised, forfeited or expired during the year ended December 31, 2021.
In December 2017, Navios Acquisition authorized and issued in the aggregate restricted shares of common stock to its directors and officers. These awards of restricted common stock are based on service conditions only and vest over . The fair value of restricted common units was determined by reference to the quoted stock price on the date of grant or the date that the grants were exchanged upon completion of the general partnershipNNA Merger. Compensation expense, net of estimated forfeitures, is recognized based on a graded expense model over the vesting period. Upon the NNA Merger, the unvested restricted common units were $1,942. On February 18, 2014, Navios Partners completedafter exchange on a 1 to basis. The effect of compensation expense arising from the exercise of the option previously granted to the underwriters in connection with the offering and issued 825,000 additionalrestricted common units atdescribed above for the public offering price lessyear ended December 31, 2021 amounted to $, and was presented under the underwriting discount. caption “General and administrative expenses” in the Consolidated Statements of Operations. There were no restricted common units exercised, forfeited or expired during the year ended December 31, 2021.
As of December 31, 2021, the estimated compensation cost relating to service conditions of non-vested restricted common units granted in 2017, 2018 and 2019 not yet recognized was $.
Restricted common units outstanding and not vested were units, on a resultsplit adjusted basis, as of the exercise of the option, Navios Partners raised additional gross proceeds of $14,273 and net proceeds, including the underwriting discount, of approximately $13,670 and issued 16,837 additional general partnership units to its general partner. The net proceeds from the issuance of the general partnership units were $291.December 31, 2021.
NOTE 14 – SEGMENT INFORMATIONSegment information
ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments.
Navios Partners reports financial information and evaluates its operations by charter revenues. Navios Partners does not use discrete financial information to evaluate operating results for each type of charter or by sector. As a result, management, including the chief operating decision maker, reviews operating results solely by revenue per day and operating results of the fleet as a whole, determining where to allocate resources and thusdrive business forward by examining consolidated results. Thus Navios Partners has determined that it operates under one reportable segment.
The following table sets out operating revenue by geographic region for Navios Partners’Partners' reportable segment. Revenue is allocated on the basis of the geographic region in which the customer is located. Drybulk, Containerships and container vesselsTankers operate worldwide. Revenues from specific geographic region, which contribute over 10% of total revenue, are disclosed separately.
Revenue by Geographic Region
Vessels operate on a worldwide basis and are not restricted to specific locations. Accordingly, it is not possible to allocate the assets of these operations to specific countries.
Segment Information - Revenue by Geographic Region
Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||||||||||
Asia | $ | 112,019 | $ | 133,542 | $ | 125,572 | $ | 431,631 | $ | 136,515 | $ | 119,344 | ||||||||
Europe | 54,006 | 70,121 | 64,858 | 225,349 | 71,531 | 95,542 | ||||||||||||||
North America | 13,364 | 10,557 | 19,943 | 56,195 | 18,576 | 3,118 | ||||||||||||||
Australia | 11,135 | 9,456 | 16,983 | 0 | 149 | 1,375 | ||||||||||||||
|
|
| ||||||||||||||||||
Total | $ | 190,524 | $ | 223,676 | $ | 227,356 | $ | 713,175 | $ | 226,771 | $ | 219,379 | ||||||||
|
|
|
Table of Contents | F- 45 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
NOTE 15 – INCOME TAXES
Income taxes
Marshall Islands, Malta and Liberia do not impose a tax on international shipping income. Under the laws of Marshall Islands, Malta, Cayman Islands, Liberia, British Virgin Islands and Liberia,Hong Kong, the countries of the vessel-owning subsidiaries’subsidiaries' incorporation and vessels’vessels' registration, the vessel-owning subsidiaries are subject to registration and tonnage taxes, which have been included in vessel operating expenses in the accompanying consolidated statementsConsolidated Statements of operations.Operations.
In accordance with the currently applicable Greek law, foreign flagged vessels that are managed by Greek or foreign ship management companies having established an office in Greece on the basis of the applicable licensing regime are subject to dutiestax liability towards the Greek state, which areis calculated on the basis of the relevant vessel’svessel's tonnage. A tax credit is recognized for tonnage tax (or similar tax) paid abroad, up to the amount of the tax due in Greece. The owner, the manager and the bareboat charterer or the financial lessee (where applicable) are liable to pay the tax due to the Greek state. The payment of said dutiestax exhausts the tax liability of the foreign ship owning company, the bareboat charterer, the financial lessee (as applicable) and the relevant manager against any tax, duty, charge or contribution payable on income from the exploitation of the foreign flagged vessel.
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Pursuant to Section 883 of the Internal Revenue Code of the United States, U.S. source income from the international operation of ships is generally exempt from U.S. income tax if the company operating the ships meets certain incorporation and ownership requirements. Among other things, in order to qualify for this exemption, the company operating the ships must be incorporated in a country, which grants an equivalent exemption from income taxes to U.S. corporations. All the vessel-owning subsidiaries satisfy these initial criteria.
In addition, these companies must meet an ownership test. The management of Navios Partners believes that this ownership test was satisfied prior to the IPO by virtue of a special rule applicable to situations where the ship operating companies are beneficially owned by a publicly traded company. Although not free from doubt, management also believes that the ownership test will be satisfied based on the trading volume and ownership of Navios Partners’Partners' units, but no assurance can be given that this will remain so in the future.
NOTE 16 – COMMITMENTS AND CONTINGENCIES
Commitments and contingencies
Navios Partners is involved in various disputes and arbitration proceedings arising in the ordinary course of business. Provisions have been recognized in the financial statements for all such proceedings where Navios Partners believes that a liability may be probable, and for which the amounts are reasonably estimable, based upon facts known at the date the financial statements were prepared. Management believes the ultimate disposition of these matters will be immaterial individually and in the aggregate to Navios Partners’ financial position, results of operations or liquidity.
In January 2011, Korea Line Corporation (“KLC”) which isNovember 2017, Navios Partners agreed to bareboat charter-in, under a bareboat contract, from an unrelated third party, the chartererNavios Libra, a newbuilding vessel of dwt, delivered on . Navios Partners agreed to pay in total $, representing a deposit for the option to acquire the vessel after the end of the Navios Melodia filed for receivership. The charter contract fourth year, of which the first half of $was affirmed and was performed by KLC on its original terms, following an interim suspension period until April 2016paid during which Navios Partners traded the vessel directly. On April 1, 2016, the vessel was delivered to KLCyear ended December 31, 2017 and the charter contract second half of $was resumed.
NOTE 17 – LEASES
The future minimum contractual lease income(charter-out rates are presented net of commissions and assume no off-hires days) as ofpaid during the year ended December 31, 2016, is as follows:
Amount | ||||
2017 | $ | 112,434 | ||
2018 | 82,445 | |||
2019 | 54,688 | |||
2020 | 65,862 | |||
2021 | 65,682 | |||
2022 and thereafter | 306,965 | |||
|
| |||
$ | 688,076 | |||
|
|
NOTE 18 – TRANSACTIONS WITH RELATED PARTIES AND AFFILIATES
The Navios Holdings Credit facility: In May 2015, Navios Partners entered into the Navios Holdings Credit Facility of up to $60,000. The Navios Holdings Credit Facility has a margin of LIBOR plus 300 bps. The final maturity date was January 2, 2017.2018. As of December 31, 2016, there 2021, the total amount of $, including expenses, is presented under the caption “Other long-term assets” in the Consolidated Balance Sheets.
On October 18, 2019, Navios Partners agreed to bareboat charter-in, under a bareboat contract each, from an unrelated third party, the Navios Amitie and the Navios Star, newbuilding vessels of dwt and dwt, respectively. The vessels were delivered in Navios Partner’s fleet on and , respectively. Navios Partners has the option to acquire the vessels after the end of the fourth year for the remaining period of the bareboat charters. Navios Partners had agreed to pay in total $, representing a deposit for the option to acquire the vessels after the end of the fourth year, of which $was no outstandingpaid during the year ended December 31, 2019, $was paid during the year ended December 31, 2020, and the remaining amount of $was paid upon the delivery of the vessels. As of December 31, 2021, the total amount of $, including expenses, is presented under this facility (See Note 11).
On January 25, 2021, Navios Partners agreed to bareboat charter-in, under a 15-year bareboat contract each, from an unrelated third party, 3newbuilding Capesize vessels of approximately 180,000 dwt each. Navios Partners has the options to acquire the vessels after the end of year four for the remaining period of the bareboat charters. Navios Partners agreed to pay in total $10,500, representing a deposit for the options to acquire the vessels after the end of the fourth year, of which $5,250 was paid in August 2021 and the remaining amount of $5,250 will be paid upon the delivery of the vessels. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2022 and the first half of 2023. As of December 31, 2021, the total amount of $5,333, including expenses, is presented under the caption “Other long-term assets” in the Consolidated Balance Sheets.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
On March 25, 2021, Navios Partners agreed to bareboat charter-in, under a 15-year bareboat contract, from an unrelated third party, 1newbuilding Capesize vessel, of approximately 180,000 dwt. Navios Partners has the option to acquire the vessel after the end of year four for the remaining period of the bareboat charter. Navios Partners agreed to pay in total $3,500, representing a deposit for the option to acquire the vessel after the end of the fourth year of which $1,750 was paid in August 2021 and the remaining amount of $1,750 will be paid upon the delivery of the vessel. The vessel is expected to be delivered by the first half of 2023. As of December 31, 2021, the total amount of $1,777, including expenses, is presented under the caption “Other long-term assets” in the Consolidated Balance Sheets.
Pursuant to a novation agreement dated December 20, 2021 the Company agreed to novate the shipbuilding contract and to simultaneously enter into a bareboat charter agreement to bareboat charter-in a newbuilding Panamax vessel, under a ten-year bareboat contract, from an unrelated third party. The vessel has approximately 81,000 dwt and is expected to be delivered in Navios Partners’ fleet during the second half of 2022. Navios Partners agreed to pay in total $6,316, of which $3,158 was paid in April 2021 and the remaining amount of $3,158 will be paid during the first quarter of 2022. In December 2021, Navios Partners declared its option to purchase the vessel. As of December 31, 2021, the total amount of $3,158 is presented under the caption “Deposits for vessels acquisitions” in the Consolidated Balance Sheets.
In June 2021, Navios Partners agreed to bareboat charter-in, under a ten-year bareboat contract, from an unrelated third party, 1newbuilding Capesize vessel, of approximately 180,000 dwt. Navios Partners has the option to acquire the vessel after the end of year four for the remaining period of the bareboat charter. Navios Partners agreed to pay in total $12,000, representing a deposit for the option to acquire the vessel after the end of the fourth year of which $6,000 was paid in September 2021 and the remaining amount of $6,000 will be paid upon the delivery of the vessel. The vessel is expected to be delivered by the second half of 2022. In September 2021, Navios Partners declared its option to purchase the vessel. As of December 31, 2021, the total amount of $6,082, including expenses, is presented under the caption “Other long-term assets” in the Consolidated Balance Sheets.
On June 30, 2021, Navios Partners agreed to acquire a newbuilding Panamax vessel, from an unrelated third party, for a purchase price of $34,300. The vessel has approximately 81,000 dwt and is expected to be delivered in Navios Partners’ fleet during the first half of 2023. Navios Partners agreed to pay in total $34,300, of which $3,430 was paid in July 2021 and the remaining amount of $30,870 will be paid during 2022 and first half of 2023. In January 2022, Navios Partners declared its option to purchase the vessel. As of December 31, 2021, the total amount of $3,430 is presented under the caption “Deposits for vessels acquisitions” in the Consolidated Balance Sheets.
On July 2, 2021, Navios Partners agreed to purchase four 5,300 TEU newbuilding containerships, from an unrelated third party, for a purchase price of $61,600 each. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2023 and first half of 2024. Navios Partners agreed to pay in total $18,480 in 3installments for each vessel and the remaining amount of $43,120 for each vessel plus extras will be paid upon delivery of the vessel. On August 13, 2021, the first installment of each vessel of $6,160, or $24,640 accumulated for the four vessels, was paid. As of December 31, 2021, the total amount of $24,640 is presented under the caption “Deposits for vessels acquisitions” in the Consolidated Balance Sheets.
On October 1, 2021, Navios Partners exercised its option to acquire two 5,300 TEU newbuilding containerships, from an unrelated third party, for a purchase price of $61,600 each. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2024. Navios Partners agreed to pay in total $18,480 in 3installments for each vessel and the remaining amount of $43,120 for each vessel plus extras will be paid upon delivery of the vessel. On November 15, 2021, the first installment of each vessel of $6,160, or $12,320 accumulated for the two vessels, was paid. As of December 31, 2021, the total amount of $12,320 is presented under the caption “Deposits for vessels acquisitions” in the Consolidated Balance Sheets.
In November 2021, Navios Partners agreed to purchase four 5,300 TEU newbuilding containerships (two plus two optional), from an unrelated third party, for a purchase price of $62,825 each. The vessels are expected to be delivered into Navios Partners’ fleet during the first and the second half of 2024. Navios Partners agreed to pay in total $25,130 in 4installments for each vessel and the remaining amount of $37,695 plus extras for each vessel will be paid upon delivery of the vessel. The closing of the transaction of the two optional containerships is subject to completion of customary documentation.
Upon acquisition of the majority of outstanding stock of Navios Acquisition, Navios Partners assumed the following commitments:
In September 2018, Navios Acquisition agreed to a bareboat charter-in agreement with de-escalating purchase options for Baghdad and Erbil, newbuilding Japanese VLCCs of dwt and dwt, respectively. On , Navios Acquisition took delivery of the vessel Baghdad. The average daily rate under bareboat charter-in agreement of Baghdad amounts to $. On , Navios Acquisition took delivery of the vessel Erbil. The average daily rate under bareboat charter-in agreement of Erbil amounts to $. As of December 31, 2021, the total amount of $is presented under the caption “Other long-term assets” in the Consolidated Balance Sheets.
Table of Contents | F- 47 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
In the first quarter of 2019, Navios Acquisition exercised its option to a bareboat charter-in agreement with de-escalating purchase options for Nave Electron, a newbuilding Japanese VLCC of dwt. On , Navios Partners took delivery of the vessel Nave Electron. The average daily rate under bareboat charter-in agreement of the Nave Electron amounts to $. As of December 31, 2021, the total amount of $is presented under the caption “Other long-term assets” in the Consolidated Balance Sheets.
In the second quarter of 2020, Navios Acquisition exercised its option for a fourth newbuilding Japanese VLCC of approximately dwt under a bareboat charter agreement with de-escalating purchase options and expected delivery in the . The average daily rate under this bareboat charter-in agreement will amount to $. As of December 31, 2021, the total amount of $is presented under the caption “Other long-term assets” in the Consolidated Balance Sheets.
As of December 31, 2021, the Company's future minimum lease commitments under the Company's charter-in contracts, are as follows:
Commitments and Contingencies - Future minimum contractual obligations
Year | Amount | |
2022 | $ | 38,385 |
2023 | 60,652 | |
2024 | 61,961 | |
2025 | 61,539 | |
2026 | 61,260 | |
2027 and thereafter | 436,850 | |
Total | $ | 720,647 |
Management fees:NOTE 17 – FUTURE MINIMUM CONTRACTUAL REVENUE
Future minimum contractual revenue
The future minimum contractual lease income (charter-out rates are presented net of commissions and assume no off-hires days) as of December 31, 2021, is as follows:
Future Minimum Contractual Revenue - Operating lease, Payments to be received
Year | Amount | |
2022 | $ | 649,858 |
2023 | 427,190 | |
2024 | 355,629 | |
2025 | 293,848 | |
2026 | 215,074 | |
2027 and thereafter | 404,381 | |
Total | $ | 2,345,980 |
NOTE 18 – TRANSACTIONS WITH RELATED PARTIES AND AFFILIATES
Transactions with related parties and affiliates
Vessel operating expenses: Pursuant to the amended Management Agreement, in each of October 2013, August 2014 and February 2015, the Manager, a wholly owned subsidiary of Navios Holdings, providesprovided commercial and technical management services to Navios Partners’ vessels for a daily fee of: (a) $4.0 $4.23 daily rate per Ultra-Handymax vessel; (b) $4.10 $4.33 daily rate per Panamax vessel; (c) $5.10 $5.25 daily rate per Capesize vessel; (d) $6.50 $6.70 daily rate per Container vesselContainership of TEU 6,800; (e) $7.20 $7.40 daily rate per Container vesselContainership of more than TEU 8,000;8,000 and (f) $8.50 $8.75 daily rate per very large Container vesselContainership of more than TEU 13,000 through December 31, 2015. 2019. These fixed daily fees cover the vessels' operating expenses, other than certain extraordinary fees and costs (pursuant to the terms of the management agreements).
In February 2016,August 2019, Navios Partners further amendedextended the duration of its existing Management Agreement with the Manager to fix the feesuntil January 1, 2025, with an automatic renewal for ship management services of its owned fleetan additional five years, unless earlier terminated by either party. Vessel operating expenses were fixed for two years commencing from January 1, 2020 at: (a) $4.10 $4.35 daily rate per Ultra-Handymax vessel;Vessel; (b) $4.20 $4.45 daily rate per Panamax vessel;Vessel; (c) $5.25 $5.41 daily rate per Capesize vessel;Vessel; and (d) $6.70 $6.90 daily rate per Container6,800 TEU Containership. The agreement also provides for a technical and commercial management fee of $0.05 per day per vessel and an annual increase of TEU 6,800; (e) $7.403% after January 1, 2022 unless agreed otherwise. In December 2019, the Management Agreement was further amended to include from January 1, 2020, a $6.1 daily rate per ContainerSub-Panamax/Panamax Containership.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Following the liquidation of Navios Europe I, Navios Partners acquired Sub-Panamax and Panamax Containerships and following the liquidation of Navios Europe II, Navios Partners acquired drybulk vessels, Panamax and Ultra-Handymax vessels. As per the Management Agreement, as amended in December 2019, vessel of more than TEU 8,000; and (f) $8.75 operating expenses are fixed for two years commencing from January 1, 2020 at $daily rate per very large ContainerSub-Panamax/Panamax Containership. The agreement also provides for a technical and commercial management fee of $per day per vessel and an annual increase of % after January 1, 2022 for the remaining period unless agreed otherwise.
Following the completion of the NMCI Merger, the fleet of Navios Containers is included in Navios Partners’ owned fleet and continued to be operated by the Manager (see Note 3 – Acquisition of Navios Containers and Navios Acquisition). As per the NMCI Management Agreement, vessel operating expenses are fixed for two years commencing from January 1, 2020 at: (a) $6.22 daily rate per Containership of TEU 3,000 up to 4,999, respectively; (b) $7.78 daily rate per Containership of TEU 8,000 up to 9,999, respectively; and (c) $8.27 daily rate per Containership of TEU 10,000 up to 11,999, respectively. The agreement also provides for a technical and commercial management fee of $0.05 per day per vessel and an annual increase of 3% after January 1, 2022 unless agreed otherwise.
Upon acquisition of the majority of outstanding stock of Navios Acquisition, the fleet of Navios Acquisition is included in Navios Partners’ owned fleet.and continued to be operated by Tankers Manager (see Note 3 – Acquisition of Navios Containers and Navios Acquisition). As per the NNA Management Agreement, vessel operating expenses are fixed for two years commencing from January 1, 2020 at: (a) $per day per MR2 and MR1 product tanker and chemical tanker vessel; (b) $per day per LR1 product tanker vessel; and (c) $per day per VLCC. The agreement also provides for a technical and commercial management fee of $per day per vessel, an annual increase of % after January 1, 2022 for the remaining period unless agreed otherwise.
Following completion of the Mergers, the Managers provide commercial and technical management services to Navios Partners' vessels for a daily fee of: (a) $4.45 daily per Panamax Vessel; (b) $4.35 daily per Ultra-Handymax Vessel; (c) $5.41 daily per Capesize Vessel; (d) $6.1 daily per owned container vessel of more than1,300TEU to 3,400TEU; (e) $6.22 daily rate per Containership of TEU 13,000 through3,000 up to 4,999; (f) $6.9 daily per 6,800 TEU Containership; (g) $7.78 daily rate per Containership of TEU 8,000 up to 9,999; (h) $8.27 daily rate per Containership of TEU 10,000 up to 11,999; (i) $6.83 per day per MR2 and MR1 product tanker and chemical tanker vessel; (j) $7.23 per day per LR1 product tanker vessel; and (k) $9.65 per day per VLCC.
The Management Agreements also provide for payment of a termination fee, equal to the fees charged for the full calendar year (for Navios Partners, Navios Containers and Navios Acquisition) preceding the termination date in the event the agreements are terminated on or before December 31, 2017. 2024.
Drydocking expenses under this agreement are reimbursed by Navios Partners at cost at occurrence. Effective Augustfor all vessels.
During the years ended December 31, 2016, Navios Partners could, upon request to Navios Holdings, partially or fully defer the reimbursement of dry docking2021 and other2020 certain extraordinary fees and expensescosts related to vessels’ regulatory requirements, including ballast water treatment system installation and exhaust gas cleaning system installation under the Company's Management AgreementAgreements, amounted to a later date, but not later than January 5, 2018, $11,408 and if reimbursed on a later date, such amounts would bear interest at a rate$3,366, respectively, and are presented under the caption “Acquisition of/ additions to vessels, net of 1% per annum over LIBOR.
Total management fees forcash acquired” in the Consolidated Statements of Cash Flows. During year ended December 31, 2016, 20152021, certain extraordinary fees and 2014costs related to Covid-19 measures, including crew related expenses, amounted to $59,209, $56,504$5,811 are presented under the caption of “Direct vessel expenses” in the Consolidated Statements of Operations. During year ended December 31, 2021, certain extraordinary fees and $50,359,costs related to Covid-19 measures, including crew related expenses, amounted to $2,034 are presented under the caption of “Other expense” in the Consolidated Statements of Operations.
Vessel operating expenses for each of the years ended December 31, 2021, 2020 and 2019 amounted to $191,449, $93,732and $68,188, respectively.
General and administrative expenses:Pursuant to the Administrative Services Agreement, the Manager also provides administrative services to Navios Partners, which include bookkeeping, audit and accounting services, legal and insurance services, administrative and clerical services, banking and financial services, advisory services, client and investor relations and other. TheUnder the Administrative Services Agreement, which provide for allocable general and administrative costs, the Manager is reimbursed for reasonable costs and expenses incurred in connection with the provision of these services. In August 2019, Navios Partners extended the duration of its existing Administrative Services Agreement with the Manager until January 1, 2025, to be automatically renewed for another five years. The agreement also provides for payment of a termination fee, equal to the fees charged for the full calendar year preceding the termination date in the event the Administrative Services Agreement is terminated on or before December 31, 2017.2024.
Total general and administrative expenses charged by Navios Holdingsthe Managers for each of the yearyears ended December 31, 2016, 20152021, 2020 and 20142019 amounted to $7,751, $6,205 $, $and $6,089,$, respectively.
Balance due from/(to) related parties:Balance due from related parties (excluding Navios Europe I(both short and Navios Europe II):Balance due from related partieslong term) as of December 31, 20162021 and December 31, 2020 amounted to $and $, respectively, of which the current receivable was $19,040 $and included$, respectively and the short-term due from Navios Holdings.long-term receivable was $, and $, respectively. The balance mainly consisted of management fees and other receivables. Amounts due from related parties as of December 31, 2015 was $0.
2020, consisted of the receivable from the Navios Holdings Guarantee of $. Balance due to related parties: Included in thenon-current liabilitiesparties, short-term as of December 31, 2016 was an amount of $11,105, which represented thenon-current amount payable2021 and December 31, 2020 amounted to Navios Holdings $and its subsidiaries. The balance$, respectively, and mainly consisted of payables for drydockto the Managers. The balances mainly consisted of administrative fees, drydocking, extraordinary fees and special survey expenses. Amounts duecosts related to related parties includedregulatory requirements including ballast water treatment system, other expenses, as well as fixed vessel operating expenses, in accordance with the current liabilities asManagement Agreement.
Impairment of December 31, 2015 was $8,680 mainly consisting of payables for drydockreceivable in affiliated company: Navios Holdings, Navios Acquisition and special survey expenses, management fees outstanding and other receivables.
Vessel Chartering:In May 2012 and 2013, Navios Partners entered into two charters with a subsidiaryhave made available to Navios Europe II revolving loans of Navios Holdings forup to $ to fund working capital requirements (collectively, the “Navios Revolving Loans II”). In March 2017, the availability under the Navios Aldebaran and the Navios Prosperity. On February 11, 2015, Navios Partners and Navios Holdings entered into a novation agreement whereby the rights to the time charter contract of the Navios Aldebaran and the Navios Prosperity were transferred to Navios Holdings on February 28 and March 5, 2015, respectively.Revolving Loans II was increased by $(see Note 20 — Investment in Affiliates).
In 2012 and 2013, Navios Partners entered into various charters with a subsidiary of Navios Holdings for the Navios Apollon, Navios Libra, Navios Felicity and Navios Hope. In April 2015, these charters were further
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
extendedOn April 21, 2020, Navios Europe II agreed with the lender to fully release the liabilities under the junior participating loan facility for approximately one year at$. Navios Europe II owned seven container vessels and seven dry bulk vessels. Navios Partners had a net daily ratereceivable of $12.5, $12.0, $12.0 and $10.0, respectively, plus 50/50 profit sharing based on actual earnings atapproximately $from Navios Europe II.
As of March 31, 2020, the enddecline in the fair value of the period. The vessels were redeliveredinvestment was considered as other-than-temporary and, therefore, an aggregate loss of April 2016.
In 2015, Navios Partners entered into various charters with a subsidiary$6,900was recognized and included in the accompanying Consolidated Statements of Navios Holdings for the Navios Gemini, Navios Hyperion, Navios Soleil, Navios Harmony, Navios Orbiter, Navios Fantastiks, Navios Alegria, Navios Pollux and Navios Sun. The terms of these charters were approximately nine to twelve months, at a net daily rate of $7.6, $12.0, $12.0, $12.0, $12.0, $12.5, $12.0, $11.4 and $12.0, respectively plus 50/50 profit sharing based on actual earnings at the end of the period. The vessels were redelivered as of April 2016.
In November 2016, Navios Partners entered into a charter with a subsidiary of Navios Holdings for the Navios Fulvia, a 2010-built Capesize vessel. The term of this charter is approximately three months that commenced in November 2016, at a net daily rate of $11.5.
Total revenue of Navios Partners from the subsidiaries of Navios HoldingsOperations for the year ended December 31, 2016, 20152020, as “Impairment of receivable in affiliated company”. The fair value of the Company’s investment was determined based on the liquidation value of Navios Europe II, including the individual fair values assigned to the assets and 2014 amountedliabilities of Navios Europe II.
On May 14, 2020, an agreement was reached to $1,939, $38,809 and $27,444, respectively.liquidate Navios Europe II before its original expiring date. The transaction was completed on June 29, 2020.
Share Purchase Agreements: On February 4, 2015,As a result of the Europe II Liquidation, Navios Partners entered intoacquired 100% of the stock of the five vessels owning Companies owning the dry bulk vessels of Navios Europe II with a share purchase agreement with Navios Holdings pursuantfair value of $56,050 and working capital balances of $(2,718). The acquisition was funded through a new credit facility (Note 11 – Borrowings) and cash on hand for total of $36,056 and the satisfaction of its receivable balances in the amount of approximately $17,276 representing the Revolving Loan, Term Loan and accrued interest thereof directly owned to which Navios Holdings made an investment in Navios Partners, by purchasing common units, and general partnership interests (See Note 13—Issuance of Units).
Registration Rights Agreement: On February 4, 2015, in connection with the share purchase agreement as discussed above, Navios Partners entered into a registration rights agreement with Navios Holdings pursuant to which Navios Partners provided Navios Holdings with certain rights relating to the registration of the common units.
Balance due from Navios Europe I: Navios Holdings, Navios Maritime Acquisition Corporation (“Navios Acquisition”) and Navios Partners have made available to Navios Europe Inc. (“Navios Europe I”) (in each case, in proportion to their ownership interests in Navios Europe I) revolving loans up to $24,100 to fund working capital requirements (collectively, the “Navios Revolving Loans I”). See Note 20 for the Investment in Navios Europe I and respective ownership interests. The Navios Revolving Loans I earn a 12.7% preferred distribution and are repaid from Free Cash Flow (as defined in the loan agreement) to the fullest extent possible at the end of each quarter. There are no covenant requirements or stated maturity dates.
As of December 31, 2016, Navios Partners’ portion of the outstanding amount relating to portion of the investment in Navios Europe I (5.0% of the $10,000) was $500,previously presented under the caption “Investment in affiliates” and the outstanding amount relating to the Navios Revolving Loans I capital was $750 (December 31, 2015: $750), under the caption “Loans receivable from affiliates”. The accrued interest income earned under the Navios Revolving Loans I was $310 under the caption “Balancecaptions “Amounts due from related parties” and “Loans receivable from affiliates”.
Following the accruedliquidation of Navios Europe II, there was no balance due from Navios Europe II as of December 31, 2021 and December 31, 2020.
Note receivable from affiliates: On March 17, 2017, Navios Holdings transferred to Navios Partners its rights to the fixed % interest income earned underon the Navios Europe I Navios Term Loans I was $235 under the caption “Loans receivable from affiliates”. As of December 31, 2016 and December 31, 2015, the amounts undrawn from the Navios Revolving Loans I were $9,100,(including the respective accrued receivable interest) in the amount of $, which Navios Partners’ portion was $455.
Balance due from Navios Europe II: Navios Holdings, Navios Acquisition included a cash consideration of $andnewly issued common units of Navios Partners, have made available to Navios Europe (II) Inc. (“Navios Europe II”) (in each case, in proportion to their ownership interests in Navios Europe II) revolving loans up to $38,500 to fund working capital requirements (collectively,on a split adjusted basis. At the “Navios Revolving Loans II”). See Note 20 fordate of this transaction, the Investment in Navios Europe II and respective ownership interests.
The Navios Revolving Loans II earn an 18.0% preferred distribution and are repaid from Free Cash Flow (as defined in the loan agreement) to the fullest extent possibleCompany recognized a receivable at the endfair value of each quarter. There are no covenant
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousandsits newly issued common units totaling $based on the closing price of U.S. Dollars except unit and $per unit data)
requirements or stated maturity dates. Asas of December 31, 2016, Navios Partners’ portion of the outstanding amount relating to portion of the investment in Navios Europe II (5.0% of the $14,000) was $700, under the caption “Investment in affiliates” and the outstanding amountMarch 16, 2017 given as consideration. The receivable relating to the consideration settled with the issuance of Navios Revolving Loans II capital was $1,221 (December 31, 2015: $771), underPartners’ common units in the caption “Loansamount of $has been classified contra equity. The receivable from affiliates”Navios Holdings was payable on maturity in December 2023. Interest would accrue through maturity and would be recognized within “Interest income” for the receivable relating to the cash consideration of $. The accrued interest income earned underOn October 23, 2019, Navios Partners’ Conflicts Committee agreed to cancel an amortizing penalty from Navios Holdings of approximately $as of December 2019, due to early liquidation of the structure. Following the liquidation of Navios Revolving Loans II was $288 underEurope I, the caption “Balance due from related parties” and the accrued interest income earned under the Navios Term Loans II was $216 under the caption “Loanslong-term note receivable from affiliates”. As of December 31, 2016, the amounts undrawn from the Navios Revolving Loans II was $14,075, of which Navios Partners’ portion was $704. As of December 31, 2015, the amount undrawn from the Navios Revolving Loans II was $23,075, of which Navios Partners’ portion was $1,154.Holdings amounted to $ .
Others: Navios Partners has entered into an omnibus agreement with Navios Holdings (the “Partners Omnibus Agreement”) in connection with the closing of Navios Partners’ IPO governing, among other things, when Navios Holdings and Navios Partners may compete against each other as well as rights of first offer on certain drybulk carriers. Pursuant to the Partners Omnibus Agreement, Navios Partners generally agreed not to acquire or own Panamax or Capesize drybulk carriers under time charters of three or more years without the consent of an independent committee of Navios Partners. In addition, Navios Holdings has agreed to offer to Navios Partners the opportunity to purchase vessels from Navios Holdings when such vessels are fixed under time charters of three or more years.
Navios Partners entered into an omnibus agreement with Navios Acquisition and Navios Holdings (the “Acquisition Omnibus Agreement”) in connection with the closing of Navios Acquisition’s initial vessel acquisition, pursuant to which, among other things, Navios Holdings and Navios Partners agreed not to acquire,charter-in or own liquid shipment vessels, except for container vesselscontainerships and vessels that are primarily employed in operations in South America, without the consent of an independent committee of Navios Acquisition. In addition, Navios Acquisition, under the Acquisition Omnibus Agreement, agreed to cause its subsidiaries not to acquire, own, operate or charter drybulk carriers subject to specific exceptions. Under the Acquisition Omnibus Agreement, Navios Acquisition and its subsidiaries granted to Navios Holdings and Navios Partners, a right of first offer on any proposed sale, transfer or other disposition of any of its drybulk carriers and related charters owned or acquired by Navios Acquisition. Likewise, Navios Holdings and Navios Partners agreed to grant a similar right of first offer to Navios Acquisition for any liquid shipment vessels it might own. These rights of first offer will not apply to a (i) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the terms of any charter or other agreement with a counterparty, or (ii) merger with or into, or sale of substantially all of the assets to, an unaffiliated third party.
In connection with the Navios Maritime Midstream Partners L.P. (“Navios Midstream”) initial public offering and effective November 18, 2014, Navios Partners entered into an omnibus agreement with Navios Midstream, Navios Acquisition and Navios Holdings pursuant to which Navios Acquisition, Navios Holdings and Navios Partners have agreed not to acquire or own any VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers under time charters of five or more years and also providing rights of first offer on certain tanker vessels.
On November 15, 2012 (as amended in March 2014), Navios Holdings and Navios Partners entered into an agreement (the “Navios Holdings Guarantee”) by which Navios Holdings will provide supplemental credit default insurance with a maximum cash payment of $20,000. During the year ended December 31, 2016 and 2015, the Company submitted claims for charterers’ default under this agreement to Navios Holdings for a total amount of $9,153 and $3,605, respectively, net of applicable deductions, of which $9,635 and $3,795 was recorded as “Other income” for the year ended December 31, 2016 and 2015, respectively.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
In connection with the Navios Containers private placement and listing on the Norwegian over-the-counter market effective June 8, 2017, Navios Partners entered into an omnibus agreement with Navios Containers, Navios Holdings, Navios Acquisition and Navios Midstream (the “Navios Containers Omnibus Agreement”), pursuant to which Navios Partners, Navios Holdings, Navios Acquisition and Navios Midstream have granted to Navios Containers a right of first refusal over any containerships to be sold or acquired in the future. The omnibus agreement contains significant exceptions that will allow Navios Partners, Navios Holdings, Navios Acquisition and Navios Midstream to compete with Navios Containers under specified circumstances.
Navios Holdings Guarantee: On November 15, 2012 (as amended and supplemented in March 2014, December 2017 and July 2019), Navios Holdings and Navios Partners entered into the Navios Holdings Guarantee by which Navios Holdings would provide supplemental credit default insurance with a maximum cash payment of $. In October 2020, Navios Holdings paid an amount of $to Navios Partners. In April 2021, Navios Holdings paid an amount of $to Navios Partners. As of December 31, 2016,2021 and 2020, the outstanding claim receivable amounted to $and $, respectively. The guarantee claim receivable is presented under the caption “Amounts due from related parties-short term” in the Consolidated Balance Sheets as of December 31, 2020.
General partner and Navios Holdings: In August 2019, Navios Holdings announced that it sold certain assets, including its ship management division and the general partnership interest in Navios Partners to N Shipmanagement Acquisition Corp. and related entities, affiliated with Navios Holdings’ Chairwoman and Chief Executive Officer, Angeliki Frangou.
Acquisition of vessels:
2021
On July 9, 2021, Navios Partners acquired the Navios Azimuth, a -built vessel of dwt, from its affiliate, Navios Holdings, for an acquisition cost of $(including $3 capitalized expenses).
On June 30, 2021, Navios Partners acquired the Navios Ray, a -built vessel of dwt and the Navios Bonavis, a -built vessel of dwt, from its affiliate, Navios Holdings, for an aggregate purchase price of $.
On June 4, 2021, Navios Partners acquired the Navios Koyo, a -built vessel of dwt, from its affiliate, Navios Holdings, for an acquisition cost of $(including $67 capitalized expenses).
On May 10, 2021, Navios Partners acquired the Ete N, a -built of TEU, the Fleur N, a -built of TEU and the Spectrum N, a -built of TEU from Navios Acquisition, for an aggregate purchase price of $.
On March 30, 2021, Navios Partners acquired the Navios Avior, a -built vessel of dwt, and the Navios Centaurus, a -built vessel of dwt, from Navios Holdings, for an acquisition cost of $(including $70 capitalized expenses), including working capital balances of $.
2020
On September 30, 2020, Navios Partners acquired the Navios Gem, a -built vessel of dwt and the Navios Victory, a -built vessel of dwt, from its affiliate, Navios Holdings, for a purchase price of $, including working capital balances of $. The acquisition was funded through a new credit facility of $(see Note 11 — Borrowings) and the balance of $seller’s credit by Navios Holdings was repaid on October 2, 2020, presented under the caption “Payable to affiliated company” in the Consolidated Statements of Cash Flows.
On June 29, 2020, Navios Partners acquired five drybulk vessels, three Panamax and two Ultra-Handymax, for a fair value of $ in total, following the liquidation of Navios Europe II.
2019
On November 26, 2019, Navios Partners entered into a share purchase agreement for the acquisition of five containerships, following the liquidation of Navios Europe I. The vessels were acquired on December 13, 2019 (see Note 7 — Vessels, net).
On November 25, 2019, Navios Partners entered into a share purchase agreement for the acquisition of Panamax and Ultra-Handymax drybulk vessels from an entity affiliated with its Chairwoman and CEO for $(plus working capital adjustment) in a transaction approved by the Conflicts Committee of the Board of Directors of Navios Partners. The vessels were acquired on (see Note 7 — Vessels, net).
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
Navios Acquisition Credit Facility: On August 24, 2021, Navios Partners and Navios Acquisition entered into a loan agreement under which Navios Partners agreed to make available to Navios Acquisition a working capital facility of up to $. As of the date hereof, the full amount of the facility has been drawn. The full amounts borrowed, including accrued and unpaid interest are due and payable on the date that is one year following the date hereof. The facility bears interest at the rate of % per annum. As of December 31, 2021, the outstanding balance of $45,000 was eliminated upon consolidation.
Loan payable to affiliated company: On , Navios Acquisition entered into a secured loan agreement with a subsidiary of N Shipmanagement Acquisition Corp. (“NSM”), an entity affiliated with Navios Acquisition’s Chairwoman and Chief Executive Officer, for a loan of up to $to (the “NSM Loan Agreement”). The loan would be repayable in years and bears interest at a rate of % per annum, payable . Navios Acquisition may elect to defer all scheduled capital and interest payments, in which case the applicable interest rate is % per annum.
In August 2021, Navios Acquisition entered into a supplemental agreement (the “Supplemental Loan Agreement”) The Supplemental Loan Agreement provided for: (i) the issuance of 8,823,529 newly-issued shares of common stock of Navios Acquisition in settlement of $30,000 of the outstanding balance of the NSM Loan Agreement and (ii) the repayment of $of the outstanding balance of the NSM Loan Agreement in cash as of the date of the Supplemental Loan Agreement and the repayment in cash on January 7, 2022 of the remainder of the outstanding balance of the NSM Loan Agreement, of approximately $.
On December 23, 2021, the outstanding amount of $. As of December 31, 2021, there was no outstanding balance of the NSM Loan Agreement. Upon completion of the NNA Merger, the newly-issued shares of common stock of Navios Acquisition were converted into common units of Navios Partners on the same terms as is applicable to other outstanding shares of common stock of Navios Acquisition.
As of December 31, 2021, there were outstanding 30,197,087 common units and 622,555 general partnership units, and Navios Holdings held an 18.0% common unita % ownership interest in Navios Partners, represented by 15,344,310 common units and it alsounits. Olympos Maritime Ltd. held aan ownership of 2.0% represented by all outstanding general partner interest of 2.0%.units.
NOTE 19 – NOTES RECEIVABLE
Notes receivable
On July 15, 2016, the Company entered into a charter restructuring agreement for the reduction of the hire rate for five Container vesselsContainerships chartered out to Hyundai Merchant Marine Co. (“HMM”)HMM which resulted in a decrease in cash charter hire to be received of approximately $38,461.$38,461. More specifically, the reduction of the hire rate will be applied as follows:
In exchange for the reduction of the hire rate, the Company received (i) $7,692 $7,692 on principal amount of senior, unsecured notes, amortizing subject to available cash flows, accruing interest at 3%3% per annum payable on maturity in July 2024 and (ii) freely tradable securities of HMM (publicly traded at the Stock Market Division of the Korean Exchange).
On July 18, 2016, the Company recognized the fair value of the HMM securities totaling $40,277 $40,277 and also recognized the fair value of the senior unsecured notes totaling $5,932.$6,074. The total fair value of thenon-cash compensation received was recognized as deferred revenue, which will be amortized over the remaining duration of the each time charter. ForThe Company recognized non-cash interest income and discount unwinding totaling to $859, $458 and $470, respectively, for these instruments under the yearcaption “Interest income” in the Consolidated Statements of Operations for each of the years ended December 31, 2016,2021, 2020 and 2019, respectively. On May 14, 2021, the outstanding balance of the notes receivable was settled. As of December 31, 2021 and December 31, 2020, the outstanding balance of the notes receivable, including accrued interest and discount unwinding, amounted to $0 and $8,013, respectively, presented under the caption “Notes Receivable, net of current portion” in the Consolidated Balance Sheets.
For each of the years ended December 31, 2021, 2020 and 2019, the Company recorded an amount of $5,537$1,127, $1,130 and $12,121, respectively, of deferred revenue amortization in the consolidated StatementConsolidated Statements of Operations under linethe caption “Time charter and voyage revenues”.
As of December 31, 2016,2021, the outstanding balances of the current andnon-current portion of deferred revenue in relation to HMM amounted to $12,102 $1,127 and $28,571,$1,057, respectively. As of December 31, 2020, the outstanding balances of the current and non-current portion of deferred revenue in relation to HMM amounted to $1,127 and $2,185, respectively.
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NAVIOS MARITIME PARTNERS L.P.
During August 2016,NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
On January 12, 2017, the Company sold all the sharesMSC Cristina for net proceeds on salea gross sales price of $20,842 resulting$126,000 and received a cash payment of $107,250 and a note receivable of $18,750 accruing interest at 6% per annum payable in a loss on sale16 quarterly instalments. As of $19,435, which was recorded under “Loss on saleDecember 31, 2021 and 2020, the outstanding balances of securities” in the consolidated Statementscurrent and non-current note receivable amounted to $0. For each of Operations for the yearyears ended December 31, 20162021, 2020 and 2019, the proceeds were classified as investing activities in the consolidated Statements of Cash Flows for the year ended December 31, 2016. The Company recognizednon-cashrecorded interest income of $0, $140 and discount unwinding totaling to $180 for these instruments $424, respectively, including accrued interest income of $0, $0 and $38 under the caption “Interest income” in the consolidatedConsolidated Statements of Operations for the year ended December 31, 2016.Operations.
NOTE 20 – INVESTMENT IN NAVIOS EUROPE I AND NAVIOS EUROPE IIAFFILIATES
Navios Europe II: : On October 9, 2013, Navios Holdings, Navios Acquisition and Navios Partners established Navios Europe I and havehad ownership interests of 47.5%%, 47.5%% and 5.0%%, respectively. On December 18, 2013, Navios Europe I acquired ten vessels for aggregate consideration consisting of: (i) cash (whichwhich was funded with the proceeds of senior loan facilities (the “Senior Loans I”) and loans aggregating $10,000 $from Navios Holdings, Navios Acquisition and Navios Partners (in each case, in proportion to their ownership interests in Navios Europe I) (collectively, the “Navios Term Loans I”) and (ii) the assumption of a junior participating loan facility (the “Junior Loan I”). In addition to the Navios Term Loans I, Navios Holdings, Navios Acquisition and Navios Partners will also makehave made available to Navios Europe I (in each case, in proportion to their ownership interests in Navios Europe I) revolving loans of up to $24,100 $to fund working capital requirements (collectively, the “Navios Revolving Loans I”).
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
On an ongoing basis, Navios Europe I is required to distribute cash flows (after payment of operating expenses and amounts due pursuant to In December 2018, the terms ofavailability under the SeniorRevolving Loans I and repayments ofwas increased by $.
Following the Navios Revolving Loans I) according to a defined waterfall calculation. Navios Partners evaluated its investment in Navios Europe I under ASC 810 and concluded that Navios Europe I is a variable interest entity (“VIE”) and that they are not the party most closely associated with Navios Europe I and, accordingly, is not the primary beneficiary of Navios Europe I. Navios Partners further evaluated its investment in the common stockliquidation of Navios Europe I, under ASC 323 and concluded that it has the ability to exercise significant influence over the operating and financial policies of Navios Europe I and, therefore, its investment in Navios Europe I is accounted for under the equity method.
As of December 31, 2016, the estimated maximum potential loss by Navios Partners in Navios Europe I would have been $1,390, which represents the Company’s carryingacquired five vessel owning companies for a fair value of the investment$ in total.
Investment of $640 plus the Company’s balance of the Navios Revolving Loans I of $750 and did not include the undrawn portion of the Navios Revolving Loans I.affiliates
As of December 31, 2016, the Navios Partners’ portion of the Navios Revolving Loan I outstanding was $750. Investment income of $74 was recognized in the Statements of Operations under the caption of “Other income” for the year ended December 31, 2016. Investment income of $45 was recognized in the Statements of Operations under the caption of “Other income” for the year ended December 31, 2015.
Navios Europe II: On February 18, 2015, Navios Holdings, Navios Acquisition and Navios Partners established Navios Europe II and have ownership interests of 47.5%%, 47.5%% and 5.0%%, respectively. From June 8, 2015 through December 31, 2015, Navios Europe II acquired fourteen vessels for aggregate consideration consisting of: (i) cash consideration of $145,550 (which$(which was funded with the proceeds of a $131,550 $senior loan facilities net of loan discount amounting to $3,375 (the$(the “Senior Loans II”) and loans aggregating $14,000 $from Navios Holdings, Navios Acquisition and Navios Partners (in each case, in proportion to their ownership interests in Navios Europe II) (collectively, the “Navios Term Loans II”); and (ii) the assumption of a junior participating loan facility (the “Junior Loan II”) with a face amount of $182,150 $and fair value of $99,147,$, at the acquisition date. In addition to the Navios Term Loans II, Navios Holdings, Navios Acquisition and Navios Partners willhave also makemade available to Navios Europe II (in each case, in proportion to their ownership interests in Navios Europe II) revolving loans up to $38,500 $to fund working capital requirements (collectively, the “Navios Revolving Loans II”).
On an ongoing basis, Navios Europe II is required to distribute cash flows (after payment In March 2017, the amount of operating expenses, amounts due pursuant to the terms of the Senior Loans and repayments of the Navios Revolving Loans II) according to a defined waterfall calculation. Navios Partners evaluated its investment in Navios Europe IIfunds available under ASC 810 and concluded that Navios Europe II is a variable interest entity (“VIE”) and that it is not the party most closely associated with Navios Europe II and, accordingly, is not the primary beneficiary of Navios Europe II. Navios Partners further evaluated its investment in the common stock of Navios Europe II under ASC 323 and concluded that it has the ability to exercise significant influence over the operating and financial policies of Navios Europe II and, therefore, its investment in Navios Europe II is accounted for under the equity method.
As of December 31, 2016, the estimated maximum potential loss by Navios Partners in Navios Europe II would have been $1,837, which represents the Company’s carrying value of the investment of $616 plus the Company’s balance of the Navios Revolving Loans II was increased by $.
Following the liquidation of $1,221 and does not include the undrawn portionNavios Europe II, Navios Partners acquired five vessel owning companies for a fair value of the Navios Revolving Loans II.$in total.
As of December 31, 2016, the Navios Partners’ portion of the Navios Revolvings Loan II outstanding was $1,221. Investment loss of $(133) was recognized in the Statements of Operations under the caption of “Other
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
income” for the year endedNavios Containers:
As of December 31, 2016.2020 and 2019, Navios Partners held common units, representing an ownership interest in Navios Containers of % and % respectively. Investment income of $49 $and $was recognized in the Consolidated Statements of Operations under the caption of “Other income”“Equity in net earnings of affiliated companies” for each of the years ended December 31, 2020 and 2019, respectively.
Based on the Company's evaluation of the duration and magnitude of the fair value decline for approximately twelve months as of December 31, 2019, the Company concluded that the decline in the fair value of its investment below its carrying value was not temporary. Thus, an OTTI loss of $was recognized as of December 31, 2019, being the difference between the fair value of $and the carrying value of the investment of $.
The fair value of Navios Partners’ equity investment in Navios Containers was based on unadjusted quoted prices in active markets for Navios Containers’ common units. The fair value of Navios Partners’ equity investment in Navios Containers as at December 31, 2020 was $compared with its carrying value of $.
On January 4, 2021, Navios Containers and the Company announced that they entered into a definitive merger agreement under which the Company would acquire all of the publicly held common units of Navios Containers in exchange for common units of the Company (the “Transaction”). The Transaction was approved by the necessary common unit holders of Navios Containers at a special meeting held on March 24, 2021. The General Partner of Navios Containers had consented to the NMCI Merger, and the Company voted the Navios Containers’ common units it holds in favor of the Transaction. The Transaction was completed on March 31, 2021. Under the terms of the Transaction, Navios Partners acquired all of the publicly held common units of Navios Containers through the issuance of newly issued common units of Navios Partners in exchange for the publicly held common units of Navios Containers at an exchange ratio of units of Navios Partners for each Navios Containers common unit (see Note 3 – Acquisition of Navios Containers and Navios Acquisition).
Following the results of the significant tests performed by the Company, it was concluded that Navios Containers met the significance threshold requiring summarized financial information for the affiliated company to be presented for each of the years ended December 31, 2020 and 2019. Since Navios Europe I and Navios Europe II were liquidated on December 13, 2019 and June 29, 2020, balances are presented only for the year ended December 31, 2015.2019.
Investments in Affiliates - Financial information of affiliate companies, Income Statement
For the year ended December 31, 2019 | |||||
Income Statement | Navios Europe I | Navios Europe II | |||
Revenue | $ | 36,822 | $ | 46,718 | |
Net loss | $ | (18,575) | $ | (30,203) |
NOTE 21 – CASH DISTRIBUTIONS AND EARNINGS PER UNIT
Navios Partners intends to makeCash distributions to the holders of common units on a quarterly basis, to the extent and as may be declared by the Board and to the extent it has sufficient cash on hand to pay the distribution after the Company establishes cash reserves and pays fees and expenses. There is no guarantee that Navios Partners will pay a quarterly distribution on the common units in any quarter. On February 3, 2016, Navios Partners announced that its board of directors decided to suspend the quarterly cash distributions to its unitholders, including the distribution for the quarter ended December 31, 2015. earnings per unit
The amount of any distributions paid underby Navios Partners’ policyPartners and the decision to make any distribution is determined by itsthe Company’s board of directors taking into considerationand will depend on, among other things, Navios Partners’ cash requirements as measured by market opportunities and restrictions under its credit agreements and other debt obligations and such other factors as the termsBoard of its partnership agreement.Directors may deem advisable. There is no guarantee that the Company will pay the quarterly distribution on the common units in any quarter. The Company is prohibited from making any distributions to unitholders if it would cause an event of default, or an event of default exists, under its existing credit facilities.
There is incentive distribution rights held by the General Partner, which are analyzed as follows:
Marginal Percentage Interest in Distributions | ||||||||||
Total Quarterly Distribution Target Amount | Common Unitholders | General Partner | ||||||||
Minimum Quarterly Distribution | up to $0.35 | 98 | % | 2 | % | |||||
First Target Distribution | up to $0.4025 | 98 | % | 2 | % | |||||
Second Target Distribution | above $0.4025 up to $0.4375 | 85 | % | 15 | % | |||||
Third Target Distribution | above $0.4375 up to $0.525 | 75 | % | 25 | % | |||||
Thereafter | above $0.525 | 50 | % | 50 | % |
The first 98% of the quarterly distribution is paid to all common units holders. The incentive distributions rights (held by the General Partner) apply only after a minimum quarterly distribution of $0.4025.
On January 24, 2014, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended December 31, 2013 of $0.4425 per unit. The distribution was paid on February 14, 2014 to all holders of record of common and general partner units on February 10, 2014. The aggregate amount of the declared distribution was $32,573.
On April 25, 2014, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended March 31, 2014 of $0.4425 per unit. The distribution was paid on May 13, 2014 to all holders of record of common and general partner units on May 9, 2014. The aggregate amount of the declared distribution was $35,474.
On July 24, 2014, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended June 30, 2014 of $0.4425 per unit. The distribution was paid on August 13, 2014 to all holders of record of common and general partner units on August 8, 2014. The aggregate amount of the declared distribution was $35,474.
On October 23, 2014, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended September 30, 2014 of $0.4425 per unit. The distribution was paid on November 10, 2014 to all holders of record of common and general partner units on November 7, 2014. The aggregate amount of the declared distribution was $35,474.
Table of Contents | F- 54 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
There are incentive distribution rights held by Navios GP L.L.C., which are analyzed as follows:
On January 26, 2015,Cash distributions and earnings per unit - Schedule Of Incentive Distributions Made To General Partners Or Unitholders By Distribution
Marginal Percentage Interest in Distributions | |||||||
Total Quarterly Distribution Target Amount | Common Unitholders | Incentive Distribution Right Holder | General Partner | ||||
Minimum Quarterly Distribution | up to $5.25 | 98% | 0 | 2% | |||
First Target Distribution | up to $6.0375 | 98% | 0 | 2% | |||
Second Target Distribution | above $ 6.0375 up to $6.5625 | 85% | 13% | 2% | |||
Third Target Distribution | above $6.5625 up to $7.875 | 75% | 23% | 2% | |||
Thereafter | above $7.875 | 50% | 48% | 2% |
The first 98% of the Boardquarterly distribution is paid to all common unitholders. The incentive distributions rights (held by Navios GP L.L.C.) apply only after a minimum quarterly distribution of Directors of Navios Partners$6.0375.
The authorized its quarterly cash distributiondistributions for all quarters during the three month periodyears ended December 31, 2014 of $0.44252021, 2020, 2019, are presented below:
Cash distributions and earnings per unit. The distribution was paid on February 13, 2015 tounit - Distributions for all holders of record of common and general partner units on February 11, 2015, which included the unitholders participating in the February 2015 offering (See Note 13—Issuance of units). The aggregate amount of the declared distribution was $38,097.quarters
Date | Authorized Quarterly Cash Distribution for the three months ended | Date of record of Common and General Partner unit Unitholders | Payment of Distribution | $/ Unit | Amount of the declared distribution | |||||||
January 2019 | December 31, 2018 | February 11, 2019 | February 14, 2019 | $ | 0.30 | $ | 3,458 | |||||
April 2019 | March 31, 2019 | May 10, 2019 | May 14, 2019 | $ | 0.30 | $ | 3,364 | |||||
July 2019 | June 30, 2019 | August 6, 2019 | August 9, 2019 | $ | 0.30 | $ | 3,364 | |||||
October 2019 | September 30, 2019 | November 7, 2019 | November 14, 2019 | $ | 0.30 | $ | 3,364 | |||||
January 2020 | December 31, 2019 | February 11, 2020 | February 13, 2020 | $ | 0.30 | $ | 3,365 | |||||
April 2020 | March 31, 2020 | May 11, 2020 | May 14, 2020 | $ | 0.30 | $ | 3,366 | |||||
July 2020 | June 30, 2020 | August 10, 2020 | August 13, 2020 | $ | 0.05 | $ | 562 | |||||
October 2020 | September 30, 2020 | November 9, 2020 | November 13, 2020 | $ | 0.05 | $ | 579 | |||||
January 2021 | December 31,2020 | February 9, 2021 | February 12, 2021 | $ | 0.05 | $ | 579 | |||||
April 2021 | March 31, 2021 | May 11, 2021 | May 14, 2021 | $ | 0.05 | $ | 1,127 | |||||
July 2021 | June 30, 2021 | August 9, 2021 | August 12, 2021 | $ | 0.05 | $ | 1,368 | |||||
October 2021 | September 30, 2021 | November 8, 2021 | November 12, 2021 | $ | 0.05 | $ | 1,541 | |||||
January 2022 | December 31,2021 | February 9, 2022 | February 11, 2022 | $ | 0.05 | $ | 1,541 |
On April 28, 2015, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended March 31, 2015 of $0.4425 per unit. The distribution was paid on May 14, 2015 to all holders of record of common and general partner units on May 13, 2015. The aggregate amount of the declared distribution was $38,097.
On July 23, 2015, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended June 30, 2015 of $0.4425 per unit. The distribution was paid on August 14, 2015 to all holders of record of common and general partner units on August 13, 2015. The aggregate amount of the declared distribution was $38,097.
On November 3, 2015, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended September 30, 2015 of $0.2125 per unit. The distribution was paid on November 13, 2015 to all holders of record of common and general partner units on November 12, 2015. The aggregate amount of the declared distribution was $18,015.
Navios Partners calculates earningsearnings/(losses) per unit by allocating reported net incomeincome/(loss) attributable to Navios Partners’ unitholders for each period to each class of units based on the distribution waterfall for available cash specified in Navios Partners’ partnership agreement, net of the unallocated earnings (or losses). Basic earningsearnings/(losses) per common unit isare determined by dividing net incomeincome/(loss) attributable to Navios Partners common unitholders by the weighted average number of common units outstanding during the period. Diluted earnings per unit is calculated in the same manner as basic earnings per unit, except that the weighted average number of outstanding units increased to include the dilutive effect of outstanding unit options or phantom units. Net loss per unit undistributed is determined by taking the distributions in excess of net income and allocating between common units and general partner units on a98%-2% basis. There were no options or phantom units outstanding during each of the years ended December 31, 2016, 20152021, 2020 and 2014.2019.
The calculations of the basic and diluted earnings per unit are presented below.
Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | ||||||||||
Net (loss)/income | $ | (52,549 | ) | $ | 41,805 | $ | 74,853 | |||||
Earnings attributable to: | ||||||||||||
Common unit holders | (51,498 | ) | 39,825 | 71,225 | ||||||||
Weighted average units outstanding (basic and diluted) | ||||||||||||
Common unit holders | 83,107,066 | 82,437,128 | 76,587,656 | |||||||||
Earnings per unit (basic and diluted): | ||||||||||||
Common unit holders | $ | (0.62 | ) | $ | 0.48 | $ | 0.93 | |||||
Earnings per unit — distributed (basic and diluted): | ||||||||||||
Common unit holders | $ | — | $ | 1.11 | $ | 1.79 | ||||||
Loss per unit — undistributed (basic and diluted): | ||||||||||||
Common unit holders | $ | (0.62 | ) | $ | (0.63 | ) | $ | (0.86 | ) |
Table of Contents | F- 55 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
The calculations of the basic and diluted earnings per unit are presented below.
Cash distribution and earnings per unit - Schedule of earnings per unit, Basic and Diluted
Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | ||||||
Net income / (loss) attributable to Navios Partners’ unitholders | $ | 516,186 | $ | (68,541) | $ | (62,134) | ||
Income / (loss) attributable to: | ||||||||
Common unitholders | $ | 505,862 | $ | (67,173) | $ | (60,899) | ||
Weighted average units outstanding basic | ||||||||
Common unitholders | 22,620,324 | 10,966,518 | 10,830,959 | |||||
Earnings/ (losses) per unit basic: | ||||||||
Common unitholders | $ | $ | $ | |||||
Weighted average units outstanding diluted | ||||||||
Common unitholders | ||||||||
Earnings/ (losses) per unit diluted: | ||||||||
Common unitholders | $ | $ | $ | |||||
Earnings per unit distributed basic: | ||||||||
Common unitholders | $ | $ | $ | |||||
Earnings per unit distributed diluted: | ||||||||
Common unitholders | $ | $ | $ | |||||
Earnings/ (losses per unit) - undistributed basic: | ||||||||
Common unitholders | $ | $ | $ | |||||
Earnings/ (losses) per unit undistributed diluted | ||||||||
Common unitholders | $ | $ | $ |
Potential common units of for the year ended December 31, 2021 are included in the calculation of diluted earnings per unit. Potential common units of and relating to unvested restricted common units for each of the years ended December 31, 2020 and 2019, respectively, have an anti-dilutive effect (i.e. those that increase income per unit or decrease loss per unit) and are therefore excluded from the calculation of diluted earnings per unit.
NOTE 22 – OTHER INCOME - OTHER EXPENSE
Other income - other expense
As of December 31, 2020, the amount of $2,697 relating to settlement of claims and recovery of other receivables of one of the Company’s vessels is included under the caption “Other income” of the Consolidated Statements of Operations.
On November 15, 2012 (as amended and supplemented in March 2014)2014, December 2017 and July 2019), Navios Holdings and Navios Partners entered into an agreementthe Navios Holdings Guarantee by which Navios Holdings willwould provide supplemental credit default insurance with a maximum cash payment of $20,000. During$. In October 2020, Navios Holdings paid an amount of $yearsoutstanding claim receivable amounted to $ to Navios Partners. In April 2021, Navios Holdings paid an amount of $ to Navios Partners. As of December 31, 2021 and 2020, the and $, respectively. The guarantee claim receivable is presented under the caption “Amounts due from related parties-short term” in the Consolidated Balance Sheets as of December 31, 2020. As of December 31, 2019, the amount of $related to the change in estimate of the guarantee claim receivable and is included under the caption “Other expense” of the Consolidated Statements of Operations.
NOTE 23 – LEASES
Leases
Time charter out contracts and pooling arrangements
The Company's contract revenues from time chartering, bareboat chartering and pooling arrangements are governed by ASC 842. Upon adoption of ASC 842, the timing and recognition of earnings from the time charter contracts and pool arrangements to which the Company is party did not change from previous practice. For further analysis, (see Note 2— Summary of Significant Accounting Policies).
Bareboat charter-in contracts
On July 24, 2019, Navios Partners took delivery of the Navios Libra, a 2019-built Panamax vessel of 82,011 dwt, for a ten-year bareboat charter-in agreement. The bareboat charter-in provides for purchase options with de-escalating purchase prices starting on the end of the fourth year and an average daily rate of $6. The Company has performed an assessment considering the lease classification criteria under ASC 842 and concluded that the arrangement is an operating lease. Consequently, the Company has recognized an operating lease liability based on the net present value of the remaining charter-in payments and a right-of-use asset at an amount equal to the operating liability adjusted for the carrying amount of the straight-line liability.
Table of Contents | F- 56 |
NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
On May 28, 2021 and June 10, 2021, Navios Partners took delivery of the Navios Amitieand the Navios Star, two 2021-built Panamaxvessels of 82,002 dwt and 81,994 dwt, respectively. The bareboat charter-in provides for purchase options with de-escalating purchase prices starting on the end of the fourth year and an average daily rate of $5.9. The Company has performed assessments considering the lease classification criteria under ASC 842 and concluded that the arrangements are operating leases. Consequently, the Company has recognized an operating lease liability based on the net present value of the remaining charter-in payments and a right-of-use asset at an amount equal to the operating liability adjusted for the carrying amount of the straight-line liability.
Upon acquisition of the majority of outstanding stock of Navios Acquisition, Navios Partners took delivery of two bareboat charter-in vessels, with de-escalating purchase options, the Baghdad, a -built Japanese of dwt and the Erbil, a -built Japanese of dwt. The average daily rate under bareboat charter-in agreement each of Baghdad and Erbil, amounts to $ . The Company has performed an assessment considering the lease classification criteria under ASC 842 and concluded that the arrangement is an operating lease. Consequently, the Company has recognized an operating lease liability based on the net present value of the remaining charter-in payments and a right-of-use asset at an amount equal to the operating liability adjusted for the carrying amount of the straight-line liability.
On August 30, 2021, Navios Partners took delivery of the Nave Electron, a 2021-built VLCC vessel of 313,329 dwt. The bareboat charter-in provides for purchase options with de-escalating purchase prices starting on the end of the fourth year and an average daily rate of $21. The Company has performed assessments considering the lease classification criteria under ASC 842 and concluded that the arrangements are operating leases. The Company has recognized an operating lease liability based on the net present value of the remaining charter-in payments and a right-of-use asset at an amount equal to the operating liability adjusted for the carrying amount of the straight-line liability.
Based on management estimates and market conditions, the lease term of the leases is being assessed at each balance sheet date. At lease commencement, the Company determines a discount rate to calculate the present value of the lease payments so that it can determine lease classification and measure the lease liability. In determining the discount rate to be used at lease commencement, the Company used its incremental borrowing rate as there was no implicit rate included in charter-in contracts that can be readily determinable. The incremental borrowing rate is the rate that reflects the interest a lessee would have to pay to borrow funds on a collateralized basis over a similar term and in a similar economic environment. The Company then applies the respective incremental borrowing rate based on the remaining lease term of the specific lease. Navios Partners’ incremental borrowing rates were approximately % for Navios Libra, % for Navios Amite and Navios Star, 6% for Baghdad and Erbil and % for Nave Electron.
As of December 31, 2021 and December 31, 2020 the unamortized balance of the lease liability amounted $243,804 and $13,153, respectively, and is presented under the captions “Operating lease liabilities, current portion” and “Operating lease liabilities, net” in the Consolidated Balance Sheets. Right of use assets amounted $244,337 and $13,285 as at December 31, 2021 and December 31, 2020, respectively, and are presented under the caption “Operating lease assets” in the Consolidated Balance Sheets.
The Company recognizes the lease payments for its operating leases as charter hire on a straight-line basis over the lease term. Lease expense for the year ended December 31, 20162021, 2020 and 2015,2019 amounted to $12,757, $2,086, and $918, respectively, and is included under the caption “Time charter and voyage expenses” in the Consolidated Statements of Operations.
As of December 31, 2021, the management of the Company submitted claimshas considered various indicators, and concluded that events and circumstances did not trigger the existence of potential impairment of its operating lease assets and that step one of the impairment analysis was not required.
As of December 31, 2020, the Company proceeded with step one of impairment assessment of the unamortized balance of the Right of use asset in relation to vessel Navios Libra. As the undiscounted projected net operating cash flows exceed the carrying value of the right-of-use asset, no impairment loss was recognized as of December 31, 2020.
No impairment loss was recognized as of each of December 31, 2021, 2020 and 2019.
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NAVIOS MARITIME PARTNERS L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except unit and per unit data)
The table below provides the total amount of lease payments on an undiscounted basis on the Company’s chartered-in contracts as of December 31, 2021:
Leases
Charter-in vessels in operation | ||
December 31, 2022 | $ | 30,603 |
December 31, 2023 | 30,558 | |
December 31, 2024 | 30,508 | |
December 31, 2025 | 30,368 | |
December 31, 2026 | 30,257 | |
December 31, 2027 and thereafter | 166,021 | |
Total | $ | 318,315 |
Operating lease liabilities, including current portion | $ | 243,804 |
Discount based on incremental borrowing rate | $ | 74,511 |
Bareboat charter-out contract
Subsequently to the charter-in agreement, the Company entered into bareboat charter-out agreements for charterers’ defaulta firm charter period of 10-years for the vessels Baghdad and Erbil. The agreement includes an optional period of 5 years. The Company performed also an assessment of the lease classification under this agreementthe ASC 842 and concluded that the arrangements are operating leases.
The Company recognizes in relation to the operating leases for the charter-out agreements the charter-out hire income in the consolidated statements of operations on a straight-line basis. As of December 31, 2021, the charter hire income (net of commissions, if any) amounted to $7,031 and it is included in the consolidated statements of operations under the caption “Time charter and voyage revenues”.
NOTE 24 – SUBSEQUENT EVENTS
Subsequent events
On March 28, 2022, Navios HoldingsPartners entered into a new credit facility with a commercial bank for a total amount of $9,635 and $3,795, which were recorded as “Other income”, respectively.
On November 10, 2016, Navios Partners repaid $28,052 up to $55,000in cash for the settlement of a nominal amount of $30,192 of the July 2012 Credit Facility achieving a $2,140 gain on debt repayment.
During the year ended December 31, 2014, Navios Partners received cash compensation of $17,779 from the sale of a defaulted counterparty claim to an unrelated third party. Navios Partners has no continuing obligation to provide any further services to the counterparty and has therefore recognized the entire compensation received immediately in the Statements of Operations within the caption of “Other income”.
As of March 25, 2014, the Company terminated the amended credit default insurance policy. In connection with the termination, Navios Partners received compensation of $30,956 (which was received in April 2014). From the total compensation, $1,170 was recorded immediately in the Statements of Operations within the caption of “Revenue”, which represents reimbursements for insurance claims submitted for the period prior to the date of the termination and the remaining amount of $29,786 was recorded immediately in the Statements of Operations within the caption of “Other income”. The Company has no future requirement to repay any of the lump sum cash payment back to the insurance company or provide any further services.
NOTE 23 – SUBSEQUENT EVENTS
On February 21, 2017, Navios Holdings has agreed to sell to Navios Partners certain loans previously funded by Navios Holdings to Navios Europe Inc. for $27,000, subject to signing of definitive documentation. Navios Partners may require Navios Holdings, under certain conditions, to repurchase the loans after the third anniversary of the date of the sale based on the then outstanding balance of the loans.
On March 6, 2017, Navios Partners announced the issuance of a new $405,000 Term Loan B facility. The Term Loan B facility bears an interest rate of LIBOR +500 basis points and has a three and a half year term. The Term Loan B facility is secured by first priority mortgages covering certain vessels owned by subsidiaries of Navios Partners, in addition to other collateral, and guaranteed by each subsidiary of Navios Partners.
Navios Partners intends to use the net proceeds of the Term Loan B facility to: (i)order to refinance the existing Term Loan B;indebtedness of three of its vessels and (ii) to pay feesfor general corporate purposes. The credit facility matures in March 2027 and expenses related tobears interest at daily cumulative or non-cumulative compounded RFR rate (as defined in the term loans. The issuance ofloan agreement) plus 2.25% per annum. On March 31, 2022, the new Term Loan B facility is subject to signing of definitive documentation.entire amount was drawn under this loan.
On January 12, 2017, in connection to the sale of the MSC Cristina, Navios Partners fully repaid the outstanding balance of $70,950 of the April 2015 Credit Facility.
On January 12, 2017, Navios Partners fully repaid the outstanding balance of $29,000 of the June 2016 Credit Facility.
In January 2017,February 2022, Navios Partners agreed to sell the Navios Apollon, a 2000 Ultra-Handymax vessel Utmost and the Navios Unite, two -built of 52,073 dwtTEU each, to an unrelated third party, for a total net salean aggregate sales price of $4,750. Delivery$. The sale is expected by April 2017.
SIGNATURESIn January 2022, the Board of Directors of Navios Partners authorized its quarterly cash distribution for the three month period ended December 31, 2021 of $0.05 per unit. The distribution was paid on February 11, 2022 to all unitholders of common units and general partner units of record as of February 9, 2022. The aggregate amount of the declared distribution was $1,541.
Pursuant to
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SIGNATURES
The registrant herby certifies that it meets all of the requirements of the Securities Exchange Act of 1934, the registrantfor filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Report to be signedannual report on its behalf by the undersigned, thereunto duly authorized.behalf.
NAVIOS MARITIME PARTNERS L.P. | |||
By: | |||
| /s/ Angeliki Frangou | ||
Angeliki Frangou | |||
Chief Executive Officer |
Date: March 13, 2017April 12, 2022