Navios at 60 - getting better with age

For quite awhile, Navios Logistics has been an important topic of discussion, with an emphasis on logistics in the rivers and coastal regions of South America. The NYSE luncheon included a lengthy presentation from Mario Bergara, Uruguay’s Minister for Economics and Finance, who described logistics as a strategic sector, and enumerated the country’s development of bulk cargo exports.

Bergara’s remarks dovetailed with the Frangou’s presentation; the slides devoted to Navios Logistics, 68.3% owned by Navios Maritime Holdings (NM) presented a story of growth in net income across its Port Terminal, Barge, and Cabotage businesses. Navios Logistics, still a private company but contributing to NM earnings is strategically positioned to handle soybeans exports- “the virtual water trade” in the words of Frangou, and iron ore production from the Carumba region of Brazil- a small, but rapidly growing source of ore moving to China.

The events came at a propitious time for the Navios companies, with Navios Maritime Partners (NMM) having raised $109m, in a sale of partnership units, and tanker company Navios Maritime Acquisition (NMA) in the process of a secondary shares offering that will raise as much as $57m if underwriters kick in and exercise their over-allotment option.  On the same morning, NM announced its Q4 and year-end 2013 earnings- a loss of $0.18 per share. Because the results were below a consensus of analysts’ estimates, shares in NM were down on the day.

But the bigger picture presented by Frangou points to a group of companies which provide a recognised and respectable shipping brand. One eye-catching statistic was the $2.5bn raised by the group in the capital markets during 2013 and through late February. In her remarks, Frangou specifically mentioned $440m raised by NMM through a “Term Loan B” issuance; this technique allows companies to market their debt to a wide range of institutional buyers- a consideration in a world with reduced availability of bank finance.

Navios has also tapped a market that’s been very popular for shipping- Perpetual Preferred Stock - which allows financing to be raised without clogging up debt ratios, while at the same time not diluting equity. NM raised $50m of these securities, at 8.75%, in January 2014. All the money has been put to good use; the presentation showed that the vessel count of the three group companies grew by 50% from 98 at end 2012 to 147 ships as of mid-February.