6-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

OF THE SECURITIES EXCHANGE ACT OF 1934

Dated: December 4, 2020

Commission File No. 001-34104

 

 

NAVIOS MARITIME ACQUISITION CORPORATION

 

 

7 Avenue de Grande Bretagne, Office 11B2

Monte Carlo, MC 98000 Monaco

(Address of Principal Executive Offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F: Form 20-F  ☒     Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Yes  ☐     No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Yes  ☐     No  ☒

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes  ☐     No  ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

 

 

 

 


Table of Contents

NAVIOS MARITIME ACQUISITION CORPORATION

FORM 6-K

TABLE OF CONTENTS

 

     Page  

Operating and Financial Review

     2  

Exhibit List

     22  

Financial Statements Index

     F-1  

This Report on Form 6-K is hereby incorporated by reference into the Navios Maritime Acquisition Corporation Registration Statement on Form F-3, File No. 333-235369.

Operating and Financial Review and Prospects

The following is a discussion of the financial condition and results of operations for the three and nine month periods ended September 30, 2020 and 2019 of Navios Maritime Acquisition Corporation (referred to herein as “we,” “us” or “Navios Acquisition”). All of the financial statements have been stated in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). You should read this section together with the consolidated financial statements and the accompanying notes included in Navios Acquisition’s 2019 Annual Report filed on Form 20-F with the U.S. Securities and Exchange Commission (the “SEC”).

This Report contains forward-looking statements (as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) concerning future events and expectations, including with respect to Navios Acquisition’s future dividends, expected cash flow generation and Navios Acquisition’s growth strategy and measures to implement such strategy; including expected vessel acquisitions and entering into further employment contracts. Words such as “may,” “expects,” “intends,” “plans,” “believes,” “anticipates,” “hopes,” “estimates,” and variations of such words and similar expressions are intended to identify forward-looking statements. Such statements include comments regarding expected revenue and employment contracts. These forward-looking statements are based on the information available to, and the expectations and assumptions deemed reasonable by, Navios Acquisition at the time this filing was made. Although Navios Acquisition believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of Navios Acquisition. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, global and regional economic and political conditions including the impact of the COVID-19 pandemic and efforts throughout the world to contain its spread, including effects on global economic activity, demand for seaborne transportation of the products we ship, the ability and willingness of charterers to fulfill their obligations to us and prevailing charter rates, shipyards performing scrubber installations, drydocking and repairs, changing vessel crews and availability of financing, potential disruption of shipping routes due to accidents, diseases, pandemics, political events, piracy or acts by terrorists, including the impact of the COVID-19 pandemic and the ongoing efforts throughout the world to contain it, the creditworthiness of our charterers and the ability of our contract counterparties to fulfill their obligations to us, tanker industry trends, including charter rates and vessel values and factors affecting vessel supply and demand, the aging of our vessels and resultant increases in operation and dry docking costs, the loss of any customer or charter or vessel, our ability to repay outstanding indebtedness, to obtain additional financing and to obtain replacement charters for our vessels, in each case, at commercially acceptable rates or at all, increases in costs and expenses, including but not limited to: crew wages, insurance, provisions, port expenses, lube oil, bunkers, repairs, maintenance and general and administrative expenses, the expected cost of, and our ability to comply with, governmental regulations and maritime self-regulatory organization standards, as well as standard regulations imposed by our charterers applicable to our business, potential liability from litigation and our vessel operations, including discharge of pollutants, general domestic and international political conditions, competitive factors in the market in which Navios Acquisition operates; risks associated with operations outside the United States; and other factors listed from time to time in the Navios Acquisition’s filings with the SEC, including its annual and interim reports filed on Form 20-F and Form 6-K. Navios Acquisition expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Navios Acquisition’s expectations with respect thereto or any change in events, conditions or circumstances on which any statement is based. Navios Acquisition makes no prediction or statement about the performance of its common stock.

 

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Table of Contents

Recent Developments

Delivery of one VLCC

On October 28, 2020, a newbuilding VLCC of 313,433 dwt under bareboat lease, the Baghdad, was delivered from a Japanese shipyard.

The vessel has been chartered out to a high-quality counterparty for a ten-year period at a bareboat rate of $27,816 net per day. The charter party has an option for an additional five-year period at a bareboat rate of $29,751 net per day.

Dividend

The Board of Directors declared a quarterly cash dividend in respect of the third quarter of 2020 of $0.05 per share of common stock which will be paid on February 10, 2021 to stockholders of record as of January 12, 2021. The declaration and payment of any further dividends remain subject to the discretion of the Board of Directors and will depend on, among other things, Navios Acquisition’s cash requirements as measured by market opportunities and restrictions under its credit agreements and other debt obligations and such other factors as the Board of Directors may deem advisable.

Debt developments

During the third quarter of 2020 and up to December 2, 2020, Navios Acquisition repurchased $55.4 million of its ship mortgage notes for a cash consideration of $39.4 million.

In October 2020, Navios Acquisition extended the maturity date to February 2021 of its existing loan with a commercial bank, having an outstanding amount of $17.6 million.

In October 2020, Navios Acquisition extended the maturity date to October 2024 of its existing loan with a commercial bank, having an outstanding amount of $28.4 million. The remaining balance of the facility is repayable in 16 quarterly installments of $0.8 million each with a final balloon payment of $14.9 million repayable on the last repayment date.

In November 2020, Navios Acquisition arranged financing with a commercial bank of up to $95.8 million in order to refinance one VLCC, two chemical tankers and seven containerships, subject to the refinancing of its ship mortgage notes and to definitive documentation. The facility is repayable through a period of two to four years, in consecutive quarterly installments of up to $1.5 million each, with a balloon payment of up to $62.7 million in total. The facility bears interest at LIBOR plus 400 bps per annum.

Continuous Offering Program

On November 29, 2019, Navios Acquisition entered into a Continuous Offering Program Sales Agreement, pursuant to which Navios Acquisition may issue and sell from time to time through the sales agent shares of common stock having an aggregate offering price of up to $25.0 million. As of December 2, 2020, since the commencement of the program, Navios Acquisition has issued 956,110 shares of common stock and received net proceeds of $5.3 million.

Fleet

As of December 2, 2020, our core fleet consisted of a total of 47 double-hulled tanker vessels, aggregating approximately 6.0 million deadweight tons, or dwt. The fleet includes 14 Very Large Crude Carriers (“VLCC”) tankers (over 200,000 dwt per ship) which transport crude oil, including one bareboat chartered-in VLCC that has been delivered on October 28, 2020 and three bareboat chartered-in VLCCs expected to be delivered in each of the first and the third quarters of 2021 and the second quarter of 2022, ten Long Range 1 (“LR1”) product tankers (60,000-85,000 dwt per ship), 18 Medium Range 2 (“MR2”) product tankers (47,000-52,000 dwt per ship), three Medium Range one (“MR1”) product tankers (35,000-45,000 dwt per ship) and two chemical tankers (25,000 dwt per ship), which transport refined petroleum products and bulk liquid chemicals. Navios Acquisition also owns seven containerships that are accounted for as held for sale. All of our vessels are currently chartered-out to quality counterparties with an average remaining charter period of approximately one year. As of December 2, 2020, we had charters covering 55.9% of available days for our core fleet in 2021.

 

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Table of Contents

Vessels

  

Type

   Year
built
     Dwt     

Net Charter

Rate (1)

  

Profit Sharing
Arrangements

  

Charter Expiration
Date (2)

    Core fleet

                 

    Owned Vessels of Navios Acquisition

 

           

Nave Polaris

   Chemical Tanker      2011        25,145      Floating Rate (3)    None    March 2021

Nave Cosmos

   Chemical Tanker      2010        25,130      Floating Rate (3)    None    March 2021

Star N

   MR1 Product Tanker      2009        37,872      $13,894    None    February 2021

Hector N

   MR1 Product Tanker      2008        38,402      $14,813    None    January 2021

Nave Alderamin

   MR2 Product Tanker      2013        49,998      $12,898(6)    None    November 2021

Nave Bellatrix

   MR2 Product Tanker      2013        49,999      $16,047    None    March 2021

Nave Capella

   MR2 Product Tanker      2013        49,995      $15,800    None    December 2020

Nave Orion

   MR2 Product Tanker      2013        49,999      $15,159    None    December 2020
            $12,898 (6)    None    December 2021

Nave Titan

   MR2 Product Tanker      2013        49,999      $14,072(27)    None    July 2021

Nave Aquila

   MR2 Product Tanker      2012        49,991      $10,863    None    March 2021
            $12,838(28)    None    November 2021

Nave Atria

   MR2 Product Tanker      2012        49,992      $14,072(16)    None    October 2021

Nave Estella

   LR1 Product Tanker      2012        75,000      $17,036    None    December 2020
            $13,234 (7)    None    December 2021

Nave Andromeda

   LR1 Product Tanker      2011        75,000      Floating Rate (8)    None    January 2021

Nave Buena Suerte

   VLCC      2011        297,491      $47,906 (9)    As per footnote (9)    June 2025

Nave Quasar

   VLCC      2010        297,376      $16,788 (10)    As per footnote (10)    January 2023

Nave Synergy

   VLCC      2010        299,973      $32,588    None    May 2022

Nave Spherical

   VLCC      2009        297,188      Floating Rate (11)    None    December 2022

Nave Neutrino

   VLCC      2003        298,287      $24,688    None    May 2021

Nave Photon

   VLCC      2008        297,395      $47,906 (9)    As per footnote (9)    June 2026

Nave Constellation

   VLCC      2010        298,000      $18,170 (12)    As per footnote (12)    February 2021

Nave Universe

   VLCC      2011        297,066      $17,775(13)    As per footnote (13)    April 2022

Nave Celeste

   VLCC      2003        298,717      $18,170 (14)    As per footnote (14)    December 2020

Nave Galactic

   VLCC      2009        297,168     

$20,475(15)

/ $17,775 (13)

  

50%/50%(15)

/As per footnote (13)

  

December 2020/

July 2022

Baghdad

   VLCC      2020        313,433      $27,816 (29)    None    October 2030

    Vessels to be delivered (31)

              

Erbil

   VLCC      Q1 2021        310,000      $27,816 (29)    None    January 2031

Nave Electron

   VLCC      Q3 2021        310,000      As per footnote (18)    —      —  

TBN IV

   VLCC      Q2 2022        310,000      —      —      —  

    Owned Vessels of Navios Midstream

 

           

Perseus N^

   MR1 Product Tanker      2009        36,264      $12,146    None    December 2021

Nave Velocity

   MR2 Product Tanker      2015        49,999      $12,344(17)    None    May 2021

Nave Sextans^

   MR2 Product Tanker      2015        49,999      $17,250 (19)    None    May 2021

Nave Pyxis

   MR2 Product Tanker      2014        49,998      $15,500    None    December 2020

Nave Luminosity

   MR2 Product Tanker      2014        49,999      $17,034 (20)    None    December 2021

Nave Jupiter

   MR2 Product Tanker      2014        49,999      $15,306 (5)    None    February 2021

Bougainville

   MR2 Product Tanker      2013        50,626      $15,600 (21)    100%    September 2023

Nave Orbit

   MR2 Product Tanker      2009        50,470      $14,000    None    September 2021

Nave Equator

   MR2 Product Tanker      2009        50,542      $16,250    None    January 2022

Nave Equinox

   MR2 Product Tanker      2007        50,922      $14,813(22)    ice-transit premium (4)    October 2021

Nave Pulsar

   MR2 Product Tanker      2007        50,922      $14,072(23)    ice-transit premium (4)    November 2021

Nave Dorado

   MR2 Product Tanker      2005        47,999      $7,653(30)    None    February 2021

Nave Atropos

   LR1 Product Tanker      2013        74,695      $29,625    None    May 2021

Nave Rigel

   LR1 Product Tanker      2013        74,673      $16,088 (24)    None    January 2022

Nave Cassiopeia^

   LR1 Product Tanker      2012        74,711      Floating Rate (8)    None    January 2021

Nave Cetus^

   LR1 Product Tanker      2012        74,581      $16,088 (24)    None    January 2022

Nave Ariadne

   LR1 Product Tanker      2007        74,671      Floating Rate (25)    None    March 2021

 

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Table of Contents

Vessels

  

Type

   Year
built
     Dwt     

Net Charter

Rate (1)

  

Profit Sharing
Arrangements

  

Charter Expiration
Date (2)

Nave Cielo

  

LR1 Product Tanker

     2007        74,671      $28,875    None    May 2021

Aurora N

  

LR1 Product Tanker

     2008        63,495      Floating Rate (25)    None    March 2021

Lumen N

  

LR1 Product Tanker

     2008        63,599      Floating Rate (25)    None    March 2021

    Owned Vessels held for sale

              

Acrux N

  

Container

     2010        23,338      $8,759    None    December 2020

Allegro N

  

Container

     2014        46,999      $14,250    None    October 2021

Fleur N

  

Container

     2012        41,130      $10,369    None    May 2021

Ete N

  

Container

     2012        41,139      $9,628    None    April 2021

Spectrum N

  

Container

     2009        34,333      $7,941    None    December 2020
            $15,800    None    April 2022

Solstice N

  

Container

     2007        44,023      $8,470    None    May 2021

Vita N

  

Container

     2010        23,359      $5,294 (26)    None    January 2021

 

(1)

Net time charter-out rate per day (net of commissions), presented in U.S. Dollars.

 

(2)

Estimated dates assuming the midpoint of the redelivery period by charterers, including owner’s extension options not declared yet.

 

(3)

Rate based on Delta-8 pool earnings.

 

(4)

The premium for the Nave Equinox and the Nave Pulsar when vessels are trading on ice or follow ice breaker is $1,500 per day.

 

(5)

Charterer’s option to extend the charter for up to four months at $15,306 net per day.

 

(6)

Charterer has the option to charter the vessel for an optional year at a rate of $14,438 net per day.

 

(7)

Charterer has the option to charter the vessel for an optional year at a rate of $14,630 net per day.

 

(8)

Rate based on LR8 pool earnings.

 

(9)

Profit sharing arrangement of 35% above $54,388, 40% above $59,388 and 50% above $69,388.

 

(10)

Contract provides 100% of BITR TD3C-TCE index up to $37,031 and 50% thereafter with $16,788 floor.

 

(11)

Contract provides 100% of BITR TD3C-TCE index plus $5,000 premium. Premium of $2,500 if vessel not fitted with scrubber.

 

(12)

Contract provides 100% of BITR TD3C-TCE index plus $2,000 up to $39,006 and 50% thereafter with $18,170 floor.

 

(13)

Contract provides adjusted BITR TD3C-TCE index up to $38,759 and 50% thereafter with $17,775 floor.

 

(14)

Contract provides 100% of BITR TD3C-TCE index plus $2,000 up to $38,513 and 50% thereafter with $18,170 floor.

 

(15)

Profit sharing arrangement 50% on actual pool earnings. Any adjustment by the charterers for the expense/loss will be provisionally settled on a quarterly basis and finally settled at the end of the charter period.

 

(16)

Charterer’s option to extend the charter for up to six months at $14,072 net per day.

 

(17)

Charterer’s option to extend the charter for up to six months at $13,331 net per day

 

(18)

To take over Nave Photon’s charter of $47,906 net per day from July 1st, 2021 plus profit sharing arrangement of 35% above $54,388, 40% above $59,388 and 50% above $69,388.

 

(19)

Charterer’s option to extend the charter for one year at $18,750 net per day.

 

(20)

Charterer has the option to charter the vessel for an optional year at a rate of $18,022 net per day.

 

(21)

Rate can reach a maximum of $18,525 net per day calculated basis on a formula.

 

(22)

Charterer has the option to charter the vessel for an optional year at a rate of $16,294 net per day.

 

(23)

Charterer’s option to extend the charter for six months at $15,553 net per day plus ice-transit premium.

 

(24)

Charterer has the option to charter the vessel for an optional year at a rate of $17,063 net per day.

 

(25)

Rate based on Penfield pool earnings.

 

(26)

Charterer has the option to charter the vessel for four to six months at a rate of $8,663 net per day.

 

(27)

Charterer’s option to extend the charter for up to four months at $14,072 net per day.

 

(28)

Charterer’s option to extend the charter for up to four months at $12,838 net per day.

 

(29)

Charterer’s option to extend the bareboat charter for five years at $29,751 net per day.

 

(30)

Charterer’s option to extend the charter for up to ten months: a) up to three months at $7,653 net per day; b) up to four months at $9,875 net per day; and c) up to three months at $11,850 net per day.

 

(31)

Bareboat chartered-in vessels with purchase option, expected to be delivered in each of the first and the third quarters of 2021. In the second quarter of 2020, Navios Acquisition exercised its option for a fourth Japanese newbuild VLCC under a twelve year bareboat charter agreement with de-escalating purchase options and expected delivery in the second quarter of 2022.

 

^

Under process of completion of documentation.

Charter Policy and Industry Outlook

Our core fleet currently consists of 47 vessels, of which 14 are VLCCs (including one bareboat chartered-in VLCC that has been delivered on October 28, 2020 and three bareboat chartered-in VLCCs expected to be delivered in each of the first and the third quarters of 2021 and the second quarter of 2022), 31 are product tankers, and two are chemical tankers. Navios Acquisition also owns seven containerships that are accounted for as held for sale. All of our vessels are currently chartered-out to quality counterparties with an average remaining charter period of approximately one year. Many of our contracts have profit sharing arrangements (see fleet

 

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table above). While all of our vessels are currently chartered-out, we intend to deploy any vessels that would become open—not chartered-out—to leading charterers in a mix of long, medium and short-term time charters, depending on the vessels’positions, seasonality and market outlook. This chartering strategy is intended to allow us to capture increased profits during strong charter markets, while developing relatively stable cash flows from longer-term time charters. We will also seek profit sharing arrangements in our employment contracts, to provide us with potential incremental revenue above the contracted minimum charter rates.

Using Navios Tankers Management Inc.’s (the “Manager”) global network of relationships and extensive experience in the maritime transportation industry, coupled with its commercial, financial and operational expertise, we plan to opportunistically grow our fleet through the timely and selective acquisition of high-quality newbuilding or secondhand vessels when we believe those acquisitions will result in attractive returns on invested capital and increased cash flow. We also intend to engage in opportunistic dispositions where we can achieve attractive values for our vessels as we assess the market cycle. We believe our diverse and versatile fleet, combined with the experience and long-standing relationships of Manager’s with participants in the maritime transportation industry, position us to identify and take advantage of attractive acquisition opportunities.

Factors Affecting Navios Acquisition’s 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:

 

   

the demand for seaborne transportation services;

 

   

the ability of Manager’s commercial and chartering operations to successfully employ our vessels at economically attractive rates, particularly as our fleet expands and our charters expire;

 

   

the effective and efficient technical management of our vessels;

 

   

the Manager’s ability to satisfy technical, health, safety and compliance standards of major commodity traders; and

 

   

the strength of and growth in the number of our customer relationships, especially with major commodity traders.

In addition to the factors discussed above, we believe certain specific factors will impact our consolidated results of operations. These factors include:

 

   

the charter hire earned by our vessels under our charters;

 

   

our access to capital required to acquire additional vessels and/or to implement our business strategy;

 

   

our ability to sell vessels at prices we deem satisfactory;

 

   

our level of debt and the related interest expense and amortization of principal;

 

   

the level of any dividend to our stockholders; and

 

   

the recent global outbreak of novel coronavirus disease (COVID-19) or other epidemics or pandemics.

Voyage, Time Charter and Pooling Arrangements

Revenues are driven primarily by the number of vessels in the fleet, the number of days during which such vessels operate and the amount of daily charter hire rates that the vessels earn under charters, which, in turn, are affected by a number of factors, including:

 

   

the duration of the charters;

 

   

the level of spot market rates at the time of charters;

 

   

decisions relating to vessel acquisitions and disposals;

 

   

the amount of time spent positioning vessels;

 

   

the amount of time that vessels spend in dry dock undergoing repairs and upgrades;

 

   

the age, condition and specifications of the vessels; and

 

   

the aggregate level of supply and demand in the tanker shipping industry.

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 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. 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 the control of management.

 

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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, is determined in accordance with an agreed-upon formula, which is determined by the points awarded to each vessel in the pool based on the vessel’s age, design and other performance characteristics.

The cost to maintain and operate a vessel increases with the age of the vessel. Older vessels are less fuel efficient, cost more to insure and require upgrades from time to time to comply with new regulations. As of December 2, 2020, the average age of Navios Acquisition’s owned fleet was 9.3 years. But, as such fleet ages or if Navios Acquisition expands its fleet by acquiring previously owned and older vessels the cost per vessel would be expected to rise and, assuming all else, including rates, remains constant, vessel profitability would be expected to decrease.

Navios Acquisition reports financial information and evaluates its operations by charter revenues. Navios Acquisition does not use discrete financial information to evaluate operating results for each type of charter. As a result, management reviews operating results solely by revenue per day and operating results of the fleet and thus Navios Acquisition has determined that it operates under one reportable segment.

Set forth below are selected historical and statistical data for Navios Acquisition for each of the three and nine month periods ended September 30, 2020 and 2019 that the Company believes may be useful in better understanding the Company’s financial position and results of operations.

 

     Three month period ended
September 30,
    Nine month period ended
September 30,
 
     2020
(unaudited)
    2019
(unaudited)
    2020
(unaudited)
    2019
(unaudited)
 

FLEET DATA

        

Available days(1)

     4,520       3,491       12,134       10,678  

Operating days(2)

     4,477       3,472       12,036       10,642  

Fleet utilization(3)

     99.1     99.4     99.2     99.7

Vessels operating at period end

     50       39       50       39  

AVERAGE DAILY RESULTS

        

Time charter equivalent rate per day(4)

   $ 16,870     $ 15,349     $ 22,812     $ 16,888  

Navios Acquisition believes that the important measures for analyzing trends in its results of operations consist of the following:

 

(1)

Available days: Available days for the fleet are total calendar days the vessels were in Navios Acquisition’s possession for the relevant period after subtracting off-hire days associated with major repairs, drydocking or special surveys. The shipping industry uses available days to measure the number of days in a relevant period during which vessels should be capable of generating revenues.

 

(2)

Operating days: 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.

 

(3)

Fleet utilization: Fleet utilization is the percentage of time that Navios Acquisition’s 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.

 

(4)

TCE Rate: Time charter equivalent rate per day is defined as voyage and time charter revenues 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 of various types of charter contracts for the number of available days of the fleet.

Period-over-Period Comparisons

For the Three Month Period ended September 30, 2020 compared to the Three Month Period ended September 30, 2019

The following table presents consolidated revenue and expense information for the three month periods ended September 30, 2020 and 2019. This information was derived from the unaudited condensed consolidated statements of operations of Navios Acquisition for the respective periods.

 

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Expressed in thousands of U.S. dollars

   Three Month period
Ended September 30, 2020
(unaudited)
     Three Month period
Ended September 30, 2019
(unaudited)
 

Revenue

   $ 78,807      $ 58,965  

Time charter and voyage expenses

     (2,559      (5,377

Direct vessel expenses

     (3,766      (2,439

Vessel operating expenses (management fees entirely through related party transactions)

     (33,969      (26,837

General and administrative expenses

     (4,719      (3,732

Depreciation and amortization

     (16,682      (17,216

Impairment loss

     —          (39,976

Gain on debt repurchase

     7,010        —    

Interest income

     25        2,384  

Interest expense and finance cost

     (20,441      (22,849

Equity in net earnings of affiliated companies

     —          936  

Other income

     —          10  

Other expense

     (470      (265
  

 

 

    

 

 

 

Net income/ (loss)

   $ 3,236      $ (56,396
  

 

 

    

 

 

 

Revenue: Revenue for the three month period ended September 30, 2020 increased by $19.8 million, or 33.6%, to $78.8 million, as compared to $59.0 million for the same period of 2019. The increase was mainly attributable to an: (i) increase in revenue by $6.0 million due to the acquisition of five product tankers from Navios Europe I in December 2019 and by $5.2 million due to the acquisition of seven containers from Navios Europe II in June 2020; and (ii) increase in market rates during the three month period ended September 30, 2020 as compared to the same period of 2019; partially mitigated by the sale of three VLCCs in 2019. Available days of the fleet increased to 4,520 days for the three month period ended September 30, 2020, as compared to 3,491 days for the three month period ended September 30, 2019, due to the reasons mentioned above. The time charter equivalent rate, or TCE Rate, increased to $16,870 for the three month period ended September 30, 2020, from $15,349 for the three month period ended September 30, 2019.

Time charter and voyage expenses: Time charter and voyage expenses for the three month period ended September 30, 2020 decreased by $2.8 million, or 51.9%, to $2.6 million, as compared to $5.4 million for the same period of 2019. The decrease was mainly attributable to a $3.1 million decrease in bunkers consumption and voyage expenses related to the spot voyages incurred in the period; partially mitigated by a $0.3 million increase in brokers’commission.

Direct vessel expenses: Direct vessel expenses, comprised of the amortization of dry dock and special survey costs, of certain vessels of our fleet amounted to $3.8 million for the three month period ended September 30, 2020, as compared to $2.4 million for the three month period ended September 30, 2019.

Vessel operating expenses (management fees): Vessel operating expenses amounted to $34.0 million for the three month period ended September 30, 2020, as compared to $26.8 million for the three month period ended September 30, 2019. The increase was mainly as a result of the acquisition of five product tankers of Navios Europe I in December 2019 and seven containers of Navios Europe II in June 2020; partially mitigated by the sale of three VLCCs in 2019. Please see Related Party Transactions for discussion on the vessel operating expenses (management fees).

General and administrative expenses: Total general and administrative expenses for the three month period ended September 30, 2020 increased by $1.0 million to $4.7 million compared to $3.7 million for the three month period ended September 30, 2019, mainly as a result of the acquisition of five product tankers from Navios Europe I in December 2019 and seven containers from Navios Europe II in June 2020; partially mitigated by the sale of three VLCCs in 2019. For the three month periods ended September 30, 2020 and 2019, the expenses charged by the Manager for administrative services were $3.5 million and $2.8 million, respectively.

Depreciation and amortization: Depreciation and amortization amounted to $16.7 million for the three month period ended September 30, 2020, as compared to $17.2 million for the three month period ended September 30, 2019, mainly due to the sale of three VLCCs in 2019; partially mitigated by the acquisition of five product tankers of Navios Europe I in December. Depreciation of a vessel is calculated using an estimated useful life of 25 years from the date the vessel was originally delivered from the shipyard.

 

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Impairment loss: There was no impairment loss for the three month period ended September 30, 2020 as compared to $40.0 million for the three month period ended September 30, 2019, that resulted from: (i) $32.7 million accelerated amortization of intangible assets in connection with early termination of certain contracts; and (ii) $7.3 million impairment loss relating to the sale of the Nave Electron as a result of the impairment testing performed.

Gain on debt repurchase: Gain on debt repurchase for the three month period ended September 30, 2020 was $7.0 million as compared to $0 for the same period in 2019. During the third quarter of 2020, Navios Acquisition repurchased $19.0 million of its ship mortgage notes for a cash consideration of $11.9 million resulting in a gain on bond repurchase of $7.0 million net of deferred fees written-off.

Interest income: Interest income for the three month period ended September 30, 2020 decreased by $2.4 million to $0 compared to $2.4 million for the three month period ended September 30, 2019.

Interest expense and finance cost: Interest expense and finance cost for the three month period ended September 30, 2020 decreased by $2.4 million to $20.4 million, as compared to $22.8 million for the three month period ended September 30, 2019. The decrease was mainly due to the decrease of the weighted average interest rate for the three month period ended September 30, 2020 to 6.21% as compared to 7.05% in the same period in 2019 and the decrease of the average outstanding balance. The average outstanding balance of our credit facilities (other than the 2021 Notes, as defined in “Long- Term Debt Obligations and Credit Arrangements – Ship Mortgage Notes”) increased to $540.6 million for the three month period ended September 30, 2020 as compared to $ 537.1 million for the three month period ended September 30, 2019. As of September 30, 2020 and 2019, the outstanding balance under Navios Acquisition’s total borrowings was $1,140.2 million and $1,237.7 million, respectively.

Equity in net earnings of affiliated companies: Equity in net earnings of affiliated companies for the three month period ended September 30, 2020 amounted to $0 as compared to $0.9 million for the three month period ended September 30, 2019 which related to income recognized for Navios Europe I and Navios Europe II.

Other income: Other income was $0 for each of the three month periods ended September 30, 2020 and 2019.

Other expense: Other expense for the three month period ended September 30, 2020 was $0.5 million. For the comparative period of 2019 other expense was $0.3 million.

For the Nine Month Period ended September 30, 2020 compared to the Nine Month Period ended September 30, 2019

The following table presents consolidated revenue and expense information for the nine month periods ended September 30, 2020 and 2019. This information was derived from the unaudited condensed consolidated statements of operations of Navios Acquisition for the respective periods.

 

Expressed in thousands of U.S. dollars

   Nine Month period
Ended September 30, 2020
(unaudited)
     Nine Month period
Ended September 30, 2019
(unaudited)
 

Revenue

   $ 288,888      $ 194,669  

Time charter and voyage expenses

     (12,091      (14,340

Direct vessel expenses

     (10,371      (7,117

Vessel operating expenses (management fees entirely through related party transactions)

     (93,642      (81,224

General and administrative expenses

     (14,966      (15,677

Depreciation and amortization

     (49,931      (52,257

Gain on sale of vessels/ Impairment loss

     —          (36,731

Gain on debt repurchase

     7,010        —    

Interest income

     32        6,840  

Interest expense and finance cost

     (63,964      (69,474

Impairment of receivable in affiliated company / Equity in net earnings of affiliated companies

     (13,900      2,670  

Other income

     —          1,343  

Other expense

     (1,943      (787
  

 

 

    

 

 

 

Net income/ (loss)

   $ 35,122      $ (72,085
  

 

 

    

 

 

 

Revenue: Revenue for the nine month period ended September 30, 2020 increased by $94.2 million, or 48.4%, to $288.9 million, as compared to $194.7 million for the same period of 2019. The increase was mainly attributable to an: (i) increase in revenue by $22.9 million due to the acquisition of five product tankers from Navios Europe I in December 2019 and by $5.2 million due to the acquisition of seven containers from Navios Europe II in June 2020; and (ii) increase in market rates during the nine month period ended September 30, 2020 as compared to the same period of 2019; partially mitigated by the sale of three VLCCs in 2019.

 

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Available days of the fleet increased to 12,134 days for the nine month period ended September 30, 2020, as compared to 10,678 days for the nine month period ended September 30, 2019, due to the reasons mentioned above. The TCE Rate increased to $22,812 for the nine month period ended September 30, 2020, from $16,888 for the nine month period ended September 30, 2019.

Time charter and voyage expenses: Time charter and voyage expenses for the nine month period ended September 30, 2020 decreased by $2.2 million, or 15.4%, to $12.1 million, as compared to $14.3 million for the same period of 2019. The decrease was mainly attributable to a $4.6 million decrease in bunkers consumption and voyage expenses related to the spot voyages incurred in the period; partially mitigated by a: (i) $1.6 million increase in port expenses; and (ii) $0.8 million increase in brokers’commission.

Direct vessel expenses: Direct vessel expenses, comprising of the amortization of dry dock and special survey costs of certain vessels of our fleet, amounted to $10.4 million for the nine month period ended September 30, 2020, as compared to $7.1 million for the nine month period ended September 30, 2019.

Vessel operating expenses (management fees): Vessel operating expenses for the nine month period ended September 30, 2020 increased by $12.4 million to $93.6 million, as compared to $81.2 million for the nine month period ended September 30, 2019. The increase was mainly as a result of the acquisition of five product tankers from Navios Europe I in December 2019 and the acquisition of seven containers from Navios Europe II in June 2020; partially mitigated by the sale of three VLCCs in 2019. Please see Related Party Transactions for discussion on the vessel operating expenses (management fees).

General and administrative expenses: Total general and administrative expenses for the nine month period ended September 30, 2020 decreased by $0.7 million to $15.0 million compared to $15.7 million for the nine month period ended September 30, 2019, mainly due to the decrease in legal and professional fees. For the nine month periods ended September 30, 2020 and 2019, the expenses charged by the Manager for administrative services were $10.0 million and $8.3 million, respectively.

Depreciation and amortization: Depreciation decreased by $2.4 million to $49.9 million for the nine month period ended September 30, 2020 as compared to $52.3 million for the nine month period ended September 30, 2019, mainly due to the sale of three VLCCs in 2019; partially mitigated by the acquisition of five product tankers of Navios Europe I in December 2019. Depreciation of a vessel is calculated using an estimated useful life of 25 years from the date the vessel was originally delivered from the shipyard.

Gain on sale of vessels/ Impairment loss: There was no gain on sale of vessel/ Impairment loss for the nine month period ended September 30, 2020 as compared to a $36.7 million for the nine month period ended September 30, 2019 , that resulted from: (i) $32.7 million accelerated amortization of intangible assets in connection with early termination of certain contracts; and (ii) $7.3 million impairment loss relating to the sale of the Nave Electron as a result of the impairment testing performed; partially mitigated by a $3.2 million gain on sale of vessel for the nine month period ended September 30, 2019.

Gain on debt repurchase: Gain on debt repurchase for the nine month period ended September 30, 2020 was $7.0 million as compared to $0 for the same period in 2019. During the nine month period ended September 30, 2020, Navios Acquisition repurchased $19.0 million of its ship mortgage notes for a cash consideration of $11.9 million resulting in a gain on bond repurchase of $7.0 million net of deferred fees written-off.

Interest income: Interest income for the nine month period ended September 30, 2020 decreased by $6.8 million to $0, as compared to $6.8 million for the nine month period ended September 30, 2019.

Interest expense and finance cost: Interest expense and finance cost for the nine month period ended September 30, 2020 decreased by $5.5 million to $64.0 million, as compared to $69.5 million for the nine month period ended September 30, 2019. The decrease was mainly due to the decrease of the weighted average interest rate for the nine month period ended September 30, 2020 to 6.48% compared to 7.17% in the same period in 2019 and the decrease of the average outstanding balance. The average outstanding balance of our credit facilities (other than the 2021 Notes, as defined in “Long-Term Debt Obligations and Credit Arrangements – Ship Mortgage Notes”) decreased to $525.8 million for the nine month period ended September 30, 2020 as compared to $541.3 million for the nine month period ended September 30, 2019. As of September 30, 2020 and 2019, the outstanding balance under Navios Acquisition’s total borrowings was $1,140.2 million and $1,237.7 million, respectively.

Impairment of receivable in affiliated company / Equity in net earnings of affiliated companies: Impairment of receivable in affiliated companies for the nine month period ended September 30, 2020 amounted to $13.9 million and related to the other-than-temporary impairment recognized in the Navios Acquisition’s receivable from Navios Europe II. Equity in net earnings of affiliated companies for the nine month period ended September 30, 2019 amounted to $2.7 million which related to income recognized for Navios Europe I and Navios Europe II.

Other income: Other income for the nine month period ended September 30, 2020 was $0 as compared to $1.3 million for the same period in 2019.

 

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Table of Contents

Other expense: Other expense for the nine month period ended September 30, 2020 was $1.9 million as compared to $0.8 million for the same period in 2019.

Liquidity and Capital Resources

Our primary short-term liquidity needs are to fund general working capital requirements, dry docking expenditures, minimum cash balance maintenance as per our credit facility agreements and debt repayment, and other obligations from time to time, 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 dry docking expenditures and expenditures to replace vessels in order to maintain the operating capacity of or revenue generated by our fleet. We anticipate that our primary sources of funds for our short-term liquidity needs will be cash flows from operations, long-term borrowings and proceeds from asset sales. As of September 30, 2020, Navios Acquisition’s current assets totaled $174.4 million, while current liabilities totaled $170.0 million, resulting in a positive working capital position of $4.4 million. Navios Acquisition’s cash forecast indicates that it will generate sufficient cash for at least the next 12 months following December 4, 2020 to make the required principal and interest payments on its indebtedness and provide for the normal working capital requirements. Generally, our long-term sources of funds derive from cash from operations, long-term bank borrowings and other debt or equity financings. We expect that we will rely upon cash from operations and upon external financing sources, including bank borrowings, to fund acquisitions, expansion and investment capital expenditures and other commitments we have entered into. We cannot assure you that we will be able to secure adequate financing or obtaining additional funds on favorable terms, to meet our liquidity needs.

Navios Acquisition may use funds to repurchase its outstanding capital stock and/or indebtedness from time to time. Repurchases may be made in the open market, or through privately negotiated transactions or otherwise, in compliance with applicable laws, rules and regulations, at prices and on terms Navios Acquisition deems appropriate and subject to its cash requirements for other purposes, compliance with the covenants under Navios Acquisition’s debt agreements, and other factors management deems relevant.

In February 2018, the Board of Directors of Navios Acquisition authorized a stock repurchase program for up to $25.0 million of Navios Acquisition’s common stock, for two years. Stock 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 management based upon market conditions and other factors. Repurchases were made pursuant to a program adopted under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The program did not require any minimum repurchase or any specific number or amount of shares of common stock and was suspended or reinstated at any time in Navios Acquisition’s discretion and without notice. Repurchases were subject to restrictions under Navios Acquisition’s credit facilities and indenture. Up to the expiration of the stock repurchase program in February 2020, Navios Acquisition had repurchased 735,251 shares since the program was initiated for approximately $7.5 million.

In the fourth quarter of 2019, Navios Acquisition repurchased $12.0 million of its 2021 Notes (as defined in “Long-Term Debt Obligations and Credit Arrangements—Ship Mortgage Notes”) from unaffiliated third parties in open market transactions for a cash consideration of $10.0 million. During the third quarter of 2020 and up to December 2, 2020, Navios Acquisition repurchased $55.4 million of its ship mortgage notes for a cash consideration of $39.4 million.

In October 2019, Navios Acquisition completed a registered direct offering of 1,875,000 shares of its common stock at $8.00 per share, raising gross proceeds of $15.0 million. Total net proceeds of the above transactions, net of agents’ costs of $0.7 million and offering costs $0.9 million, amounted to $13.4 million.

On November 29, 2019, Navios Acquisition entered into a Continuous Offering Program Sales Agreement for the issuance and sale from time to time shares of Navios Acquisition’s common stock having an aggregate offering price of up to $25.0 million. An amended Sales Agreement was entered into on December 23, 2019. As before, the Sales Agreement contains, among other things, customary representations, warranties and covenants by Navios Acquisition and indemnification obligations of the parties thereto as well as certain termination rights for such parties. As of December 2, 2020, since the commencement of the program, Navios Acquisition has issued 956,110 shares of common stock and received net proceeds of $5.3 million.

Cash Flow

Cash flows for the nine month period ended September 30, 2020 compared to the nine month period ended September 30, 2019:

The following table presents cash flow information for the nine month periods ended September 30, 2020 and 2019.

 

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Table of Contents
     Nine Month
Period Ended
September 30, 2020
(unaudited)
     Nine Month
Period Ended
September 30, 2019
(unaudited)
 

Expressed in thousands of U.S. dollars

     

Net cash provided by operating activities

   $ 85,985      $ 21,058  

Net cash (used in)/ provided by investing activities

     (46,408      31,343  

Net cash (used in)/ provided by financing activities

     (23,375      3,862  
  

 

 

    

 

 

 

Net increase in cash, cash equivalents and restricted cash

   $ 16,202      $ 56,263  

Cash, cash equivalents and restricted cash, beginning of period

     44,051        46,609  
  

 

 

    

 

 

 

Cash, cash equivalents and restricted cash, end of period

   $ 60,253      $ 102,872  

Cash provided by operating activities for the nine month period ended September 30, 2020 as compared to the nine month period ended September 30, 2019:

Net cash provided by operating activities increased by $64.9 million to $86.0 million for the period ended September 30, 2020 as compared to $21.1 million for the period ended September 30, 2019. The increase is analyzed as follows:

The net income for the nine month period ended September 30, 2020 was $35.1 million compared to net loss of $72.1 million for the nine month period ended September 30, 2019. In determining net cash provided by operating activities for the nine month period ended September 30, 2020, the net income was adjusted for the effect of depreciation and amortization of $49.9 million, $13.9 million impairment of receivable in affiliated company, $9.8 million for the amortization of drydock and special survey costs, $7.0 million for gain on debt repurchase, $4.4 million for amortization and write-off of deferred finance fees and bond premium and $0.4 million for stock based compensation.

The net cash inflow resulting from the change in operating assets, liabilities and payments for drydock and special survey costs of $20.5 million for the nine month period ended September 30, 2020 mainly resulted from a $5.3 million increase in deferred revenue, a $20.2 million decrease in accounts receivable, a $3.9 million decrease in prepaid expense, a $0.6 million decrease in inventories and an $11.5 million increase in accrued expenses. These were partially offset by a $30.9 million payment for drydock and special survey costs, a $20.1 million decrease in the balance due to related parties short-term, an $8.0 million decrease in accounts payable, a $0.6 million increase in other long term assets and a $2.4 million increase in the balance due from related parties, short- term.

In determining net cash provided by operating activities for the nine month period ended September 30, 2019, the net loss was adjusted for the effect of depreciation and amortization of $52.3 million, $36.7 million for gain on sale of vessels and impairment loss, $7.1 million for the amortization of drydock and special survey costs, $3.3 million for amortization and write-off of deferred finance fees and bond premium, $2.7 million for equity in net earnings of affiliated companies, net of dividends received and $0.7 million for stock based compensation.

The net cash outflow resulting from the change in operating assets, liabilities and payments for drydock and special survey costs of $4.3 million for the nine month period ended September 30, 2019 mainly resulted from a $6.4 million increase in the balance due from related parties, short-term, a $17.1 million decrease in the balance due to related parties, a $6.8 million payment for drydock and special survey costs, a $1.7 million decrease in deferred revenue and a $0.7 million decrease in accounts payable. These were partially offset by a $12.0 million increase in accrued expenses, an $11.9 million decrease in accounts receivable, a $2.9 million decrease in the balance due from related parties, long-term and a $1.6 million decrease in prepaid expenses.

Cash (used in)/ provided by investing activities for the nine month period ended September 30, 2020 as compared to the nine month period ended September 30, 2019:

Net cash (used in)/ provided by investing activities decreased by $77.7 million to $46.4 million outflow for the nine month period ended September 30, 2020 from $31.3 million inflow for the nine month period ended September 30, 2019.

Net cash used in investing activities for the nine month period ended September 30, 2020, resulted from $46.4 million from the acquisition of seven containers from Navios Europe II in June 2020 and vessels improvements.

Net cash provided by investing activities for the nine month period ended September 30, 2019, resulted from $46.4 million net proceeds from sale of vessel; partially mitigated by: (i) $13.1 million from vessels additions; and (ii) $2.0 million from loans to affiliates.

 

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Cash (used in)/ provided by financing activities for the nine month period ended September 30, 2020 as compared to the nine month period ended September 30, 2019:

Net cash (used in)/ provided by financing activities decreased by $27.2 million to $23.4 million outflow for the nine month period ended September 30, 2020 from $3.9 million inflow for the nine month period ended September 30, 2019.

Net cash used in financing activities for the nine month period ended September 30, 2020 resulted from: (a) $144.8 million of loan repayments; and (b) $14.5 million of dividends paid; and was partially mitigated by: (i) $132.8 million loan proceeds, net of deferred finance costs; and (ii) $3.0 million in equity offering proceeds.

Net cash provided by financing activities for the nine month period ended September 30, 2019 resulted from the receipt of $156.6 million in loan proceeds, net of deferred finance costs, which was partially offset by: the use of (i) $144.1 million of loan repayments; (ii) $8.2 million of dividends paid; and (iii) $0.4 million for acquisition of treasury stock.

Reconciliation of EBITDA and Adjusted EBITDA to Net Cash from Operating Activities

 

     Three Month
Period
Ended
September 30,
2020
(unaudited)
     Three Month
Period
Ended
September 30,
2019
(unaudited)
     Nine Month
Period
Ended
September 30,
2020
(unaudited)
     Nine Month
Period
Ended
September 30,
2019
(unaudited)
 

Expressed in thousands of U.S. dollars

           

Net cash provided by operating activities

   $ 35,262      $ 19,513      $ 85,985      $ 21,058  

Net (increase)/ decrease in operating assets

     (20,341      (5,311      (21,710      132  

Net (decrease)/ increase in operating liabilities

     (7,376      (15,735      11,342        (2,633

Net interest cost

     20,416        20,465        63,932        62,634  

Amortization and write-off of deferred finance costs and bond premium

     (1,359      (1,053      (4,404      (3,346

Impairment of receivable in Navios Europe II / Equity in net earnings of affiliated companies

     —          936        (13,900      2,670  

Payments for dry dock and special survey costs

     10,448        5,119        30,869        6,781  

Gain on sale of vessels

     —          —          —          3,245  

Impairment loss

     —          (7,287      —          (7,287

Gain on debt repurchase

     7,010        —          7,010        —    

Stock-based compensation

     (124      (234      (370      (694
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

   $ 43,936      $ 16,413      $ 158,754      $ 82,560  

Gain on sale of vessels

     —          —          —          (3,245

Impairment of receivable in Navios Europe II

     —          7,287        13,900        7,287  

Gain on debt repurchase

     (7,010      —          (7,010      —    

Stock-based compensation

     124        234        370        694  

Adjusted EBITDA

   $ 37,050      $ 23,934      $ 166,014      $ 87,296  

 

     Three Month
Period
Ended
September 30,
2020
(unaudited)
     Three Month
Period
Ended
September 30,
2019
(unaudited)
     Nine Month
Period
Ended
September 30,
2020
(unaudited)
     Nine Month
Period
Ended
September 30,
2019
(unaudited)
 

Net cash provided by operating activities

   $ 35,262      $ 19,513      $ 85,985      $ 21,058  

Net cash (used in)/ provided by investing activities

   $ (1,785    $ 5,605      $ (46,408    $ 31,343  

Net cash (used in)/ provided by financing activities

   $ (41,706    $ 35,792      $ (23,375    $ 3,862  

 

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Table of Contents

EBITDA in this document represents net income/ (loss) before interest and finance costs, before depreciation and amortization and before income taxes. Adjusted EBITDA in this document represents EBITDA excluding certain items, such as stock-based compensation, gain on sale of vessels, gain/ (loss) on debt repayment and other than temporary investment loss on equity investment.

We use Adjusted EBITDA as liquidity measure and reconcile EBITDA and Adjusted EBITDA to net cash provided by operating activities, the most comparable U.S. GAAP liquidity measure. EBITDA in this document is calculated as follows: net cash provided by operating activities adding back, when applicable and as the case may be, the effect of: (i) net (increase)/ decrease in operating assets; (ii) net increase in operating liabilities; (iii) net interest cost; (iv) amortization and write-off of deferred finance costs and bond premium; (v) impairment of receivable in Navios Europe II / Equity in net earnings of affiliated companies; (vi) payments for dry dock and special survey costs; (vii) gain on sale of vessel; and (viii) stock- based compensation. Navios Acquisition believes that EBITDA and Adjusted EBITDA are each the basis upon which liquidity can be assessed and present useful information to investors regarding Navios Acquisition’s ability to service and/or incur indebtedness, pay capital expenditures, meet working capital requirements and pay dividends. Navios Acquisition 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.

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 Acquisition’s 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 are non-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 Acquisition’s 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.

Adjusted EBITDA affected by the items described in the table above, for the three month period ended September 30, 2020 increased by $13.2 million to $37.1 million, as compared to $23.9 million for the same period of 2019. The increase in Adjusted EBITDA was mainly due to a: (a) $19.8 million increase in revenue; and (b) $2.8 million decrease in time charter and voyage expenses; partially mitigated by a: (i) $7.2 million increase in operating expenses mainly due to the acquisition of the five product tankers from Navios Europe I in December 2019 and to the seven containers from Navios Europe II in June 2020 and to the amendment of the fees under the management agreement, partially mitigated by the sale of three VLCCs in 2019; (ii) $1.1 million increase in general and administrative expenses (excluding stock-based compensation); (iii) $0.9 million decrease in equity in net earnings of affiliated companies; and (iv) $0.2 million increase in other expense.

Adjusted EBITDA affected by the items described in the table above, for the nine month period ended September 30, 2020 increased by $78.7 million to $166.0 million, as compared to $87.3 million for the same period of 2019. The increase in Adjusted EBITDA was mainly due to a: (a) $94.2 million increase in revenue; (b) $2.2 million decrease in time charter and voyage expenses; and (c) $0.4 million decrease in general and administrative expenses (excluding stock-based compensation); partially mitigated by a: (i) $12.4 million increase in operating expenses mainly due to the acquisition of the five product tankers from Navios Europe I in December 2019 and due to the acquisition of seven containers from Navios Europe II in June 2020 and to the amendment of the fees under the management agreement, partially mitigated by the sale of three VLCCs in 2019; (ii) $2.7 million decrease in equity in net earnings of affiliated companies; (iii) $1.3 million decrease in other income; (iv) $1.2 million increase in other expense; and (v) $0.6 million increase in direct vessel expenses (other than amortization of dry dock and special survey cost).

Long-Term Debt Obligations and Credit Arrangements

Ship Mortgage Notes

8 1/8% First Priority Ship Mortgages: On November 13, 2013, the Company and its wholly owned subsidiary, Navios Acquisition Finance (US) Inc. (“Navios Acquisition Finance” and together with the Company, the “2021 Co-Issuers”) issued $610.0 million in first priority ship mortgage notes (the “Existing Notes”) due on November 15, 2021 at a fixed rate of 8.125%.

On March 31, 2014, the Company completed a sale of $60.0 million of its first priority ship mortgage notes due in 2021 (the “Additional Notes,” and together with the Existing Notes, the “2021 Notes”). The terms of the Additional Notes are identical to the Existing Notes and were issued at 103.25% plus accrued interest from November 13, 2013.

The 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of Navios Acquisition’s subsidiaries with the exception of Navios Acquisition Finance (a co-issuer of the 2021 Notes) and the exception of Navios Maritime Midstream Partners L.P. (“Navios Midstream”) subsidiaries.

 

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The 2021 Co-Issuers currently have the option to redeem the 2021 Notes in whole or in part, at a fixed price of 106.094% of the principal amount, which price declined ratably until it reached par in 2019, plus accrued and unpaid interest, if any.

In addition, upon the occurrence of certain change of control events, the holders of the 2021 Notes will have the right to require the 2021 Co-Issuers to repurchase some or all of the 2021 Notes at 101% of their face amount, plus accrued and unpaid interest to the repurchase date.

The 2021 Notes contain covenants which, among other things, limit the incurrence of additional indebtedness, issuance of certain preferred stock, the payment of dividends, redemption or repurchase of capital stock or making restricted payments and investments, creation of certain liens, transfer or sale of assets, entering in transactions with affiliates, merging or consolidating or selling all or substantially all of the 2021 Co-Issuers’ properties and assets and creation or designation of restricted subsidiaries.

Following the acquisition of the Star N and the Hector N MR1 product tankers from Navios Europe I, the vessels were offered as collateral under its ship mortgage notes, in substitution of an amount of $25.4 million that was held as cash collateral from the sale proceeds of the Nave Electron.

In the fourth quarter of 2019, Navios Acquisition repurchased $12.0 million of its ship mortgage notes for a cash consideration of $10.0 million resulting in a gain on bond repurchase of $1.9 million net of deferred fees written-off.

In the third quarter of 2020, Navios Acquisition repurchased $19.0 million of its ship mortgage notes for a cash consideration of $11.9 million resulting in a gain on bond repurchase of $7.0 million net of deferred fees written-off.

The 2021 Co-Issuers were in compliance with the covenants as of September 30, 2020.

The Existing Notes and the Additional Notes are treated as a single class for all purposes under the indenture including, without limitation, waivers, amendments, redemptions and other offers to purchase and the Additional Notes rank evenly with the Existing Notes. The Additional Notes and the Existing Notes have different CUSIP numbers.

The Company’s 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of the Company’s subsidiaries with the exception of Navios Acquisition Finance (a co-issuer of the 2021 Notes) and the exception of Navios Midstream subsidiaries. The Company’s 2021 Notes are unregistered. The guarantees of our subsidiaries that own mortgaged vessels are senior secured guarantees and the guarantees of our subsidiaries that do not own mortgaged vessels are senior unsecured guarantees. All subsidiaries, including Navios Acquisition Finance and Navios Midstream subsidiaries are 100% owned. Navios Acquisition does not have any independent assets or operations.

The Company intends to engage in discussions with holders of the 2021 Notes and other prospective investors with respect to a potential refinancing of the 2021 Notes with new, later maturing senior secured notes (the “New Secured Notes”). The New Secured Notes would be expected to be secured by the same collateral that secures the 2021 Notes and may also include additional collateral that may be available, including guarantees and equity pledges of currently unrestricted subsidiaries. The terms of the New Secured Notes would be based on the 2021 Notes, but may include additional provisions, including provisions that may restrict the Company’s reinvestment of excess cash flow, subject to certain conditions. There can be no assurance that the Company will be able to refinance the 2021 Notes with the New Secured Notes, or at all.

This notice shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of 2021 Notes or New Secured Notes, in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The 2021 Notes have not been, and any New Secured Notes would not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws, and unless so registered, may not be offered or sold in the United States or to U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.

Credit Facilities

As of September 30, 2020, the Company had secured credit facilities with various commercial banks with a total outstanding balance of $0.1 billion.

The purpose of the facilities was to finance the construction or acquisition of vessels or refinance existing indebtedness. All of the facilities are denominated in U.S. Dollars and bear interest based on LIBOR plus spread ranging from 230 bps to 410 bps per annum. The facilities are repayable in either semi-annual or quarterly installments, followed by balloon payments with maturities, ranging from February 2021 to October 2027. See also “Contractual obligations” below.

On December 6, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52.0 million out of which $46.2 million has been drawn (divided into two tranches of $23.1 million each) to partially finance the acquisition costs of two LR1 product tanker vessels. Each tranche of the facility was repayable in 32 equal quarterly installments of $0.3 million each with a final balloon payment of $13.3 million, to be repaid on the last repayment date. The maturity date of the loan was in the third and fourth quarter of 2020. The repayment of each tranche started three months after the delivery date of the respective vessel. It bore interest at a rate of LIBOR plus 300 bps. The loan also required compliance with certain financial covenants. The outstanding balance under the facility of $27.5 million was fully prepaid in June 2020.

In November 2015, Navios Acquisition, entered into a term loan facility of up to $125.0 million (divided into five tranches) with Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB for the: (i) financing of the purchase price of the Nave Spherical; and (ii) the refinancing of the existing facility with Deutsche Bank AG Filiale Deutschlandgescäft and Skandinaviska Enskilda Banken AB, dated July 18, 2014. Four of the five tranches of the facility are repayable in 20 quarterly installments of between approximately $0.4 million and $1.9 million, each with a final balloon repayment to be made on the last

 

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repayment date. The fifth tranche is repayable in 16 quarterly installments of between approximately $0.07 million and $0.8 million, each. The maturity date of the loan is in the fourth quarter of 2020. The credit facility bears interest at LIBOR plus 295 bps per annum. On March 23, 2018, Navios Acquisition prepaid $26.8 million, being the respective tranche of the Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB facility that was drawn to finance the Nave Equinox and the Nave Pyxis, which substituted the Nave Galactic as collateral vessels under the 8 1/8% 2021 Notes. On June 18, 2020, Navios Acquisition prepaid $16.3 million, being the respective tranche of the Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB facility that was drawn to finance the Nave Sextans. As of September 30, 2020, the outstanding balance under this facility was $17.6 million. In October 2020, Navios Acquisition extended the maturity date of the loan to February 2021.

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 one VLCC. The facility is repayable in 4 quarterly installments of $0.8 million each with a final balloon payment of $28.4 million repayable on the last repayment date. The facility matures in October 2020 and bears interest at LIBOR plus 280 bps per annum. As of September 30, 2020, $29.3 million was outstanding under this facility. In October 2020, Navios Acquisition extended the maturity date of the loan to October 2024. The remaining balance of the facility is repayable in 16 quarterly installments of $0.8 million each with a final balloon payment of $14.9 million repayable on the last repayment date.

In December 2019, Navios Acquisition entered into a loan agreement with Deutsche Bank AG Filiale Deutschlandgeschäft of up to $32.5 million in order to finance one MR1 and two LR1s acquired from Navios Europe I. The facility was repayable in one single repayment on the last repayment date. The facility matured in June 2020 and bore interest at LIBOR plus 400 bps per annum. In the second quarter of 2020, Navios Acquisition fully repaid the amount of $32.5 million.

In June 2020, Navios Acquisition entered into a loan agreement with Eurobank S.A. of $20.8 million in order to refinance two LR1s. The facility is repayable in 16 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 June 2024 and bears interest at LIBOR plus 300 bps per annum. As of September 30, 2020, an amount of $20.0 million was outstanding under this facility.

In June 2020, Navios Acquisition entered into a loan agreement with Hamburg Commercial Bank AG of $41.7 million in order to acquire seven containerships. The facility is repayable in 4 quarterly installments with a final balloon payment of $21.7 million repayable on the last repayment date. The facility matures in May 2021 and bears interest at LIBOR plus 375 bps per annum and top up fee ranging from 225 bps to 425 bps per annum. As of September 30, 2020, an amount of $36.7 million was outstanding under this facility and is presented under “Liabilities associated with assets held for sale”. (Please refer to Note 7)

Amounts drawn under the agreements are secured by first preferred mortgages on Navios Acquisition’s vessels and other collateral and are guaranteed by each vessel-owning subsidiary. The agreements contain a number of restrictive covenants that prohibit or limit Navios Acquisition from, among other things: incurring or guaranteeing indebtedness; entering into affiliate transactions; changing the flag, class, management or ownership of Navios Acquisition’s vessels; changing the commercial and technical management of Navios Acquisition’s vessels; selling Navios Acquisition’s vessels; and subordinating the obligations under each credit facility to any general and administrative costs relating to the vessels, including the fixed daily fee payable under the Management Agreement. The credit facilities also require Navios Acquisition to comply with the ISM Code and ISPS Code and to maintain valid safety management certificates and documents of compliance at all times.

As of September 30, 2020, no amount was available to be drawn from the Company’s facilities.

Sale and Leaseback Agreements

As of September 30, 2020, the Company had sale and leaseback agreements with various unrelated third parties with a total outstanding balance of $0.4 billion.

As of September 30, 2020 and December 31, 2019, the deposits under the sale and leaseback agreements were $9.1 million and $5.5 million, respectively, and are presented under “Other long term assets” in the condensed consolidated balance sheets.

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. 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 $27.0 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 the vessel financed. As of September 30, 2020, the outstanding balance under the agreements was $70.3 million.

Amounts drawn under the facilities are secured by first preferred mortgages on Navios Acquisition’s vessels and other collateral and are guaranteed by each vessel-owning subsidiary. The credit facilities contain a number of restrictive covenants that prohibit or limit Navios Acquisition from, among other things: incurring or guaranteeing indebtedness; entering into affiliate transactions;

 

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changing the flag, class, management or ownership of Navios Acquisition’s vessels; changing the commercial and technical management of Navios Acquisition’s vessels; selling Navios Acquisition’s vessels; and subordinating the obligations under each credit facility to any general and administrative costs relating to the vessels, including the fixed daily fee payable under the Management Agreement. The credit facilities also require Navios Acquisition to comply with the ISM Code and ISPS Code and to maintain valid safety management certificates and documents of compliance at all times.

As of September 30, 2020, the Company was in compliance with its covenants.

Off-Balance Sheet Arrangements – Legal Proceedings

The Company 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 the Company believes that a liability may be probable, and for which the amounts are reasonably estimable, based upon facts known at the date of the financial statements were prepared. In the opinion of the management, the ultimate disposition of these matters individually and in aggregate will not materially affect the Company’s financial position, results of operations or liquidity.

Contractual Obligations

The following table summarizes our long-term contractual obligations as of September 30, 2020:

 

     Payments due by period (Unaudited)  

(In thousands of U.S. dollars)

   Less than
1 year
     1-3 years      3-5 years      More than
5 years
     Total  

Long-term debt obligations(1)

   $ 88,677      $ 806,255      $ 129,546      $ 115,739      $ 1,140,217  

Lease Obligations (Time Charters) for vessels to be delivered(2)

     15,297        62,700        66,960        256,526        401,483  

Total contractual obligations

   $ 103,974        868,955        196,506        372,265      $ 1,541,700  

 

(1)

The amount identified does not include interest costs associated with the outstanding credit facilities, which are based on LIBOR, plus the costs of complying with any applicable regulatory requirements and a margin ranging from 230 bps to 410 bps per annum or the $670.0 million 2021 Notes fixed rate of 8.125%.

(2)

In August 2018, Navios Acquisition agreed to the main terms of a 12-year bareboat charter-in agreement with de-escalating purchase options for two newbuild Japanese VLCCs delivering in each of the fourth quarter of 2020 and the first quarter of 2021. In the first quarter of 2019, we exercised our option for a third VLCC newbuilding under a bareboat operating lease with an expected delivery in the second quarter of 2021. In the second quarter of 2020, Navios Acquisition exercised its option for a fourth Japanese newbuild VLCC under a bareboat operating lease with an expected delivery in the second quarter of 2022.

Navios Acquisition leases office space in Monaco pursuant to a five year lease agreement, dated July 1, 2018, that expires in June 2023, for a monthly rent of approximately $0.01 million.

Related Party Transactions

Vessel operating expenses (management fees): Pursuant to the Management Agreement dated May 28, 2010 and as amended in May 2012, May 2014, May 2016 and May 2018, the Manager provided commercial and technical management services to Navios Acquisition’s vessels for a fixed daily fee of: (a) $6,500 per MR2 product tanker and chemical tanker vessel; (b) $7,150 per LR1 product tanker vessel; and (c) the current daily fee of $9,500 per VLCC, through May 2020.

Following the Merger with Navios Midstream, completed on December 13, 2018, the Management Agreement covers vessels acquired.

On August 29, 2019, Navios Acquisition entered into a sixth amendment (the “Sixth Amendment”) to the Management Agreement (as amended, the “Management Agreement”) with Navios Tankers Management Inc. The Sixth Amendment, among other changes, extends the duration of the Management Agreement 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 by Navios Acquisition in the event the Management Agreement is terminated on or before December 31, 2024. The Sixth Amendment also sets forth the fixed vessel operating expenses for the period through December 31, 2019 and the two-year period commencing January 1, 2020, which fixed vessel operating expenses exclude dry-docking expenses, which are reimbursed at cost by Navios Acquisition: (a) $7,150 and $7,225, respectively, daily rate per owned LR1 product tanker vessel; (b) $6,500 and $6,825, respectively, daily rate per owned MR2 product tanker vessel and chemical tanker vessel; (c) $9,500 and $9,650, respectively, daily rate per VLCC tanker vessel; and (d) effective in both periods, $50 per vessel daily rate for technical and commercial management services. Commencing January 1, 2022, the fees described in subsections (a) through (c) are subject to an annual increase of 3%, unless otherwise agreed and provides for payment of a termination fee, equal to the fees charged for the full calendar year preceding the termination date, by Navios Acquisition in the event the Management Agreement is terminated on or before December 31, 2024.

 

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Following the liquidation of Navios Europe I (“Liquidation of Navios Europe I”) in December 2019, which resulted in the acquisition of three MR1 product tankers and two LR1 product tankers, as per the terms of the Management Agreement, vessel operating expenses are fixed for two years commencing from January 1, 2020 at: (a) $6,825 per day per MR1, MR2 product tanker and chemical tanker; (b) $7,225 per day per LR1 product tanker vessel; and (c) $9,500 per VLCC. The Management 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.

Following the Liquidation of Navios Europe II, Navios Acquisition acquired seven containerships on June 29, 2020. As per the amendment to the Management Agreement dated June 26, 2020, the vessel operating expenses are fixed at: (a) $5,250 per day per Container vessel of 1,500 TEU up to 1,999 TEU; and (b) $6,100 per day per Container vessel of 2,000 TEU up to 3,450 TEU. The Management 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.

Drydocking expenses are reimbursed at cost for all vessels.

For the nine month periods ended September 30, 2020 and 2019 certain extraordinary fees and costs related to regulatory requirements, including ballast water treatment system installation and exhaust gas cleaning system installation and under Company’s Management Agreement amounted to $4.4 million and $13.1 million, respectively, and are presented under “Container vessel owning companies acquisition / vessels improvements” in the condensed Consolidated Statements of Cash Flows. (Please refer to Note 5)

Total fixed vessel operating expenses for the three month periods ended September 30, 2020 and 2019 amounted to $34.0 million and $26.8 million, respectively. Total fixed vessel operating expenses for the nine month periods ended September 30, 2020 and 2019 amounted to $93.6 million and $81.2 million, respectively.

General and administrative expenses: On May 28, 2010, Navios Acquisition entered into an Administrative Services Agreement with the Manager, pursuant to which the Manager provides certain administrative management services to Navios Acquisition 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 services. The Manager is reimbursed for reasonable costs and expenses incurred in connection with the provision of these services. In May 2014, Navios Acquisition extended the duration of its existing Administrative Services Agreement with the Manager, until May 2020.

In August 2019, Navios Acquisition 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, by Navios Acquisition in the event the Administrative Services Agreement is terminated on or before December 31, 2024.

Following the Liquidation of Navios Europe I in December 2019, Navios Acquisition acquired three MR1 product tankers and two LR1 product tankers. The Administrative Services Agreement also covers the vessels acquired.

Following the Liquidation of Navios Europe II, Navios Acquisition acquired seven containerships on June 29, 2020. The Administrative Services Agreement also covers the vessels acquired.

For each of the three month periods ended September 30, 2020 and 2019 the expense arising from administrative services rendered by the Manager amounted to $3.5 million and $2.8 million, respectively. For each of the nine month periods ended September 30, 2020 and 2019 the expense arising from administrative services rendered by the Manager amounted to $9.5 million and $8.4 million, respectively.

Balance due from/ (to) related parties: Balance due from related parties (both short and long-term) as of September 30, 2020, was $17.1 million (December 31, 2019: $14.7 million) and balance due to related parties as of September 30, 2020 was $0 (December 31, 2019:$32.2 million). The balances mainly consisted of administrative expenses, costs related to regulatory requirements including ballast water treatment system, special survey and dry docking expenses, as well as operating expenses and working capital deposits, in accordance with the Management Agreement. The amount of $1.8 million related to seven containerships acquired after the liquidation of Navios Europe II is included under “Assets held for sale” in the condensed consolidated balance sheets.

 

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Navios Midstream Merger Agreement: On December 13, 2018, Navios Acquisition completed the Merger contemplated by the Merger Agreement, dated as of October 7, 2018, by and among Navios Acquisition, its direct wholly-owned subsidiary Merger Sub, Navios Midstream and NAP General Partner. Pursuant to the Merger Agreement, Merger Sub merged with and into Navios Midstream, with Navios Midstream surviving as a wholly-owned subsidiary of Navios Acquisition.

Omnibus Agreements

Acquisition Omnibus Agreement: Navios Acquisition entered into an omnibus agreement (the “Acquisition Omnibus Agreement”) with Navios Maritime Holdings Inc. (“Navios Holdings”) and Navios Maritime Partners L.P. (“Navios Partners”) 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 vessels 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-in drybulk carriers under specific exceptions. Under the Acquisition Omnibus Agreement, Navios Acquisition and its subsidiaries grant 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 they might own. These rights of first offer will not apply to a: (a) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the existing terms of any charter or other agreement with a counterparty; or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third party.

Midstream Omnibus Agreement: Navios Acquisition entered into an omnibus agreement (the “Midstream Omnibus Agreement”), with Navios Midstream, Navios Holdings and Navios Partners in connection with the Navios Midstream IPO, pursuant to which Navios Acquisition, Navios Midstream, Navios Holdings, Navios Partners and their controlled affiliates generally have agreed not to acquire or own any VLCCs, crude oil tankers, refined petroleum product tankers, liquefied petroleum gas (“LPG”) tankers or chemical tankers under time charters of five or more years without the consent of the Navios Midstream General Partner. The Midstream Omnibus Agreement contains significant exceptions that have allowed Navios Acquisition, Navios Holdings, Navios Partners or any of their controlled affiliates to compete with Navios Midstream under specified circumstances.

Under the Midstream Omnibus Agreement, Navios Midstream and its subsidiaries have granted to Navios Acquisition a right of first offer on any proposed sale, transfer or other disposition of any of its VLCCs or any crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers and related charters owned or acquired by Navios Midstream. Likewise, Navios Acquisition have agreed (and will cause its subsidiaries to agree) to grant a similar right of first offer to Navios Midstream for any of the VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers under charter for five 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.

Navios Containers Omnibus Agreement: In connection with the Navios Maritime Containers Inc. (“Navios Containers”) private placement and listing on the Norwegian over-the-counter market effective June 8, 2017, Navios Acquisition entered into an omnibus agreement with Navios Containers, Navios Midstream, Navios Holdings and Navios Partners, pursuant to which Navios Acquisition, Navios Holdings, Navios Partners 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 Acquisition, Navios Holdings, Navios Partners and Navios Midstream to compete with Navios Containers under specified circumstances.

Navios Midstream General Partner Option Agreement with Navios Holdings: Navios Acquisition entered into an option agreement, dated November 18, 2014, with Navios Holdings under which Navios Acquisition grants Navios Holdings the option to acquire any or all of the outstanding membership interests in Navios Midstream General Partner and all of the incentive distribution rights in Navios Midstream representing the right to receive an increasing percentage of the quarterly distributions when certain conditions are met. The option shall expire on November 18, 2024. Any such exercise shall relate to not less than twenty-five percent of the option interest and the purchase price for the acquisition of all or part of the option interest shall be an amount equal to its fair market value.

Balance due from Navios Europe II: Navios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe II revolving loans up to $43.5 million to fund working capital requirements. In March 2017, the availability under the Navios Revolving Loans II was increased by $14.0 million.

The decline in the fair value of the investment was considered as other-than-temporary and, therefore, an aggregate loss of $13.9 million was recognized and included in the accompanying condensed consolidated statements of income for the three month period ended March 31, 2020, and the nine month period ended September 30, 2020, as “Impairment of receivable in affiliated company/Equity in net earnings of affiliated companies.” The fair value of the Company’s investment was determined based on the liquidation value of Navios Europe II, determined on the individual fair values assigned to the assets and liabilities of Navios Europe II.

 

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Following the Liquidation of Navios Europe II, the balance due from Navios Europe II as of September 30, 2020 was $0. The balance due from Navios Europe II as of December 31, 2019 was $44.9 million which included the Navios Revolving Loans II of $20.7 million, the non-current amount of $7.6 million related to the accrued interest income earned under the Navios Term Loans II under the caption “Due from related parties, long-term” and the accrued interest income earned under the Navios Revolving Loans II of $16.7 million under the caption “Due from related parties, short-term.”

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 U.S. dollars 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 in the statements of income.

Interest Rate Risk

As of September 30, 2020, Navios Acquisition had a total of $1,140.2 million in long-term and short-term indebtedness. Borrowings under our credit facilities bear interest at rates based on a premium over LIBOR in U.S dollars except for the interest rate on the Existing Notes and the Additional Notes which is fixed. Therefore, we are exposed to the risk that our interest expense may increase if interest rates rise. For the three month period ended September 30, 2020, we paid interest on our outstanding debt at a weighted average interest rate of 6.21%. A 1% increase in LIBOR would have increased our interest expense for the three month period ended September 30, 2020 by $1.4 million. For the nine month period ended September 30, 2020, we paid interest on our outstanding debt at a weighted average interest rate of 6.48%. A 1% increase in LIBOR would have increased our interest expense for the nine month period ended September 30, 2020 by $4.0 million.

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 nine month period ended September 30, 2020, Navig8 Chemicals Shipping and Trading Co (“Navig8”) accounted for 29.1%, China ZhenHua Oil Co., Ltd accounted for 12.6% and China Shipping Developement (Hong Kong) accounted for 10.3%, respectively, of Navios Acquisition’s revenue. For the year ended December 31, 2019, Navig8 and COSCO Shipping Tanker (Dalian) Co., Ltd. accounted for 34.6%, and 10.0%, respectively, of Navios Acquisition’s revenue.

Cash and Cash Equivalents

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 Acquisition does maintain cash deposits and equivalents in excess of government-provided insurance limits. Navios Acquisition also minimizes exposure to credit risk by dealing with a diversified group of major financial institutions.

Inflation

Inflation has had a minimal impact on vessel operating expenses and general and administrative expenses. Our management does not consider inflation to be a significant risk to expenses in the current and foreseeable economic environment.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying generally accepted accounting principles to contract modifications, hedging relationships, and other transactions impacted by reference rate reform. The provisions of ASU 2020-04 apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 is optional and is effective from March 12, 2020 through December 31, 2022. We are currently evaluating the impact of ASU 2020-04 on our condensed consolidated financial statements.

 

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In August 2018, FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”. This update modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and earlier adoption is permitted. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In October 2018, FASB issued ASU 2018-17, Consolidation (Topic 810): “Targeted Improvements to Related Party Guidance for Variable Interest Entities” (“ASU 2018-17”). ASU 2018-17 provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. This is consistent with how indirect interests held through related parties under common control are considered for determining whether a reporting entity must consolidate a Variable Interest Entity (“VIE”). For Public business entities the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU is effective for periods beginning after December 15, 2019, with an election to adopt early. The ASU requires only a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value. It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In June 2016, FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard requires entities to measure all expected credit losses of financial assets held at a reporting date based on historical experience, current conditions, and reasonable and supportable forecasts in order to record credit losses in a more timely matter. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standard is effective for interim and annual reporting periods beginning after December 15, 2019, although early adoption is permitted for interim and annual periods beginning after December 15, 2018. In November 2018, FASB issued ASU 2018-19 “Codification Improvements to topic 326, Financial Instruments-Credit Losses”. The amendments in this update clarify that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

Critical Accounting Policies

Navios Acquisition’s interim consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires Navios Acquisition to make estimates in the application of our accounting policies based on the best assumptions, judgments and opinions of management. 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. Other than as described below, all significant accounting policies are as described in Note 2 to the consolidated financial statements included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2019 filed with the SEC on March 6, 2020. 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 asset (disposal group); the asset (disposal group) is available for immediate sale in its present condition; 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 assets are not depreciated once they meet the criteria to be held for sale.

 

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Exhibit List

 

Exhibit
No.
  

Exhibit

4.1    Amending and Restating Agreement, dated October  16, 2020, by and among Lefkada Shipping Corporation, as borrower, Hamburg Commercial Bank AG, as agent, mandated lead arranger and security trustee, and the banks and financial institutions listed therein.

 

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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER  30, 2020 AND AUDITED CONDENSED CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2019

     F-2  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

     F-3  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR NINE MONTH PERIOD ENDED SEPTEMBER 30, 2020 AND 2019

     F-4  

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

     F-5  

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

     F-6  

 

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CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of U.S. Dollars except share data)

 

     Notes      September 30,
2020
(unaudited)
    December 31,
2019
 

ASSETS

       

Current assets

       

Cash and cash equivalents

     3      $ 59,538     $ 43,561  

Restricted cash

     3        715       490  

Accounts receivable, net

        13,722       34,235  

Due from related parties, short term

     8,13        2,426       16,688  

Prepaid expenses and other current assets

     4        9,981       12,826  

Inventories

     4        5,419       6,208  

Assets held for sale

     7        82,577        

Total current assets

        174,378       114,008  

Vessels, net

     5        1,302,682       1,348,251  

Goodwill

        1,579       1,579  

Other long-term assets

     2,11        9,679       5,456  

Deferred dry dock and special survey costs, net

        46,857       37,133  

Investment in affiliates

     8              6,650  

Due from related parties, long-term

     8,13        14,658       42,878  

Total non-current assets

        1,375,455       1,441,947  

Total assets

      $ 1,549,833     $ 1,555,955  

LIABILITIES AND STOCKHOLDERS’ EQUITY

       

Current liabilities

       

Accounts payable

      $ 7,872     $ 15,355  

Accrued expenses

     10        25,814       14,337  

Due to related parties, short-term

     13              32,150  

Dividends payable

     9        4,921       4,711  

Deferred revenue

        7,723       2,433  

Current portion of long-term debt, net of deferred finance costs

     11        86,227       172,953  

Liabilities associated with assets held for sale

     7        37,419        

Total current liabilities

        169,976       241,939  

Long-term debt, net of current portion, premium and net of deferred finance costs

     11        1,041,956       1,000,164  

Total non-current liabilities

        1,041,956       1,000,164  

Total liabilities

      $ 1,211,932     $ 1,242,103  

Commitments and contingencies

     14               

Stockholders’ equity

       

Common stock, $0.0001 par value; 250,000,000 shares authorized; 16,513,935 and 15,873,391 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

     15        2       2  

Additional paid-in capital

     15        510,202       521,275  

Accumulated deficit

        (172,303     (207,425

Total stockholders’ equity

        337,901       313,852  

Total liabilities and stockholders’ equity

      $ 1,549,833     $ 1,555,955  

See unaudited condensed notes to consolidated financial statements.

 

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in thousands of U.S. dollars- except share and per share data)

 

     Notes      For the Three
Months
Ended
September 30, 2020
(unaudited)
    For the Three
Months
Ended
September 30, 2019
(unaudited)
    For the Nine
Months
Ended
September 30, 2020
(unaudited)
    For the Nine
Months
Ended
September 30, 2019
(unaudited)
 

Revenue

     2,16      $ 78,807     $ 58,965     $ 288,888     $ 194,669  

Time charter and voyage expenses

        (2,559     (5,377     (12,091     (14,340

Direct vessel expenses

        (3,766     (2,439     (10,371     (7,117

Vessel operating expenses (management fees entirely through related party transactions)

     13        (33,969     (26,837     (93,642     (81,224

General and administrative expenses

     13        (4,719     (3,732     (14,966     (15,677

Depreciation and amortization

     5,6        (16,682     (17,216     (49,931     (52,257

Gain on sale of vessels/ Impairment loss

     5,6        —         (39,976     —         (36,731

Gain on debt repurchase

     11        7,010       —         7,010       —    

Interest income

     8,13        25       2,384       32       6,840  

Interest expense and finance cost

     11        (20,441     (22,849     (63,964     (69,474

Impairment of receivable in affiliated company / Equity in net earnings of affiliated companies

     8        —         936       (13,900     2,670  

Other income

        —         10       —         1,343  

Other expense

        (470     (265     (1,943     (787
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income/ (loss)

      $ 3,236     $ (56,396   $ 35,122     $ (72,085
     

 

 

   

 

 

   

 

 

   

 

 

 

Dividend declared on restricted shares

        (46     (65     (139     (196

Undistributed loss attributable to Series C participating preferred shares

        —         —         —         (13
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income/ (loss) attributable to common stockholders, basic

     17      $ 3,190     $ (56,461   $ 34,983     $ (72,294
     

 

 

   

 

 

   

 

 

   

 

 

 

Undistributed loss attributable to Series C participating preferred shares

        —         —         —         13  

Net income/ (loss) attributable to common stockholders, diluted

     17      $ 3,190     $ (56,461   $ 34,983     $ (72,281
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income/ (loss) per share, basic

     17      $ 0.20     $ (4.18   $ 2.20     $ (5.38

Weighted average number of shares, basic

        16,104,011       13,510,361       15,903,447       13,446,836  

Net income/ (loss) per share, diluted

        0.20       (4.18     2.18       (5.38

Weighted average number of shares, diluted

        16,257,957       13,510,361       16,058,579       13,446,836  

See unaudited condensed notes to consolidated financial statements.

 

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of U.S. dollars)

 

     Notes      For the Nine Months
Ended September 30, 2020
(unaudited)
    For the Nine Months
Ended September 30, 2019
(unaudited)
 

Operating Activities

       

Net income/ (loss)

      $ 35,122     $ (72,085

Adjustments to reconcile net income/ (loss) to net cash provided by operating activities:

       

Gain on debt repurchase

     11        (7,010     —    

Depreciation and amortization

     5,6        49,931       52,257  

Amortization and write-off of deferred finance fees and bond premium

     11        4,404       3,346  

Amortization of dry dock and special survey costs

        9,769       7,065  

Stock based compensation

     15        370       694  

Gain on sale of vessels/ Impairment loss

        —         36,731  

Impairment loss relating to the investment in Navios Europe II

     8        13,900       —    

Equity in net earnings of affiliated companies, net of dividends received

        —         (2,670

Changes in operating assets and liabilities:

       

Decrease in prepaid expenses and other current assets

        3,931       1,595  

Decrease in inventories

        582       —    

Decrease in accounts receivable

        20,243       11,863  

Increase in due from related parties, short-term

        (2,426     (6,402

Increase in other long term assets

        (620     —    

Decrease in due from related parties, long-term

        —         2,858  

Decrease in accounts payable

        (8,026     (667

Increase in accrued expenses

        11,466       12,037  

Payments for dry dock and special survey costs

        (30,869     (6,781

Decrease in due to related parties, short-term

        (20,072     (17,057

Increase/ (Decrease) in deferred revenue

        5,290       (1,726

Net cash provided by operating activities

      $ 85,985     $ 21,058  

Investing Activities

       

Loans to affiliates

     13        —         (2,000

Container vessel owning companies acquisition/ vessels improvements

     5,7        (46,408     (13,108

Net cash proceeds from sale of vessel

     5        —         46,451  

Net cash (used in)/ provided by investing activities

      $ (46,408   $ 31,343  

Financing Activities

       

Loan proceeds, net of deferred finance costs

     11,8        132,840       156,588  

Loan repayments

     11        (144,771     (144,120

Dividend paid

     9        (14,485     (8,240

Acquisition of treasury stock

        —         (366

Net proceeds from equity offering

        3,041       —    

Net cash (used in)/ provided by financing activities

      $ (23,375   $ 3,862  

Net increase in cash, cash equivalents and restricted cash

        16,202       56,263  

Cash, cash equivalents and restricted cash, beginning of period

        44,051       46,609  

Cash, cash equivalents and restricted cash, end of period

      $ 60,253     $ 102,872  

Supplemental disclosures of cash flow information

       

Cash interest paid

      $ 47,920     $ 52,769  

Non-cash investing activities

       

Accrued interest on loan to affiliate

      $ —       $ 2,670  

Container vessel owning companies acquisition

      $ 37,658     $ —    

Non-cash financing activities

       

Stock based compensation

      $ 370     $ 694  

Deferred finance costs

      $ 638     $ 375  

Other long term assets

      $ 3,602     $ 5,456  

See unaudited condensed notes to consolidated financial statements.

 

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of U.S. dollars, except share data)

 

     Preferred Stock      Common Stock                     
     Number of
Preferred
Shares
     Amount      Number of
Common
Shares
     Amount      Additional
Paid-in
Capital
    Accumulated
deficit
    Total
Stockholders’
Equity
 

Balance, December 31, 2019

     —          —          15,873,391      $ 2      $ 521,275     $ (207,425   $ 313,852  

Stock based compensation (see Note 15)

     —          —          —          —          123       —         123  

Continuous Offering Program (see Note 15)

     —          —          63,545        —          304       —         304  

Dividend paid/ declared (see Note 9)

     —          —          —          —          (4,755     —         (4,755

Net income

     —          —          —          —          —         869       869  

Balance, March 31, 2020 (unaudited)

     —          —          15,936,936      $ 2      $ 516,947     $ (206,556   $ 310,393  

Stock based compensation (see Note 15)

     —          —                 —          123       —         123  

Continuous Offering Program (see Note 15)

     —          —          152,954      —          644       —         644  

Dividend paid/ declared (see Note 9)

     —          —          —          —          (4,809     —         (4,809

Net income

     —          —          —          —          —         31,017       31,017  

Balance, June 30, 2020 (unaudited)

     —          —          16,089,890      $ 2      $ 512,905     $ (175,539   $ 337,368  

Stock based compensation (see Note 15)

     —          —                 —          124       —         124  

Continuous Offering Program (see Note 15)

     —          —          424,045        —          2,094       —         2,094  

Dividend paid/ declared (see Note 9)

     —          —          —          —          (4,921     —         (4,921

Net income

     —          —          —          —          —         3,236       3,236  

Balance, September 30, 2020 (unaudited)

     —          —          16,513,935      $ 2      $ 510,202     $ (172,303   $ 337,901  

 

     Preferred Stock      Common Stock                     
     Number of
Preferred
Shares
    Amount      Number of
Common
Shares
    Amount      Additional
Paid-in
Capital
    Accumulated
deficit
    Total
Stockholders’
Equity
 

Balance, December 31, 2018

     1,000     $ —        13,280,927     $ 1      $ 522,335     $ (141,984   $ 380,352  

Conversion of preferred stock to common (see Note 15)

     (1,000     —          511,733       —          —         —         —    

Stock based compensation (see Note 15)

     —         —          —         —          229       —         229  

Acquisition of treasury stock

     —         —          (64,289     —          (366     —         (366

Dividend paid/ declared (see Note 9)

     —         —          —         —          (4,121     —         (4,121

Net income

     —         —          —         —          —         861       861  

Balance, March 31, 2019 (unaudited)

     —       $ —        13,728,371     $ 1      $ 518,077     $ (141,123   $ 376,955  

Stock based compensation (see Note 15)

     —         —          —         —          231       —         231  

Dividend paid/ declared (see Note 9)

     —         —          —         —          (4,119     —         (4,119

Net loss

     —         —          —         —          —         (16,550     (16,550

Balance, June 30, 2019 (unaudited)

     —       $ —        13,728,371     $ 1      $ 514,189     $ (157,673   $ 356,517  

Stock based compensation (see Note 15)

     —         —          —         —          234       —         234  

Dividend paid/ declared (see Note 9)

     —         —          —         —          (4,119     —         (4,119

Net loss

     —         —          —         —          —         (56,396     (56,396

Balance, September 30, 2019 (unaudited)

     —       $ —        13,728,371     $ 1      $ 510,304     $ (214,069   $ 296,236  

See unaudited condensed notes to consolidated financial statements.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

NOTE 1: DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

Navios Maritime Acquisition Corporation (“Navios Acquisition” or the “Company”) (NYSE: NNA) owns a large fleet of modern crude oil, refined petroleum product and chemical tankers providing world-wide marine transportation services. The Company’s strategy is to charter its vessels to international oil companies, refiners and large vessel operators under long, medium and short-term contracts. The Company is committed to providing quality transportation services and developing and maintaining long-term relationships with its customers. The operations of Navios Acquisition are managed by Navios Tankers Management Inc. (the “Manager”).

Navios Acquisition was incorporated in the Republic of the Marshall Islands on March 14, 2008. On July 1, 2008, Navios Acquisition completed its initial public offering (“IPO”). On May 28, 2010, Navios Acquisition consummated the vessel acquisition which constituted its initial business combination. Following such transaction, Navios Acquisition commenced its operations as an operating company.

On November 22, 2019, an agreement was reached to liquidate Navios Europe I. As a result of the liquidation, which was completed in December 2019 (“Liquidation of Navios Europe I”), Navios Acquisition acquired five vessel owning companies.

In October 2019, Navios Acquisition completed a registered direct offering of 1,875,000 shares of its common stock at $8.00 per share, raising gross proceeds of $15,000. Total net proceeds of the above transactions, net of agents’ costs of $675 and offering costs of $957, amounted to $13,368.

On November 29, 2019, Navios Acquisition entered into a Continuous Offering Program Sales Agreement for the issuance and sale from time to time shares of Navios Acquisition’s common stock having an aggregate offering price of up to $25,000. The sales were being made pursuant to a prospectus supplement as part of a shelf registration statement which was set to expire in December 2019. Navios Acquisition went effective on a new shelf registration statement which was declared effective on December 23, 2019. Accordingly, an updated Continuous Offering Program Sales Agreement (the “Sales Agreement”) was entered into on December 23, 2019. As before, the updated Sales Agreement contains, among other things, customary representations, warranties and covenants by Navios Acquisition and indemnification obligations of the parties thereto as well as certain termination rights for such parties. As of September 30, 2020, since the program commencement Navios Acquisition has issued 910,564 shares of common stock having received net proceeds of $5,140.

On April 21, 2020, an agreement was reached to liquidate Navios Europe II. As a result of the liquidation, which was completed in June 2020 (“Liquidation of Navios Europe II”), Navios Acquisition acquired seven vessel owning companies. The vessels are containerships and meet the criteria to be accounted for as held for sale.

As of September 30, 2020, Navios Maritime Holdings Inc. (“Navios Holdings”) had 29.5% of the voting power and 29.7% of the economic interest in Navios Acquisition.

As of September 30, 2020, Navios Acquisition had: 16,513,935 shares of common stock outstanding.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation: The accompanying interim condensed consolidated financial statements are unaudited, but, in the opinion of management, reflect all adjustments for a fair statement of Navios Acquisition’s unaudited condensed consolidated balance sheets, statement of changes in equity, statements of operations and cash flows for the periods presented. The results of operations for the interim periods are not necessarily indicative of results for the full year. The footnotes are condensed as permitted by the requirements for interim financial statements and accordingly, do not include information and disclosures required under accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements. All such adjustments are deemed to be of a normal recurring nature. These interim financial statements should be read in conjunction with the Company’s consolidated financial statements and notes included in Navios Acquisition’s 2019 Annual Report filed on Form 20-F with the Securities and Exchange Commission (“SEC”).

 

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

(ab) Recent accounting pronouncements

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, which provides guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying generally accepted accounting principles to contract modifications, hedging relationships, and other transactions impacted by reference rate reform. The provisions of ASU 2020-04 apply only to those transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions of ASU 2020-04 is optional and is effective from March 12, 2020 through December 31, 2022. The company is currently evaluating the impact of ASU 2020-04 on its condensed consolidated financial statements.

In August 2018, FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”. This update modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and earlier adoption is permitted. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In October 2018, FASB issued ASU 2018-17, Consolidation (Topic 810): “Targeted Improvements to Related Party Guidance for Variable Interest Entities” (“ASU 2018-17”). ASU 2018-17 provides that indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. This is consistent with how indirect interests held through related parties under common control are considered for determining whether a reporting entity must consolidate a Variable Interest Entity (“VIE”). For Public business entities the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU is effective for periods beginning after December 15, 2019, with an election to adopt early. The ASU requires only a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value. It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

In June 2016, FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard requires entities to measure all expected credit losses of financial assets held at a reporting date based on historical experience, current conditions, and reasonable and supportable forecasts in order to record credit losses in a more timely matter. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standard is effective for interim and annual reporting periods beginning after December 15, 2019, although early adoption is permitted for interim and annual periods beginning after December 15, 2018. In November 2018, FASB issued ASU 2018-19 “Codification Improvements to topic 326, Financial Instruments-Credit Losses”. The amendments in this update clarify that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. The adoption of this new accounting guidance did not have a material effect on the Company’s consolidated financial statements.

(b) Principles of consolidation: The accompanying consolidated financial statements include the accounts of Navios Acquisition, a Marshall Islands corporation, and its majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidated statements.

The Company also consolidates entities that are determined to be variable interest entities (“VIEs”) 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 characteristics of a controlling financial interest, including decision making ability and an interest in the entity’s residual risks and rewards, or (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.

Based on internal forecasts and projections that take into account reasonably possible changes in Company’s 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 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.

 

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UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

(c) Equity method investments: 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.

Navios Acquisition evaluates its equity method investments, 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.

(d) Subsidiaries: Subsidiaries are those entities in which the Company has an interest of more than one half of the voting rights and/or otherwise has power to govern the financial and operating policies. The acquisition method of accounting is used to account for the acquisition of subsidiaries if deemed to be a business combination. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition. The excess of the cost of acquisition over the fair value of the net assets acquired and liabilities assumed is recorded as goodwill.

As of September 30, 2020, the entities included in these consolidated financial statements were:

 

Navios Maritime Acquisition

Corporation and Subsidiaries:

  

Nature

  

Country of

Incorporation

  

2020

  

2019

Company Name

           

Aegean Sea Maritime Holdings Inc.

   Sub-Holding Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Amorgos Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Andros Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Antikithira Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Antiparos Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Amindra Navigation Co.

   Sub-Holding Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Crete Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Folegandros Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Ikaria Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Ios Shipping Corporation

   Vessel-Owning Company(8)    Cayman Is.    1/1 – 9/30    1/1 – 9/30

Kithira Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Kos Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Mytilene Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Navios Maritime Acquisition Corporation

   Holding Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Navios Acquisition Finance (U.S.) Inc.

   Co-Issuer    Delaware    1/1 – 9/30    1/1 – 9/30

Rhodes Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Serifos Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Shinyo Loyalty Limited

   Former Vessel-Owning Company(1)    Hong Kong    1/1 – 9/30    1/1 – 9/30

Shinyo Navigator Limited

   Former Vessel-Owning Company(2)    Hong Kong    1/1 – 9/30    1/1 – 9/30

Sifnos Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Skiathos Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Skopelos Shipping Corporation

   Vessel-Owning Company(8)    Cayman Is.    1/1 – 9/30    1/1 – 9/30

 

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UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

Syros Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Thera Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Tinos Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Oinousses Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Psara Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Antipsara Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Samothrace Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Thasos Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Limnos Shipping Corporation

   Vessel-Owning Company(8)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Skyros Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Alonnisos Shipping Corporation

   Former Vessel-Owning Company(4)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Makronisos Shipping Corporation

   Former Vessel-Owning Company(4)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Iraklia Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Paxos Shipping Corporation

   Former Vessel-Owning Company(5)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Antipaxos Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Donoussa Shipping Corporation

   Former Vessel-Owning Company(6)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Schinousa Shipping Corporation

   Former Vessel-Owning Company(7)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Navios Acquisition Europe Finance Inc

   Sub-Holding Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Kerkyra Shipping Corporation

   Vessel-Owning Company(3)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Lefkada Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Zakynthos Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Leros Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Kimolos Shipping Corporation

   Former Vessel-Owning Company(13)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Samos Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Tilos Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Delos Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Agistri Shipping Corporation

   Operating Subsidiary    Malta    1/1 – 9/30    1/1 – 9/30

Olivia Enterprises Corp.

   Vessel-Owning Company(10)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Cyrus Investments Corp.

   Vessel-Owning Company(10)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Doxa International Corp.

   Vessel-Owning Company(10)    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Tzia Shipping Corp.

   Vessel-Owning Company(10)    Marshall Is.    6/4 – 9/30   

Navios Maritime Midstream Partners GP LLC

   Holding Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Navios Maritime Midstream Operating LLC

   Sub-Holding Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Navios Maritime Midstream Partners L.P.

   Sub-Holding Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Navios Maritime Midstream Partners Finance (US) Inc.

   Co-borrower    Delaware    1/1 – 9/30    1/1 – 9/30

Shinyo Kannika Limited

   Former Vessel-Owning Company    Hong Kong    1/1 – 9/30    1/1 – 9/30

Shinyo Ocean Limited

   Former Vessel-Owning Company(11)    Hong Kong    1/1 – 9/30    1/1 – 9/30

Shinyo Saowalak Limited

   Vessel-Owning Company    British Virgin Is.    1/1 – 9/30    1/1 – 9/30

Shinyo Kieran Limited

   Vessel-Owning Company    British Virgin Is.    1/1 – 9/30    1/1 – 9/30

Shinyo Dream Limited

   Former Vessel-Owning Company(12)    Hong Kong    1/1 – 9/30    1/1 – 9/30

Sikinos Shipping Corporation

   Vessel-Owning Company    Marshall Is.    1/1 – 9/30    1/1 – 9/30

Alkmene Shipping Corporation

   Vessel-Owning Company(14)    Marshall Is.    1/1 – 9/30   

Persephone Shipping Corporation

   Vessel-Owning Company(14)    Marshall Is.    1/1 – 9/30   

Rhea Shipping Corporation

   Vessel-Owning Company(14)    Marshall Is.    1/1 – 9/30   

Aphrodite Shipping Corporation

   Vessel-Owning Company(14)    Marshall Is.    1/1 – 9/30   

Dione Shipping Corporation

   Vessel-Owning Company(14)    Marshall Is.    1/1 – 9/30   

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

Bole Shipping Corporation

   Vessel-Owning Company(15)    Marshall Is.    6/29 – 9/30   

Boysenberry Shipping Corporation

   Vessel-Owning Company(15)    Marshall Is.    6/29 – 9/30   

Brandeis Shipping Corporation

   Vessel-Owning Company(15)    Marshall Is.    6/29 – 9/30   

Buff Shipping Corporation

   Vessel-Owning Company(15)    Marshall Is.    6/29 – 9/30   

Cadmium Shipping Corporation

   Vessel-Owning Company(15)    Marshall Is.    6/29 – 9/30   

Celadon Shipping Corporation

   Vessel-Owning Company(15)    Marshall Is.    6/29 – 9/30   

Cerulean Shipping Corporation

   Vessel-Owning Company(15)    Marshall Is.    6/29 – 9/30   

 

(1)

Former vessel-owner of the Shinyo Splendor which was sold to an unaffiliated third party on May 6, 2014.

(2)

Former vessel-owner of the Shinyo Navigator which was sold to an unaffiliated third party on December 6, 2013.

(3)

Navios Maritime Midstream Partners L.P. (“Navios Midstream”) acquired all of the outstanding shares of capital stock of the vessel-owning subsidiary on March 29, 2018.

(4)

Each company had the rights over a shipbuilding contract of an MR2 product tanker vessel. In February 2015, these shipbuilding contracts were terminated, with no exposure to Navios Acquisition, due to the shipyard’s inability to issue a refund guarantee.

(5)

Former vessel-owner of the Nave Lucida which was sold to an unaffiliated third party on January 27, 2016.

(6)

Former vessel-owner of the Nave Universe which was sold to an unaffiliated third party on October 4, 2016.

(7)

Former vessel-owner of the Nave Constellation which was sold to an unaffiliated third party on November 15, 2016.

(8)

Currently, vessel-operating company under a sale and leaseback transaction.

(9)

The vessel Shinyo Kannika was sold to an unaffiliated third party on March 22, 2018.

(10)

Bareboat chartered-in vessels with purchase option, expected to be delivered in each of the fourth quarter of 2020, the first and the third quarters of 2021 and the second quarter of 2022.

(11)

In March 2019, the Shinyo Ocean, a 2001-built VLCC vessel of 281,395 dwt was involved in a collision incident. The Company maintains insurance coverage for such types of events (subject to applicable deductibles and other customary limitations). In May 10, 2019, Navios Acquisition sold the Shinyo Ocean, a 2001-built VLCC vessel of 281,395 dwt to an unaffiliated third party for a sale price of $12,525.

(12)

On March 25, 2019, Navios Acquisition sold the C. Dream, a 2000-built VLCC vessel of 298,570 dwt to an unaffiliated third party for a sale price of $21,750.

(13)

On October 8, 2019, Navios Acquisition sold the Nave Electron, a 2002-built VLCC vessel of 305,178 dwt to an unaffiliated third party for a sale price of $25,250.

(14)

In December 2019, Navios Acquisition acquired five product tankers, two LR1 product tankers and three MR1 product tankers following the Liquidation of Navios Europe I.

(15)

In June 2020, Navios Acquisition acquired seven vessel owning companies following the Liquidation of Navios Europe II.

(g) Assets Held for Sale/ Liabilities associated with 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 groups of assets and liabilities that are intended to be sold (disposal groups) as being held for sale when the following criteria are met: management has committed to a plan to sell the asset or the disposal group; the asset or disposal group is available for immediate sale in its present condition; an active program to locate a buyer and other actions required to complete the plan to sell the asset or disposal group have been initiated; the sale of the asset or disposal group is probable, and transfer of the asset or disposal group is expected to qualify for recognition as a completed sale within one year; the asset ordisposal 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 assets are not depreciated once they meet the criteria to be held for sale.

(f) Revenue and Expense Recognition:

Revenue Recognition: On January 1, 2018, the Company adopted the provisions of ASC 606, Revenue from Contracts with Customers (ASC 606). The guidance provides a unified model to determine how revenue is recognized. In doing so, the Company makes judgments including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each performance obligation. Revenues are recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 will apply to both types of leases – capital (or finance) leases and operating leases. According to the new Accounting Standard, (a) 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 and (b) previous accounting standards for lessors will be updated to align certain requirements with the updates to lessee accounting standards and the revenue recognition accounting standards. ASU 2016 – 02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842 Leases (“ASU 2018-10”). The amendments in ASU 2018-10 affect narrow aspects of the guidance issued in the amendments in ASU 2016-02. For entities that early adopted Topic 842, the amendments are effective upon issuance of this Update, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. In addition in July 2018, the FASB issued ASU 2018-11, Targeted Improvements to Topic 842 Leases (“ASU 2018-11). The improvements in ASU 2018-11 provide for (a) an optional new transition method for adoption that results in initial recognition of a cumulative effect adjustment to retained earnings in the year of adoption and (b) a practical expedient for lessors, under certain circumstances, to combine the lease and non-lease components of revenues for presentation purposes.

The Company has elected to early adopt the requirements of ASU 2016-02 effective January 1, 2018, using the modified retrospective method which is consistent, with the approach the Company has elected under the new revenue standard, and elected to apply the additional optional transition method along with the following practical expedients: (i) a package of practical expedients which does not require the Company to reassess: (1) whether any expired or existing contracts are or contain leases; (2) lease classification for any expired or existing leases; and (3) whether initial direct costs for any expired or existing leases would qualify for capitalization under ASC 842; (ii) to account for non-lease components (primarily crew and maintenance services) of time charters as a single lease component as the timing and pattern of transfer of the non-lease components and associated lease component are the same, the lease components, if accounted for separately, would be classified as an operating lease, and such non-lease components are not predominant components of the combined component. 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 component 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 contract beginning when the vessel is delivered to the charterer until it is redelivered back to the Company. As a result of adoption, there was no cumulative impact to the Company’s retained earnings at January 1, 2018.

The Company’s contract revenues from time chartering and pooling arrangements are governed by ASU 2016-02 “Leases”, which the Company early adopted on January 1, 2018. Upon adoption of ASC 606 and ASC 842, the timing and recognition of earnings from the pool arrangements and time charter contracts to which the Company is party did not change from previous practice. 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 component 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 contract beginning when the vessel is delivered to the charterer until it is redelivered back to the Company. As a result of the adoption of these standards, there was no effect on the Company’s opening retained earnings, consolidated balance sheets and consolidated statements of income.

In December 2018, FASB issued ASU 2018-20, Leases (Topic 842), “Narrow-Scope Improvements for Lessors”: to clarify guidance for lessors on sales taxes and other similar taxes collected from lessees, certain lessor costs and recognition of variable payments for contracts with lease and non-lease components. The Company has early adopted the standard effective January 1, 2018 and is using that date as the date of initial application. The adoption of this guidance had no impact on the Company’s disclosures to the consolidated financial statements.

Revenue from time chartering

Revenues from time chartering of vessels are accounted for as operating leases and are thus recognized on a straight-line basis as the average 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 crew, maintenance and insurance are typically paid by the owner of the vessel. Revenues from time chartering of vessels amounted to $69,418 and $38,785 for the three month periods ended September 30, 2020 and 2019, respectively. For the nine month periods ended September 30, 2020 and 2019, revenues from time chartering of vessels amounted to $198,583 and $129,505, respectively. The majority of revenue from time chartering is usually collected in advance.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

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 vessels, is determined in accordance with an agreed-upon formula, which are determined by the margins 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 in the period in which the variability is resolved. 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. The allocation of such net revenue may be subject to future adjustments by the pool however, such changes are not expected to be material. Revenue for vessels operating in pooling arrangements amounted to $7,891 and $13,898 for the three month periods ended September 30, 2020 and 2019, respectively. For the nine month periods ended September 30, 2020 and 2019, revenue operating in pooling arrangements amounted to $47,249 and $46,494, respectively. The majority of revenue from pooling arrangements is usually collected through the month they are incurred.

Revenue from voyage contracts

The Company’s revenues earned under voyage contracts (revenues for the transportation of cargo) were previously recognized ratably over the estimated relative transit time of each voyage. A voyage was deemed to commence when a vessel was available for loading and was deemed to end upon the completion of the discharge of the current cargo. 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. Revenues earned under voyage contracts amounted to $0 and $6,479 for the three month periods ended September 30, 2020 and 2019, respectively. For the nine month periods ended September 30, 2020 and 2019, revenues under voyage contracts amounted to $9,030 and $16,157, respectively. Capitalized costs as of September 30, 2020 and December 31, 2019 related to costs to fulfill the contract amounted to $0 and $103, respectively, and are included under caption “Prepaid expenses and other current assets”. Accounts receivable, net, as of September 30, 2020 that related to voyage contracts was $8,592 (December 31, 2019: $12,219). The majority of revenue from voyage contracts is usually collected after the discharging takes place.

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 half-yearly 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 share elements, these are accounted for on the actual cash settlement. Profit sharing for the three month periods ended September 30, 2020 and 2019 amounted to $2,180 and $(197), respectively. For the nine month periods ended September 30, 2020 and 2019, profit sharing revenues amounted to $34,024 and $2,513, respectively.

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.

Options to extend or terminate a lease

The Company’s vessels have the following options to extent or renew their charters:

 

Vessel

  

Option

Nave Sextans    Charterer’s option to extend the charter for one year at $18,750 net per day.
Nave Pulsar    Charterer’s option to extend the charter for six months at $15,553 net per day plus ice-transit premium.
Nave Rigel    Charterer has the option to charter the vessel for an optional year at a rate of $17,063 net per day.
Nave Equinox    Charterer has the option to charter the vessel for an optional year at a rate of $16,294 net per day.
Nave Alderamin    Charterer has the option to charter the vessel for an optional year at a rate of $14,438 net per day.
Nave Orion    Charterer has the option to charter the vessel for an optional year at a rate of $14,438 net per day.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

Nave Estella    Charterer has the option to charter the vessel for an optional year at a rate of $14,630 net per day.
Nave Titan    Charterer’s option to extend the charter for up to four months at $14,072 net per day.
Nave Atria    Charterer’s option to extend the charter for up to six months at $14,072 net per day.
Nave Aquila    Charterer’s option to extend the charter for up to four months at $12,838 net per day.
Nave Velocity    Charterer’s option to extend the charter for six months at $13,331 net per day
Nave Jupiter    Charterer’s option to extend the charter for up to four months at $15,306 net per day.
Nave Dorado    Charterer’s option to extend the charter for up to ten months: a) up to three months at $7,653 net per day; b) up to four months at $9,875 net per day; and c) up to three months at $11,850 net per day.
Vita N    Charterer has the option to charter the vessel for four to six months at a rate of $8,663 net per day.
Nave Luminosity    Charterer has the option to charter the vessel for an optional year at a rate of $18,022 net per day.
Baghdad    Charterer’s option to extend the bareboat charter for five years at $29,751 net per day.
TBN 2    Charterer’s option to extend the bareboat charter for five years at $29,751 net per day.

NOTE 3: CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

Cash and cash equivalents consisted of the following:

 

     September 30, 2020      December 31, 2019  

Cash on hand and at banks

   $ 49,508      $ 43,561  

Short-term deposits

     10,030         

Restricted cash

     715        490  

Total cash, cash equivalents and restricted cash

   $ 60,253      $ 44,051  

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. The Company does maintain cash deposits and equivalents in excess of government-provided insurance limits. The Company also minimizes exposure to credit risk by dealing with a diversified group of major financial institutions.

Restricted cash includes amounts held in retention accounts in order to service debt and interest payments, as required by certain of Navios Acquisition’s credit facilities.

NOTE 4: INVENTORIES, PREPAID EXPENSES AND OTHER CURRENT ASSETS

Inventories, prepaid expenses and other current assets consisted of the following:

 

     September 30,
2020
     December 31,
2019
 

Inventories

   $ 5,419      $ 6,208  

Advances for working capital purposes

     5,350        7,250  

Insurance claims

     3,695        4,785  

Voyage charters deferred contract costs and other

     936        791  

Total inventories, prepaid expenses and other current assets

   $ 15,400      $ 19,034  

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

NOTE 5: VESSELS, NET

 

Vessels

   Cost      Accumulated
Depreciation
     Net Book
Value
 

Balance at December 31, 2018

   $ 1,687,274      $ (303,669    $ 1,383,605  

Additions/ (Depreciation)

     102,637        (63,935      38,702  

Disposals

     (77,922      11,153        (66,769

Impairment loss

     (7,287      —          (7,287

Balance at December 31, 2019

   $ 1,704,702      $ (356,451    $ 1,348,251  

Additions/ (Depreciation)

     4,362        (49,931      (45,569

Balance at September 30, 2020

   $ 1,709,064      $ (406,382    $ 1,302,682  

Additions of vessels

2020

As of September 30, 2020, certain extraordinary fees and costs related to vessels’ regulatory requirements, including ballast water treatment system installation and exhaust gas cleaning system installation, amounted to $4,362 (see Note 13 — Transactions with related parties).

2019

As of December 31, 2019, certain extraordinary fees and costs related to vessels’ regulatory requirements, including ballast water treatment system installation and exhaust gas cleaning system installation, amounted to $18,207 (see Note 13 — Transactions with related parties).

During the quarter ended December 31, 2019, Navios Acquisition acquired five product tankers, two LR1 product tankers and three MR1 product tankers for an acquisition cost of approximately $84,430 in total, following the Liquidation of Navios Europe I, through bank financing of $32,500 and $33,210 receivables (Please refer to Note 8 – Investments in Affiliates).

For each of the vessels purchased from Navios Europe I, the acquisition of all vessels 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 respective charter-out contracts. Management accounted for each acquisition as an asset acquisition under ASC 805. At the transaction date, the purchase price approximated the fair value of the assets acquired, which was determined based on a combination of methodologies including discounted cash flow analyses and independent valuation analyses.

Disposals of vessels

2019

On March 25, 2019, Navios Acquisition sold the C. Dream, a 2000-built VLCC vessel of 298,570 dwt to an unaffiliated third party for a sale price of $21,750. The gain on sale of the vessel amounted to $651, which is included in “Gain on sale of vessels”.

On May 10, 2019, following a collision incident, Navios Acquisition sold the Shinyo Ocean, a 2001-built VLCC vessel of 281,395 dwt to an unaffiliated third party for a sale price of $12,525.

On October 8, 2019, Navios Acquisition sold the Nave Electron, a 2002-built VLCC vessel of 305,178 dwt to an unaffiliated third party for a sale price of $25,250.

Impairment loss

2019

During the year ended December 31, 2019 and as a result of the impairment review performed, it was determined that the carrying amount of one tanker was not recoverable and, therefore, an impairment loss of $7,287 was recognized.

NOTE 6: INTANGIBLE ASSETS OTHER THAN GOODWILL

On December 13, 2018, Navios Acquisition acquired, as part of the Merger, at fair value, the intangible assets of Navios Midstream, consisting of favorable lease terms.

Intangible assets as of September 30, 2020 and December 31, 2019 were $0.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

On September 25, 2019, the U.S. Department of Treasury’s Office of Foreign Assets Control added, amongst others, COSCO Shipping Tanker (Dalian) Co., Ltd. (“COSCO Dalian”) to the Specially Designated Nationals and Blocked Persons list after being determined by the State Department to meet the criteria for the imposition of sanctions under Executive Order 13846. The Company had two VLCCs chartered to COSCO Dalian, the Nave Constellation (ex. Shinyo Saowalak) and the Nave Universe (ex. Shinyo Kieran), through June 18, 2025 and June 8, 2026, respectively, each at a net rate of $48,153 per day, with profit sharing above $54,388. Subsequent to September 30, 2019 both charter contracts have been terminated.

COSCO Dalian was removed from the Specially Designated Nationals and Blocked Persons list on January 31, 2020.

Amortization expense of favorable lease terms for the three and nine month periods ended September 30, 2020 and 2019 is presented in the following table:

 

     Three Month Period Ended      Nine Month Period Ended  
     September 30,
2020
     September 30,
2019
     September 30,
2020
     September 30,
2019
 

Favorable lease terms charter-out

   $ —      $ (1,319    $ —      $ (3,957

Total

   $ —      $ (1,319    $ —      $ (3,957

NOTE 7: ASSETS HELD FOR SALE / LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE

Following the Liquidation of Navios Europe II (Note 8) on June 29, 2020, Navios Acquisition acquired seven vessel owning companies. For each of the vessels purchased from Navios Europe II, the acquisition of all vessels 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 respective charter-out contracts. Management accounted for each acquisition as an asset acquisition under ASC 805. At the transaction date, the purchase price approximated the fair value of the assets acquired.

Upon acquisition of the vessel owning companies, the Company assessed that all the held for sale criteria were met for their assets, mainly consisting of the vessels owned and reviewed the carrying amount in connection with their fair market value less any costs to sell. The review indicated that such carrying amounts were not in excess of the fair value less any costs to sell and therefore, no loss was recorded for the six month period ended on June 30, 2020. On the transaction date the fair value of the vessels was determined based on a combination of methodologies including discounted cash flow analyses and independent valuation analyses. In addition, as of September 30, 2020 the container vessels have been re-measured to their fair value less cost to sell without having changes in their values leading to no impairment charge being recognized in the accompanying consolidated statement of income. On the re-measurement date the fair value of the vessels was determined based on independent valuation analyses.

Furthermore, liabilities associated with the assets held for sale are separately presented under “Liabilities associated with assets held for sale” in the accompanying condensed consolidated balance sheet. The major class of assets held for sale consist of the carrying value of the vessels amounting to $79,124. The major class of liabilities associated with assets held for sale, consist of their respective debt with a carrying amount of $36,700. Please refer to Note 11 “Borrowings”.

NOTE 8: INVESTMENT IN AFFILIATES

Navios Europe I

On October 9, 2013, Navios Holdings, Navios Acquisition and Navios Maritime Partners L.P. (“Navios Partners”) established Navios Europe I and had economic 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 which was funded with the proceeds of senior loan facility (the “Senior Loan I”) and loans aggregating $10,000 from Navios Holdings, Navios Acquisition and Navios Partners (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 agreed to make available to Navios Europe I revolving loans up to $24,100 to fund working capital requirements (collectively, the “Navios Revolving Loans I”). In December 2018, the availability under the Revolving Loans I was increased by $30,000. Effective November 2014 and through the Liquidation completed in December 2019, Navios Holdings, Navios Acquisition and Navios Partners had a voting interest of 50%, 50% and 0%, respectively.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

On an ongoing basis, Navios Europe I was required to distribute cash flows (after payment of operating expenses, amounts due pursuant to the terms of the Senior Loan I and repayments of the Navios Revolving Loans I) according to a defined waterfall calculation.

Following the Liquidation of Navios Europe I, Navios Acquisition acquired five vessel owning companies for an acquisition cost of approximately $84,627 in total.

As of September 30, 2020 and December 31, 2019 and subsequent to the Liquidation of Navios Europe I, the Company had no exposure.

For the three month period ended September 30, 2019 income recognized in “Equity in net earnings of affiliated companies” was $311. For the nine month period ended September 30, 2019 income recognized in “Equity in net earnings of affiliated companies” was $895.

Navios Europe II

On February 18, 2015, Navios Holdings, Navios Acquisition and Navios Partners established Navios Europe II Inc. and had in such entity economic interests of 47.5%, 47.5% and 5.0%, respectively, and voting interests of 50.0%, 50.0% and 0%, respectively. From June 8, 2015 through December 31, 2015, Navios Europe II acquired fourteen vessels for: (i) cash consideration of $145,550 (which was funded with the proceeds of $131,550 of senior loan facilities (the “Senior Loans II”) and loans aggregating $14,000 from Navios Holdings, Navios Acquisition and Navios Partners (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. In addition to the Navios Term Loans II, Navios Holdings, Navios Acquisition and Navios Partners agreed to make available to Navios Europe II revolving loans up to $57,500 to fund working capital requirements (collectively, the “Navios Revolving Loans II”). On April 21, 2020, Navios Europe II agreed with the lender to fully release the liabilities under the junior participating loan facility for $5,000.

On an ongoing basis, Navios Europe II was required to distribute cash flows (after payment 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.

As of September 30, 2020, and subsequent to the Liquidation of Navios Europe II, the Company had no exposure. As of December 31, 2019, the estimated maximum potential loss by Navios Acquisition in Navios Europe II was $51,558, which represented the Company’s carrying value of the investment of $6,650, the Company’s balance of the Navios Revolving Loans II including accrued interest on the Navios Term Loans II of $28,220, which was included under “Due from related parties, long-term”, and the accrued interest income on the Navios Revolving Loans II in the amount of $16,688, which is included under “Due from related parties, short-term”. Refer to Note 13 for the terms of the Navios Revolving Loans II.

The decline in the fair value of the investment was considered as other-than-temporary and, therefore, an aggregate loss of $13,900 was recognized as of March 31, 2020 and included in the accompanying condensed consolidated statements of income for the nine month period ended September 30, 2020, as “Impairment of receivable in affiliated company/ Equity in net earnings of affiliated companies.” The fair value of the Company’s investment was determined based on the liquidation value of Navios Europe II, determined on the individual fair values assigned to the assets and liabilities of Navios Europe II.

For the three month periods ended September 30, 2020 and 2019, income recognized in “Equity in net earnings of affiliated companies” was $0 and $625, respectively. For the nine month periods ended September 30, 2020 and 2019, income/loss recognized in “Impairment of receivable in affiliated company / Equity in net earnings of affiliated companies” was $13,900 and $1,775, respectively.

NOTE 9: DIVIDENDS PAYABLE

On January 22, 2020, the Board of Directors declared a quarterly cash dividend in respect of the fourth quarter of 2019 of $0.30 per share of common stock which was paid on April 7, 2020 to stockholders of record as of March 5, 2020.

On April 29, 2020, the Board of Directors declared a quarterly cash dividend in respect of the first quarter of 2020 of $0.30 per share of common stock which was paid on July 9, 2020 to stockholders of record as of June 3, 2020.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

On July 28, 2020, the Board of Directors declared a quarterly cash dividend in respect of the second quarter of 2020 of $0.30 per share of common stock which was paid on October 8, 2020 to stockholders of record as of September 4, 2020.

The declaration and payment of any further dividends remain subject to the discretion of the Board of Directors and will depend on, among other things, Navios Acquisition’s cash requirements as measured by market opportunities and restrictions under its credit agreements and other debt obligations.

NOTE 10: ACCRUED EXPENSES

Accrued expenses as of September 30, 2020 and December 31, 2019 consisted of the following:

 

     September 30,
2020
     December 31,
2019
 

Accrued voyage expenses

   $ 2,934      $ 2,643  

Accrued loan interest

     22,108        10,468  

Accrued legal and professional fees

     772        1,226  

Total accrued expenses

   $ 25,814      $ 14,337  

NOTE 11: BORROWINGS

 

     September 30,
2020
     December 31,
2019
 

Eurobank Ergasias S.A. $52,000

     —          28,758  

DVB Bank S.E. and Credit Agricole Corporate and Investment Bank

     37,109        39,453  

Ship Mortgage Notes $670,000

     639,000        658,000  

Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB

     17,582        39,173  

BNP Paribas $44,000

     26,000        28,000  

HSH $24,000

     16,563        18,280  

HCOB $31,800

     29,262        31,800  

Deutsche Bank AG Filiale Deutschlandgeschäft

     —          32,500  

Eurobank S.A. $20,800

     20,000        —    

Total credit facilities

     785,516        875,964  

Sale and Leaseback Agreements–$71,500

     56,604        62,563  

Sale and Leaseback Agreements–$103,155

     90,921        97,723  

Sale and Leaseback Agreements–$15,000

     12,813        14,219  

Sale and Leaseback Agreements–$47,220

     41,771        45,858  

Sale and Leaseback Agreements–$90,811

     82,331        90,811  

Sale and Leaseback Agreements–$72,053

     70,261        —    

Total borrowings

     1,140,217        1,187,138  

Less: Deferred finance costs, net

     (12,432      (14,638

Add: bond premium

     398        617  

Less: current portion of credit facilities, net of deferred finance costs

     (47,459      (141,214

Less: current portion of Sale and Leaseback Agreements, net of deferred finance costs

     (38,768      (31,739

Total long-term borrowings, net of current portion, bond premium and deferred finance costs

   $ 1,041,956      $ 1,000,164  

Long-Term Debt Obligations and Credit Arrangements

Ship Mortgage Notes:

8 1/8% First Priority Ship Mortgages: On November 13, 2013, the Company and its wholly owned subsidiary, Navios Acquisition Finance (US) Inc. (“Navios Acquisition Finance” and together with the Company, the “2021 Co-Issuers”) issued $610,000 in first priority ship mortgage notes (the “Existing Notes”) due on November 15, 2021 at a fixed rate of 8.125%.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

On March 31, 2014, the Company completed a sale of $60,000 of its first priority ship mortgage notes due in 2021 (the “Additional Notes,” and together with the Existing Notes, the “2021 Notes”). The terms of the Additional Notes are identical to the Existing Notes and were issued at 103.25% plus accrued interest from November 13, 2013.

The 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of Navios Acquisition’s subsidiaries with the exception of Navios Acquisition Finance (a co-issuer of the 2021 Notes) and the exception of Navios Midstream subsidiaries.

The 2021 Co-Issuers currently have the option to redeem the 2021 Notes in whole or in part, at a fixed price of 106.094% of the principal amount, which price declined ratably until it reached par in 2019, plus accrued and unpaid interest, if any.

In addition, upon the occurrence of certain change of control events, the holders of the 2021 Notes will have the right to require the 2021 Co-Issuers to repurchase some or all of the 2021 Notes at 101% of their face amount, plus accrued and unpaid interest to the repurchase date.

The 2021 Notes contain covenants which, among other things, limit the incurrence of additional indebtedness, issuance of certain preferred stock, the payment of dividends, redemption or repurchase of capital stock or making restricted payments and investments, creation of certain liens, transfer or sale of assets, entering in transactions with affiliates, merging or consolidating or selling all or substantially all of the 2021 Co-Issuers’ properties and assets and creation or designation of restricted subsidiaries.

Following the acquisition of the Star N and the Hector N MR1 product tankers from Navios Europe I, the vessels were offered as collateral under its ship mortgage notes, in substitution of an amount of $25,405 that was held as cash collateral from the sale proceeds of the Nave Electron.

In the fourth quarter of 2019, Navios Acquisition repurchased $12,000 of its ship mortgage notes for a cash consideration of $9,950 resulting in a gain on bond repurchase of $1,940 net of deferred fees written-off.

In the third quarter of 2020, Navios Acquisition repurchased $19,000 of its ship mortgage notes for a cash consideration of $11,898 resulting in a gain on bond repurchase of $7,010 net of deferred fees written-off.

The 2021 Co-Issuers were in compliance with the covenants as of September 30, 2020.

The Existing Notes and the Additional Notes are treated as a single class for all purposes under the indenture including, without limitation, waivers, amendments, redemptions and other offers to purchase and the Additional Notes rank evenly with the Existing Notes. The Additional Notes and the Existing Notes have different CUSIP numbers.

Guarantees

The Company’s 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of the Company’s subsidiaries with the exception of Navios Acquisition Finance (a co-issuer of the 2021 Notes) and the exception of Navios Midstream subsidiaries. The Company’s 2021 Notes are unregistered. The guarantees of the Company’s subsidiaries that own mortgaged vessels are senior secured guarantees and the guarantees of Company’s subsidiaries that do not own mortgaged vessels are senior unsecured guarantees. All subsidiaries, including Navios Acquisition Finance and Navios Midstream subsidiaries are 100% owned. Navios Acquisition does not have any independent assets or operations.

Credit Facilities

As of September 30, 2020, the Company had secured credit facilities with various commercial banks with a total outstanding balance of $146,516.

On December 6, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52,000 out of which $46,200 has been drawn (divided into two tranches of $23,100 each) to partially finance the acquisition costs of two LR1 product tanker vessels. Each tranche of the facility was repayable in 32 equal quarterly installments of $306 each with a final balloon payment of $13,308, to be repaid on the last repayment date. The maturity date of the loan was in the third and fourth quarter of 2020. The repayment of each tranche started three months after the delivery date of the respective vessel. It bore interest at a rate of LIBOR plus 300 bps. The loan also required compliance with certain financial covenants. The outstanding balance under the facility of $27,534 was fully prepaid in June 2020. Following the prepayment, an amount of $50 was written-off in the consolidated statement of operations.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

In November 2015, Navios Acquisition, entered into a term loan facility of up to $125,000 (divided into five tranches) with Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB for the: (i) financing of the purchase price of the Nave Spherical; and (ii) the refinancing of the existing facility with Deutsche Bank AG Filiale Deutschlandgescäft and Skandinaviska Enskilda Banken AB, dated July 18, 2014. Four of the five tranches of the facility are repayable in 20 quarterly installments of between approximately $435 and $1,896, each with a final balloon repayment to be made on the last repayment date. The fifth tranche is repayable in 16 quarterly installments of between approximately $709 and $803, each. The maturity date of the loan is in the fourth quarter of 2020. The credit facility bears interest at LIBOR plus 295 bps per annum. On March 23, 2018, Navios Acquisition prepaid $26,770, being the respective tranche of the Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB facility that was drawn to finance the Nave Equinox and the Nave Pyxis, which substituted the Nave Galactic as collateral vessels under the 8 1/8% 2021 Notes. Following the prepayment, an amount of $297 was written-off in the consolidated statement of operations. On June 18, 2020, Navios Acquisition prepaid $16,272, being the respective tranche of the Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB facility that was drawn to finance the Nave Sextans. Following the prepayment, an amount of $26 was written-off in the consolidated statement of operations. As of September 30, 2020, the outstanding balance under this facility was $17,582. In October 2020, Navios Acquisition extended the maturity date of the loan to February 2021.

In October 2019, Navios Acquisition entered into a loan agreement with Hamburg Commercial Bank AG of up to $31,800 in order to refinance one VLCC. The facility is repayable in 4 quarterly installments of $846 each with a final balloon payment of $28,416 repayable on the last repayment date. The facility matures in October 2020 and bears interest at LIBOR plus 280 bps per annum. As of September 30, 2020, $29,262 was outstanding under this facility. In October 2020, Navios Acquisition extended the maturity date of the loan to October 2024. The remaining balance of the facility is repayable in 16 quarterly installments of $846 each with a final balloon payment of $14,880 repayable on the last repayment date.

In December 2019, Navios Acquisition entered into a loan agreement with Deutsche Bank AG Filiale Deutschlandgeschäft of up to $32,500 in order to finance one MR1 and two LR1s acquired from Navios Europe I. The facility was repayable in one single repayment on the last repayment date. The facility matured in June 2020 and bore interest at LIBOR plus 400 bps per annum. In the second quarter of 2020, Navios Acquisition fully repaid the amount of $32,500.

In June 2020, Navios Acquisition entered into a loan agreement with Eurobank S.A. of $20,800 in order to refinance two LR1s. The facility is repayable in 16 quarterly installments of $800 each with a final balloon payment of $8,000 repayable on the last repayment date. The facility matures in June 2024 and bears interest at LIBOR plus 300 bps per annum. As of September 30, 2020, an amount of $20,000 was outstanding under this facility.

In June 2020, Navios Acquisition entered into a loan agreement with Hamburg Commercial Bank AG of $41,700 in order to acquire seven containerships. The facility is repayable in 4 quarterly installments with a final balloon payment of $21,700 repayable on the last repayment date. The facility matures in May 2021 and bears interest at LIBOR plus 375 bps per annum and top up fee ranging from 225 bps to 425 bps per annum. As of September 30, 2020, an amount of $36,700 was outstanding under this facility and is presented under “Liabilities associated with assets held for sale”. (Please refer to Note 7)

Amounts drawn under the facilities are secured by first preferred mortgages on Navios Acquisition’s vessels and other collateral and are guaranteed by each vessel-owning subsidiary. The credit facilities contain a number of restrictive covenants that prohibit or limit Navios Acquisition from, among other things: incurring or guaranteeing indebtedness; entering into affiliate transactions; changing the flag, class, management or ownership of Navios Acquisition’s vessels; changing the commercial and technical management of Navios Acquisition’s vessels; selling Navios Acquisition’s vessels; and subordinating the obligations under each credit facility to any general and administrative costs relating to the vessels, including the fixed daily fee payable under the Management Agreement. The credit facilities also require Navios Acquisition to comply with the ISM Code and ISPS Code and to maintain valid safety management certificates and documents of compliance at all times.

As of September 30, 2020, no amount was available to be drawn from the Company’s facilities.

Sale and Leaseback Agreements

As of September 30, 2020, the Company had sale and leaseback agreements with various unrelated third parties with a total outstanding balance of $354,701.

As of September 30, 2020 and December 31, 2019, the deposits under the sale and leaseback agreements were $9,058 and $5,456, respectively, and are presented under “Other long term assets” in the condensed consolidated balance sheets.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

In June 2020, Navios Acquisition entered into sale and leaseback agreements with unrelated third parties for $72,053 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. The agreements will be repaid through periods ranging from four to seven years in consecutive quarterly installments of $1,791 each, with a repurchase obligation of up to $26,963 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 September 30, 2020, the outstanding the balance under the agreements was $70,261.

The maturity table below reflects the principal payments of all notes, credit facilities and the Financing arrangements outstanding as of September 30, 2020 for the next five years and thereafter are based on the repayment schedule of the respective financing arrangements (as described above) and the outstanding amount due under the 2021 Notes.

 

     September 30,
2020
 

Long-Term Debt Obligations:

  

12 month period ending

  

September 30, 2021

     88,677  

September 30, 2022

     742,391  

September 30, 2023

     63,865  

September 30, 2024

     87,924  

September 30, 2025

     41,622  

September 30, 2026 and thereafter

     115,738  

Total

   $ 1,140,217  

The financing arrangements include, among other things, compliance with loan to value ratios and certain financial covenants: (i) minimum liquidity at the higher of $40,000 or $1,000 per vessel; (ii) minimum net worth ranging from $50,000 to $135,000; and (iii) total liabilities divided by total assets, adjusted for market values to be generally lower than 75% or 80% and for certain facilities, as amended for a specific period of time until December 31, 2019 to be ranging from a maximum of 80% to 85%. It is an event of default under the financing arrangements if such covenants are not complied with, including the loan to value ratios for which the Company may provide sufficient additional security or prepay part of the facility, to prevent such an event.

As of September 30, 2020, the Company was in compliance with its covenants.

NOTE 12: FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents: 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.

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.

Accounts receivable, net: Carrying amounts are considered to approximate fair value due to the short-term nature of these accounts receivables and no significant changes in interest rates. All amounts that are assumed to be uncollectible are written-off and/or reserved.

Accounts payable: The carrying amount of accounts payable reported in the balance sheet approximates its fair value due to the short-term nature of these accounts payable and no significant changes in interest rates.

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.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

Other long-term debt, net of deferred finance costs: As a result of the adoption of ASU 2015-03, the book value has been adjusted to reflect the net presentation of deferred financing costs. The outstanding balance of the floating rate loans continues to approximate its fair value, excluding the effect of any deferred finance costs.

Ship Mortgage Notes and premiums: The fair value of the 2021 Notes, which has a fixed rate, was determined based on quoted market prices, as indicated in the table below.

 

     September 30, 2020      December 31, 2019  
     Book Value      Fair Value      Book Value      Fair Value  

Cash and cash equivalents

   $ 59,538      $ 59,538      $ 43,561      $ 43,561  

Restricted cash

   $ 715      $ 715      $ 490      $ 490  

Accounts receivable

   $ 13,722      $ 13,722      $ 34,235      $ 34,235  

Accounts payable

   $ 7,872      $ 7,872      $ 15,355      $ 15,355  

Ship mortgage notes and premium

   $ 636,390      $ 439,261      $ 653,614      $ 527,005  

Other long-term debt, net of deferred finance costs

   $ 491,793      $ 501,217      $ 519,503      $ 529,138  

Due from related parties, long-term

   $ 14,658      $ 14,658      $ 42,878      $ 42,878  

Fair Value Measurements

The estimated fair value of the financial instruments that are not measured at fair value on a recurring basis, categorized based upon the fair value hierarchy, is as follows:

Level I: Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets that we have 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 III inputs as of September 30, 2020 and December 31, 2019.

 

     Fair Value Measurements at September 30, 2020 Using  
     Total      Level I      Level II      Level III  

Cash and cash equivalents

   $ 59,538      $ 59,538      $ —      $ —  

Restricted cash

   $ 715      $ 715      $ —      $ —  

Accounts receivable

   $ 13,722      $ 13,722      $ —      $ —  

Accounts payable

   $ 7,872      $ 7,872      $ —      $ —  

Ship mortgage notes and premium

   $ 439,261      $ 439,261      $ —      $ —  

Other long-term debt(1)

   $ 501,217      $ —      $ 501,217      $ —  

Due from related parties, long-term(2)

   $ 14,658      $ —      $ 14,658      $ —  

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

     Fair Value Measurements at December 31, 2019 Using  
     Total      Level I      Level II      Level III  

Cash and cash equivalents

   $ 43,561      $ 43,561      $ —      $ —  

Restricted cash

   $ 490      $ 490      $ —      $ —  

Accounts receivable

   $ 34,235      $ 34,235      $ —      $ —  

Accounts payable

   $ 15,355      $ 15,355      $ —      $ —  

Ship mortgage notes and premium

   $ 527,005      $ 527,005      $ —      $ —  

Other long-term debt(1)

   $ 529,138      $    $ 529,138      $ —  

Due from related parties, long-term(2)

   $ 42,878      $    $ 42,878      $ —  

 

(1)

The fair value of the Company’s other long-term debt is estimated based on currently available debt with similar contract terms, interest rate and remaining maturities as well as taking into account the Company’s creditworthiness.

(2)

The fair value of the Company’s long term amounts due from related parties is estimated based on currently available debt with similar contract terms, interest rate and remaining maturities as well as taking into account the counterparty’s creditworthiness.

NOTE 13: TRANSACTIONS WITH RELATED PARTIES

Vessel operating expenses (management fees): Pursuant to the management agreement with the Manager (the “Management Agreement”) dated May 28, 2010 and as amended in May 2012, May 2014, May 2016 and May 2018, the Manager provided commercial and technical management services to Navios Acquisition’s vessels for a fixed daily fee of: (a) $6.5 per MR2 product tanker and chemical tanker vessel; (b) $7.15 per LR1 product tanker vessel; and (c) the current daily fee of $9.5 per VLCC, through May 2020.

Following the Merger with Navios Midstream, completed on December 13, 2018, the Management Agreement also covers vessels acquired in the Merger.

In August 2019, Navios Acquisition extended the duration of its existing Management Agreement with the Manager until January 1, 2025, to be automatically renewed for another five years. In addition fixed vessel operating expenses are fixed for two years commencing from January 1, 2020 at: (a) $6.8 per day per MR2 product tanker and chemical tanker vessel; (b) $7.23 per day per LR1 product tanker vessel; and (c) $9.7 per day per VLCC. The agreement also provides for a technical and commercial management fee of $0.05 per day per vessel and an annual increase of 3% for the remaining period unless agreed otherwise and provides for payment of a termination fee, equal to the fees charged for the full calendar year preceding the termination date, by Navios Acquisition in the event the Management Agreement is terminated on or before December 31, 2024.

Following the Liquidation of Navios Europe I in December 2019, Navios Acquisition acquired three MR1 product tankers and two LR1 product tankers. As per the Management Agreement as amended in December 2019, vessel operating expenses are fixed for two years commencing from January 1, 2020 at: (a) $6.8 per day per MR1 product tanker; and (b) $7.23 per day per LR1 product tanker vessel. 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 for the remaining period unless agreed otherwise.

Following the Liquidation of Navios Europe II, Navios Acquisition acquired seven containers on June 29, 2020. As per the amendment to the Management Agreement dated June 26, 2020, the vessel operating expenses are fixed at: (a) $5.3 per day per Container vessel of 1,500 TEU up to 1,999 TEU; and (b) $6.1 per day per Container vessel of 2,000 TEU up to 3,450 TEU.

Drydocking expenses are reimbursed at cost for all vessels.

For the nine month periods ended September 30, 2020 and 2019 certain extraordinary fees and costs related to regulatory requirements, including ballast water treatment system installation and exhaust gas cleaning system installation and under Company’s Management Agreement amounted to $4,406 and $13,108, respectively, and are presented under “Container vessel owning companies acquisition / vessels improvements” in the condensed Consolidated Statements of Cash Flows. (Please refer to Note 5)

Total fixed vessel operating expenses for the three month periods ended September 30, 2020 and 2019 amounted to $33,969 and $26,837, respectively. Total fixed vessel operating expenses for the nine month periods ended September 30, 2020 and 2019 amounted to $93,642 and $81,224, respectively.

General and administrative expenses: On May 28, 2010, Navios Acquisition entered into an Administrative Services Agreement with the Manager, pursuant to which the Manager provides certain administrative management services to Navios Acquisition 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 services. The Manager is reimbursed for reasonable costs and expenses incurred in connection with the provision of these services. In May 2014, Navios Acquisition extended the duration of its existing Administrative Services Agreement with the Manager, until May 2020.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

Following the Merger with Navios Midstream, completed on December 13, 2018, the Administrative Services Agreement covered the vessels acquired.

In August 2019, Navios Acquisition 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, by Navios Acquisition in the event the Administrative Services Agreement is terminated on or before December 31, 2024.

Following the Liquidation of Navios Europe I in December 2019, Navios Acquisition acquired three MR1 product tankers and two LR1 product tankers. The Administrative Services Agreement also covers the vessels acquired.

Following the Liquidation of Navios Europe II, Navios Acquisition acquired seven containers on June 29, 2020. The Administrative Services Agreement also covers the vessels acquired.

For each of the three month periods ended September 30, 2020 and 2019 the expense arising from administrative services rendered by the Manager amounted to $3,519 and $2,760, respectively. For each of the nine month periods ended September 30, 2020 and 2019 the expense arising from administrative services rendered by the Manager amounted to $9,506 and $8,386, respectively.

Balance due from/ (to) related parties: Balance due from related parties (both short and long-term) as of September 30, 2020, was $17,084 (December 31, 2019: $14,658) and balance due to related parties as of September 30, 2020 was $0 (December 31, 2019: $32,150). The balances mainly consisted of administrative expenses, costs related to regulatory requirements including ballast water treatment system, special survey and dry docking expenses, as well as operating expenses and working capital deposits, in accordance with the Management Agreement. The amount of $1,845 related to seven containerships acquired after the liquidation of Navios Europe II is included under “Assets held for sale” in the condensed consolidated balance sheets.

Navios Midstream Merger Agreement: On December 13, 2018, Navios Acquisition completed the Merger contemplated by the Merger Agreement, dated as of October 7, 2018, by and among Navios Acquisition, its direct wholly-owned subsidiary Merger Sub, Navios Midstream and NAP General Partner. Pursuant to the Merger Agreement, Merger Sub merged with and into Navios Midstream, with Navios Midstream surviving as a wholly-owned subsidiary of Navios Acquisition.

Omnibus Agreements

Acquisition Omnibus Agreement: Navios Acquisition entered into an omnibus agreement (the “Acquisition Omnibus Agreement”) with Navios Holdings and Navios Partners 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 vessels 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-in drybulk carriers under specific exceptions. Under the Acquisition Omnibus Agreement, Navios Acquisition and its subsidiaries grant 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 they might own. These rights of first offer will not apply to a: (a) sale, transfer or other disposition of vessels between any affiliated subsidiaries, or pursuant to the existing terms of any charter or other agreement with a counterparty; or (b) merger with or into, or sale of substantially all of the assets to, an unaffiliated third party.

Midstream Omnibus Agreement: Navios Acquisition entered into an omnibus agreement (the “Midstream Omnibus Agreement”), with Navios Midstream, Navios Holdings and Navios Partners in connection with the Navios Midstream IPO, pursuant to which Navios Acquisition, Navios Midstream, Navios Holdings, Navios Partners and their controlled affiliates generally have agreed not to acquire or own any VLCCs, crude oil tankers, refined petroleum product tankers, liquefied petroleum gas (“LPG”) tankers or chemical tankers under time charters of five or more years without the consent of the Navios Midstream General Partner. The Midstream Omnibus Agreement contains significant exceptions that have allowed Navios Acquisition, Navios Holdings, Navios Partners or any of their controlled affiliates to compete with Navios Midstream under specified circumstances.

Under the Midstream Omnibus Agreement, Navios Midstream and its subsidiaries have granted to Navios Acquisition a right of first offer on any proposed sale, transfer or other disposition of any of its VLCCs or any crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers and related charters owned or acquired by Navios Midstream. Likewise, Navios Acquisition have agreed (and will cause its subsidiaries to agree) to grant a similar right of first offer to Navios Midstream for any of the VLCCs, crude oil tankers, refined petroleum product tankers, LPG tankers or chemical tankers under charter for five 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.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

Navios Containers Omnibus Agreement: In connection with the Navios Maritime Containers Inc. (“Navios Containers”) private placement and listing on the Norwegian over-the-counter market effective June 8, 2017, Navios Acquisition entered into an omnibus agreement with Navios Containers, Navios Midstream, Navios Holdings and Navios Partners, pursuant to which Navios Acquisition, Navios Holdings, Navios Partners 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 Acquisition, Navios Holdings, Navios Partners and Navios Midstream to compete with Navios Containers under specified circumstances.

Navios Midstream General Partner Option Agreement with Navios Holdings: Navios Acquisition entered into an option agreement, dated November 18, 2014, with Navios Holdings under which Navios Acquisition grants Navios Holdings the option to acquire any or all of the outstanding membership interests in Navios Midstream General Partner and all of the incentive distribution rights in Navios Midstream representing the right to receive an increasing percentage of the quarterly distributions when certain conditions are met. The option shall expire on November 18, 2024. Any such exercise shall relate to not less than twenty-five percent of the option interest and the purchase price for the acquisition of all or part of the option interest shall be an amount equal to its fair market value.

Balance due from Navios Europe II: Navios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe II revolving loans up to $43,500 to fund working capital requirements. In March 2017, the availability under the Navios Revolving Loans II was increased by $14,000. See Note 8 for the Investment in Navios Europe II.

Following the Liquidation of Navios Europe II, the balance due from Navios Europe II as of September 30, 2020 was $0. The balance due from Navios Europe II as of December 31, 2019 was $44,908 which included the Navios Revolving Loans II of $20,662, the non-current amount of $7,558 related to the accrued interest income earned under the Navios Term Loans II under the caption “Due from related parties, long-term” and the accrued interest income earned under the Navios Revolving Loans II of $16,688 under the caption “Due from related parties, short-term.”

NOTE 14: COMMITMENTS AND CONTINGENCIES

In September 2018, Navios Acquisition agreed to a 12-year bareboat charter-in agreement with de-escalating purchase options for two newbuild Japanese VLCCs each delivering in the fourth quarter of 2020 and the first quarter of 2021. In the first quarter of 2019, Navios Acquisition exercised its option for a third Japanese VLCC newbuilding under a 12 year bareboat chartered-in agreement with de-escalating purchase options. The vessel is expected to be delivered in the second quarter of 2021. In the second quarter of 2020, Navios Acquisition exercised its option for a fourth Japanese newbuild VLCC under a twelve year bareboat charter agreement with de-escalating purchase options and expected delivery in the second quarter of 2022.

The future minimum commitments as of September 30, 2020 of Navios Acquisition under its charter-in agreement for vessels delivery are as follows:

 

     Amount  

Lease Obligations (Time Charters) for vessels to be delivered:

  

Year

  

September 30, 2021

   $ 15,297  

September 30, 2022

     29,266  

September 30, 2023

     33,434  

September 30, 2024

     33,526  

September 30, 2025 and thereafter

     289,960  

Total

   $ 401,483  

The Company 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 the Company believes that a liability may be probable, and for which the amounts are reasonably estimable, based upon facts known at the date of the financial statements were prepared. In the opinion of the management, the ultimate disposition of these matters individually and in aggregate will not materially affect the Company’s financial position, results of operations or liquidity.

 

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NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

NOTE 15: COMMON STOCK

Common Stock and Puttable Common Stock

In February 2018, the Board of Directors of Navios Acquisition authorized a stock repurchase program for up to $25.0 million of Navios Acquisition’s common stock, for two years. Stock 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 management based upon market conditions and other factors. Repurchases were made pursuant to a program adopted under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The program did not require any minimum repurchase or any specific number or amount of shares of common stock and was suspended or reinstated at any time in Navios Acquisition’s discretion and without notice. Repurchases were subject to restrictions under Navios Acquisition’s credit facilities and indenture. The program expired in February 2020. Upon the expiration, the Company had repurchased and cancelled 735,251 shares of common stock, at a total cost of approximately $7,493.

Equity Offering

In October 2019, Navios Acquisition completed a registered direct offering of 1,875,000 shares of its common stock at $8.00 per share, raising gross proceeds of $15,000. Total net proceeds of the above transactions, net of agents’ costs of $675 and offering costs of $957, amounted to $13,368.

Continuous Offering Program

On November 29, 2019, as further updated on December 23, 2019 to provide for Navios Acquisition’s replacement of its expiring universal shelf, Navios Acquisition entered into a Continuous Offering Program Sales Agreement, pursuant to which Navios Acquisition may issue and sell from time to time through the sales agent shares of common stock having an aggregate offering price of up to $25,000. The sales were being made pursuant to a prospectus supplement as part of a shelf registration statement which was set to expire in December 2019. Navios Acquisition went effective on a new shelf registration statement which was declared effective on December 23, 2019. Accordingly, an updated Continuous Offering Program Sales Agreement (the “Sales Agreement”) was entered into on December 23, 2019. As before, the Sales Agreement contains, among other things, customary representations, warranties and covenants by Navios Acquisition and indemnification obligations of the parties thereto as well as certain termination rights for such parties. As of September 30, 2020, since the commencement of the program, Navios Acquisition has issued 910,564 shares of common stock and received net proceeds of $5,140.

As of September 30, 2020, the Company was authorized to issue 250,000,000 shares of $0.0001 par value common stock of which 16,513,935 were issued and outstanding.

Stock based compensation

During the fiscal year 2019 and the nine month period ended September 30, 2020, the Company did not authorize and issue any restricted shares of common stock to its directors and officers.

2018

In December 2018, Navios Acquisition authorized and issued in the aggregate 129,269 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 four years.

The holders of restricted stock are entitled to dividends paid on the same schedule as paid to the stockholders of the company. The fair value of restricted stock is determined by reference to the quoted stock price on the date of grant of $5.36 per share (or total fair value of $693).

Compensation expense is recognized based on a graded expense model over the vesting period.

The effect of compensation expense arising from the stock-based arrangement described above was $47 and $91 for the three months periods ended September 30, 2020 and 2019, respectively, and it is reflected in general and administrative expenses on the statement of operations. The recognized compensation expense for the year is presented as adjustment to reconcile net income to net cash provided by operating activities on the statements of cash flows. For the nine month period ended September 30, 2020 and 2019, the effect of compensation expense arising from the stock-based arrangement described above amounted to $140 and $270, respectively.

 

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UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

There were no restricted stock or stock options exercised, forfeited or expired, that were issued in 2018, during the nine month period ended September 30, 2020.

As of September 30, 2020 and December 31, 2019, there remained 95,452 and 96,952 restricted shares outstanding, respectively, that were issued in 2018, that had not yet vested.

The estimated compensation cost relating to service conditions of non-vested restricted stock, not yet recognized was $185 as of September 30, 2020 and is expected to be recognized over the weighted average time to vest of 2.2 years.

2017

In December 2017, Navios Acquisition authorized and issued in the aggregate 118,328 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 four years.

The holders of restricted stock are entitled to dividends paid on the same schedule as paid to the stockholders of the Company. The fair value of restricted stock is determined by reference to the quoted stock price on the date of grant of $17.7 per share (or total fair value of $2,094).

Compensation expense is recognized based on a graded expense model over the vesting period.

The effect of compensation expense arising from the stock-based arrangement described above was $77 and $143 for the three month period ended September 30, 2020 and 2019, respectively, and it is reflected in general and administrative expenses on the statement of operations. The recognized compensation expense for the year is presented as adjustment to reconcile net income to net cash provided by operating activities on the statements of cash flows. For the nine month period ended September 30, 2020 and 2019, the effect of compensation expense arising from the stock-based arrangement described above amounted to $229 and $424, respectively.

There were no restricted stock or stock options exercised, forfeited or expired, that were issued in 2017, during the nine month period ended September 30, 2020.

As of September 30, 2020 and December 31, 2019, there remained 58,496 and 59,162 restricted shares outstanding, respectively, that were issued in 2017 that had not yet vested.

The estimated compensation cost relating to service conditions of non-vested restricted stock, not yet recognized was $192 as of September 30, 2020 and is expected to be recognized over the weighted average time to vest of 1.2 years.

NOTE 16: SEGMENT INFORMATION

Navios Acquisition reports financial information and evaluates its operations by charter revenues. Navios Acquisition does not use discrete financial information to evaluate operating results for each type of charter. As a result, management reviews operating results solely by revenue per day and operating results of the fleet and thus Navios Acquisition has determined that it operates under one reportable segment.

The following table sets out operating revenue by geographic region for Navios Acquisition’s reportable segment. Revenue is allocated on the basis of the geographic region in which the customer is located. Tanker vessels operate worldwide. Revenues from specific geographic regions which contribute over 10% of total revenue are disclosed separately.

 

F-26


Table of Contents

NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

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.

 

     Three Month
Period ended
September 30, 2020
(unaudited)
     Three Month
Period ended
September 30, 2019
(unaudited)
     Nine Month
Period ended
September 30, 2020
(unaudited)
     Nine Month
Period ended
September 30, 2019
(unaudited)
 

Asia

   $ 53,142      $ 45,150      $ 214,407      $ 146,934  

Europe

     16,586        5,715        50,144        14,863  

United States

     9,079        8,100        24,337        32,872  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 78,807      $ 58,965      $ 288,888      $ 194,669  
  

 

 

    

 

 

    

 

 

    

 

 

 

NOTE 17: EARNINGS/ (LOSS) PER COMMON SHARE

Earnings/ (loss) per share is calculated by dividing net income attributable to common stockholders by the weighted average number of shares of common stock of Navios Acquisition outstanding during the period.

 

     For the Three
Months Ended
September 30, 2020
     For the Three
Months Ended
September 30, 2019
     For the Nine
Months Ended
September 30, 2020
     For the Nine
Months Ended
September 30, 2019
 

Numerator:

           

Net income/ (loss)

   $ 3,236      $ (56,396    $ 35,122      $ (72,085

Less:

           

Dividend declared on restricted shares

     (46      (65      (139      (196

Undistributed loss attributable to Series C participating preferred shares

     —          —          —          (13
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income/ (loss) attributable to common stockholders, basic

   $ 3,190      $ (56,461    $ 34,983      $ (72,294
  

 

 

    

 

 

    

 

 

    

 

 

 

Plus:

           

Undistributed income attributable to Series C participating preferred shares

     —          —          —          13  

Net income/ (loss) attributable to common stockholders, diluted

   $ 3,190      $ (56,461    $ 34,983      $ (72,281
  

 

 

    

 

 

    

 

 

    

 

 

 

Denominator:

           

Denominator for basic net income/ (loss) per share — weighted average shares

     16,104,011        13,510,361        15,903,447        13,446,836  

Series C participating preferred shares

     —          —          —          —    

Denominator for diluted net income/ (loss) per share — adjusted weighted average shares

     16,257,957        13,510,361        16,058,579        13,446,836  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income/ (loss) per share, basic

   $ 0.20      $ (4.18    $ 2.20      $ (5.38

Net income/ (loss) per share, diluted

   $ 0.20      $ (4.18    $ 2.18      $ (5.38
  

 

 

    

 

 

    

 

 

    

 

 

 

NOTE 18: INCOME TAXES

Marshall Islands, Cayman Islands, British Virgin Islands, and Hong Kong, do not impose a tax on international shipping income. Under the laws of these countries, the countries of incorporation of the Company and its subsidiaries and /or vessels’ registration, the companies are subject to registration and tonnage taxes which have been included in the daily management fee.

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 are subject to duties towards the Greek state which are calculated on the basis of the relevant vessels’ tonnage. The payment of said duties exhausts the tax liability of the foreign ship owning company and the relevant manager against any tax, duty, charge or contribution payable on income from the exploitation of the foreign flagged vessel. In case that tonnage tax and/or similar taxes/duties are paid to the vessel’s flag state, these are deducted from the amount of the duty to be paid in Greece.

 

F-27


Table of Contents

NAVIOS MARITIME ACQUISITION CORPORATION

UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. Dollars except share and per share data)

 

The amount included in Navios Acquisition’s statements of operations related to the Greek Tonnage tax for the nine months ended September 30, 2020, and 2019 was $601 and $639, respectively, and for the three months ended September 30, 2020 and 2019, it was $224 and $240, respectively.

Pursuant to Section 883 of the Internal Revenue Code of the United States (the “Code”), 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 Navios Acquisition’s ship-operating subsidiaries satisfy these initial criteria. In addition, these companies must meet an ownership test. Subject to proposed regulations becoming finalized in their current form, the management of Navios Acquisition believes by virtue of a special rule applicable to situations where the ship operating companies are beneficially owned by a publicly traded company like Navios Acquisition, the second criterion can also be satisfied based on the trading volume and ownership of the Company’s shares, but no assurance can be given that this will remain so in the future.

NOTE 19: SUBSEQUENT EVENTS

The Board of Directors declared a quarterly cash dividend in respect of the third quarter of 2020 of $0.05 per share of common stock which will be paid on February 10, 2021 to stockholders of record as of January 12, 2021. The declaration and payment of any further dividends remain subject to the discretion of the Board of Directors and will depend on, among other things, Navios Acquisition’s cash requirements as measured by market opportunities and restrictions under its credit agreements and other debt obligations and such other factors as the Board of Directors may deem advisable.

Subsequent to September 30, 2020, Navios Acquisition repurchased $36,400 of its ship mortgage notes for a cash consideration of $27,518.

On November 29, 2019, Navios Acquisition entered into a Continuous Offering Program Sales Agreement, pursuant to which Navios Acquisition may issue and sell from time to time through the sales agent shares of common stock having an aggregate offering price of up to $25,000. Subsequent to September 30, 2020, Navios Acquisition has issued 45,546 shares of common stock and received net proceeds of $193.

On October 28, 2020, the Baghdad, a newbuilding VLCC of 313,433 dwt under bareboat lease, was delivered from a Japanese shipyard.

 

 

F-28


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

NAVIOS MARITIME ACQUISITION CORPORATION.
By:  

/s/ Angeliki Frangou

  Angeliki Frangou
  Chief Executive Officer
  Date: December 4, 2020
EX-4.1

Exhibit 4.1

Dated 16 October 2020

LEFKADA SHIPPING CORPORATION

as Borrower

THE BANKS AND FINANCIAL INSTITUTIONS

listed in Schedule 1

as Lenders

and

HAMBURG COMMERCIAL BANK AG

as Agent, Mandated Lead Arranger and Security Trustee

AMENDING AND RESTATING AGREEMENT

relating to

the financing of

m.v. “NAVE BUENA SUERTE”

 

LOGO


Index

 

Clause        Page  

1

  Definitions and Interpretation      1  

2

  Agreement of the Creditor Parties      3  

3

  Conditions Precedent      3  

4

  Representations      3  

5

  Amendment and Restatement of Loan Agreement and other Finance Documents      4  

6

  Further Assurance      4  

7

  Term-Out Fee      6  

8

  Costs and Expenses      6  

9

  Notices      6  

10

  Counterparts      6  

11

  Governing Law      6  

12

  Enforcement      6  

Schedules

  

Schedule 1 The Lenders

     8  

Schedule 2 Effective Date Certificate

     9  

Schedule 3 Conditions Precedent

     10  

Execution

  

Execution Pages

     12  

Appendices

Appendix Part A Form of Amended and Restated Loan Agreement marked to indicate amendments to the Loan Agreement

Appendix Part B Form of clean copy Amended and Restated Loan Agreement


THIS AGREEMENT is made on 16 October 2020

PARTIES

 

(1)

LEFKADA SHIPPING CORPORATION, a corporation incorporated in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, The Marshall Islands MH 96960 as borrower (the “Borrower”)

 

(2)

THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1 (The Lenders) as lenders (the “Lenders”)

 

(3)

HAMBURG COMMERCIAL BANK AG as agent (the “Agent”), as mandated lead arranger (the “Mandated Lead Arranger”) and as security trustee (the “Security Trustee”)

BACKGROUND

 

(A)

By the Loan Agreement, the Lenders made available to the Borrower a facility of (originally) up to $31,800,000 of which $29,262,000 is outstanding at the date of this Agreement.

 

(B)

This Agreement sets out the terms and conditions on which the Lenders and the other Creditor Parties agree, with effect on and from the Effective Date, at the request of the Borrower, to the amendments set out in clause 2.1 below, including, without limitation, the extension of the maturity of an amount of up to the lesser of (A) US$28,416,000 and (B) 65 per cent. of the Market Value of the Ship, and to the consequential amendment of the Loan Agreement and the other Finance Documents in connection with those matters.

OPERATIVE PROVISIONS

 

1

DEFINITIONS AND INTERPRETATION

 

1.1

Definitions

In this Agreement:

Amended and Restated Loan Agreement” means the Loan Agreement as amended and restated by this Agreement in the form set out in the Appendix.

Charter” means in respect of the Ship the time charter party dated 17 October 2019 (as amended and supplemented by Addendum No. 1 dated 17 January 2020 and Addendum No. 2 dated 20 January 2020 and as may be further amended and supplemented from time to time) and made between the Borrower as owner and CHINA SHIPPING DEVELOPMENT (HONG KONG) WYTEX LIMITED as charterer.

Charter Assignment” means, in relation to the Charter, a Charterparty Assignment under the Loan Agreement in the Agreed Form.

Corporate Guarantee” means a guarantee of the obligations of the Borrower under the Loan Agreement and the other Finance Documents to which the Borrower is a party, in the Agreed Form.

Corporate Guarantor” means Navios Maritime Acquisition Corporation, a corporation incorporated in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960.

 


Effective Date” means the date on which the conditions precedent in Clause 3 (Conditions Precedent) are satisfied as confirmed by the Effective Date Certificate.

Effective Date Certificate” means a certificate executed by the Agent in the form set out in Schedule 2.

Loan Agreement” means the loan agreement dated 8 October 2019 and made between (i) the Borrower, (ii) the Lenders, (iii) the Agent, (iv) the Mandated Lead Arranger and (v) the Security Trustee.

Obligor” means the Borrower, the Corporate Guarantor, the Shareholder or any of the other Security Parties and, in the plural, means all of them.

Second Deed of Covenant” means the second priority deed of covenant collateral to the Second Mortgage.

Second Mortgage” means the second preferred, or as the case may be, priority ship mortgage on the Ship in the Agreed Form.

Shareholder” means Aegean Sea Maritime Holdings Inc., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands, whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, the Marshall Islands MH96960.

Shares Security Deed” means, in respect of all the issued shares in the Borrower, a pledge of such shares executed or to be executed by the Shareholder in favour of the Security Trustee in the Agreed Form.

 

1.2

Defined expressions

Defined expressions in the Loan Agreement and the other Finance Documents shall have the same meanings when used in this Agreement unless the context otherwise requires or unless otherwise defined in this Agreement.

 

1.3

Application of construction and interpretation provisions of Loan Agreement

Clauses 1.2 (construction of certain terms) to 1.6 (Headings) of the Loan Agreement applies to this Agreement as if it were expressly incorporated in it with any necessary modifications.

 

1.4

Designation as a Finance Document

The Borrower and the Agent designate this Agreement as a Finance Document.

 

1.5

Third party rights

Unless provided to the contrary in a Finance Document, a person who is not a party to this Agreement has no right under the Third Parties Act to enforce or to enjoy the benefit of any term of this Agreement.

 

2


2

AGREEMENT OF THE CREDITOR PARTIES

 

2.1

Agreement of the Lenders

The Lenders agree, subject to and upon the terms and conditions of this Agreement, to inter alia, amend the repayment schedule set out in clause 8.1 of the Loan Agreement.

 

2.2

Agreement of the Creditor Parties

The Creditor Parties agree, subject to and upon the terms and conditions of this Agreement, to the consequential amendment of the Loan Agreement and the other Finance Documents in connection with the matters referred to in Clause 2.1 (Agreement of the Lenders).

 

2.3

Effective Date

The agreement of the Lenders and the other Creditor Parties contained in Clause 2.1 (Agreement of the Lenders) and Clause 2.2 (Agreement of the Creditor Parties) shall have effect on and from the Effective Date.

 

3

CONDITIONS PRECEDENT

The agreement of the Lenders and the other Creditor Parties contained in Clause 2.1 (Agreement of the Lenders) and Clause 2.2 (Agreement of the Creditor Parties) is subject to:

 

(a)

no Event of Default continuing on the date of this Agreement and the Effective Date or resulting from the occurrence of the Effective Date;

 

(b)

the representations and warranties to be made by each Obligor in accordance with the relevant Finance Document to which it is a party being true on the date of this Agreement and the Effective Date;

 

(c)

no event described in paragraphs (a) to (b) of clause 8.8 (mandatory prepayment) of the Loan Agreement having occurred on the date of this Agreement or the Effective Date; and

 

(d)

the Agent having received all of the documents and other evidence listed in Schedule 3 (Conditions Precedent) in form and substance reasonably satisfactory to the Facility Agent on or before 19 October 2020 or such later date as the Agent may agree with the Borrower.

 

4

REPRESENTATIONS

 

4.1

Loan Agreement representations

The Borrower makes the representations and warranties set out in clause 10 (representations and warranties) of the Loan Agreement, as amended and restated by this Agreement and updated with appropriate modifications to refer to this Agreement by reference to the circumstances then existing on the date of this Agreement and on the Effective Date.

 

4.2

Finance Document representations

Each Obligor makes the representations and warranties set out in the Finance Documents (other than the Loan Agreement) to which it is a party, as amended and restated by this Agreement and updated with appropriate modifications to refer to this Agreement by reference to the circumstances then existing on the date of this Agreement and on the Effective Date.

 

3


5

AMENDMENT AND RESTATEMENT OF LOAN AGREEMENT AND OTHER FINANCE DOCUMENTS

 

5.1

Specific amendments to the Loan Agreement

With effect on and from the Effective Date the Loan Agreement shall be, and shall be deemed by this Agreement to be, amended and restated in the form of the Amended and Restated Loan Agreement and, as so amended and restated, the Loan Agreement shall continue to be binding on each of the parties to it in accordance with its terms as so amended and restated.

 

5.2

Amendments to Finance Documents

With effect on and from the Effective Date each of the Finance Documents other than the Loan Agreement shall be, and shall be deemed by this Agreement to be, amended as follows:

 

(a)

the definition of, and references throughout each of the Finance Documents to, the Loan Agreement and any of the other Finance Documents shall be construed as if the same referred to the Loan Agreement and those Finance Documents as amended and restated by this Agreement; and

 

(b)

by construing references throughout each of the Finance Documents to “this Agreement”, “this Deed” and other like expressions as if the same referred to such Finance Documents as amended and supplemented by this Agreement.

 

5.3

Finance Documents to remain in full force and effect

The Finance Documents shall remain in full force and effect:

 

(a)

in the case of the Loan Agreement as amended and restated pursuant to Clause 5.1 (Specific amendments to the Loan Agreement); and

 

(b)

in the case of the Finance Documents other than the Loan Agreement as amended and supplemented by the amendments to such Finance Documents contained or referred to in Clause 5.2 (Amendments to Finance Documents),

subject to such further or consequential modifications as may be necessary to give full effect to the terms of this Agreement.

 

6

FURTHER ASSURANCE

 

6.1

Further assurance

 

(a)

The Borrower shall and shall procure that each Obligor shall promptly, and in any event within the time period specified by the Agent do all such acts (including procuring or arranging any registration, notarisation or authentication or the giving of any notice) or execute or procure execution of all such documents (including assignments, transfers, mortgages, charges, notices, instructions, acknowledgements, proxies and powers of attorney), as the Agent may specify (and in such form as the Agent may require in favour of the Agent or its nominee(s)) to implement the terms and provisions of this Agreement.

 

4


(b)

The Borrower shall and shall procure that each Obligor shall promptly, and in any event within the time period specified by the Security Trustee do all such acts (including procuring or arranging any registration, notarisation or authentication or the giving of any notice) or execute or procure execution of all such documents (including assignments, transfers, mortgages, charges, notices, instructions, acknowledgments, proxies and powers of attorney), as the Security Trustee may specify (and in such form as the Security Trustee may require in favour of the Security Trustee or its nominee(s)):

 

  (i)

to create, perfect, vest in favour of the Security Trustee or protect the priority of the Security Interest or any right or any kind created or intended to be created under or evidenced by the Finance Documents as amended and restated and/or supplemented by this Agreement (which may include the execution of a mortgage, charge, assignment or other Security Interest over all or any of the assets which are, or are intended to be, the subject of the Security Interest created by a Finance Document) or for the exercise of any rights, powers and remedies of the Security Trustee, any Receiver or the Creditor Parties provided by or pursuant to the Finance Documents as amended and restated and/or supplemented by this Agreement or by law;

 

  (ii)

to facilitate or expedite the realisation and/or sale of, the transfer of title to or the grant of, any interest in or right relating to the assets which are, or are intended to be, the subject of the Security Interest created by a Finance Document or to exercise any power specified in any Finance Document as amended and restated and/or supplemented by this Agreement in respect of which the Security Interest has become enforceable; and/or

 

  (iii)

to enable or assist the Security Trustee to enter into any transaction to commence, defend or conduct any proceedings and/or to take any other action relating to any item of the Trust Property.

 

(c)

The Borrower shall and shall procure that each Obligor shall, take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Security Interest conferred or intended to be conferred on the Security Trustee or the Creditor Parties by or pursuant to the Finance Documents as amended and restated and/or supplemented by this Agreement.

 

6.2

Additional corporate action

At the same time as an Obligor delivers to the Agent or Security Trustee any document executed under this Clause 6 (Further Assurance), the Borrower shall and shall procure that each Obligor shall deliver to the Agent or Security Trustee as applicable a certificate signed by an officer of that Obligor which shall:

 

(a)

set out the text of a resolution of that Obligor’s directors specifically authorising the execution of the document specified by the Agent or the Security Trustee as applicable; and

 

(b)

state that either the resolution was duly passed at a meeting of the directors validly convened and held, throughout which a quorum of directors entitled to vote on the resolution was present, or that the resolution has been signed by all the directors of officers and is valid under that Obligor’s articles of incorporation or other constitutional documents.

 

5


7

TERM-OUT FEE

The Borrower shall pay to the Agent a non-refundable term-out fee in the amount of $227,328 (representing 0.80 per cent. of the outstanding Loan on the Effective Date) which shall be due and payable to the Agent no later than 19 October 2020. The Borrower hereby authorises the Agent to debit the Earnings Account with number 1200064014 without further notice in order to settle the amount due and payable under this Clause 7.

 

8

COSTS AND EXPENSES

Clause 20.3 (costs of variation, amendments, enforcement etc.) of the Loan Agreement, as amended and restated by this Agreement, applies to this Agreement as if it were expressly incorporated in it with any necessary modifications.

 

9

NOTICES

Clause 28 (notices) of the Loan Agreement, as amended and restated by this Agreement, applies to this Agreement as if it were expressly incorporated in it with any necessary modifications.

 

10

COUNTERPARTS

This Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

 

11

GOVERNING LAW

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law.

 

12

ENFORCEMENT

 

12.1

Jurisdiction

 

(a)

The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement) (a “Dispute”).

 

(b)

The Borrower accepts that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly the Borrower will not argue to the contrary.

 

(c)

This Clause 12.1 (Jurisdiction) is for the benefit of the Creditor Parties only. As a result, no Creditor Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Creditor Parties may take concurrent proceedings in any number of jurisdictions.

 

12.2

Service of process

 

(a)

Without prejudice to any other mode of service allowed under any relevant law, the Borrower:

 

  (i)

irrevocably appoints Hill Dickinson LLP at their office for the time being, presently at The Broadgate Tower, 20 Primrose Street, London EC2A 2EW, England as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and

 

6


  (ii)

agrees that failure by a process agent to notify the Borrower of the process will not invalidate the proceedings concerned.

 

(b)

If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process, the Borrower must immediately (and in any event within 7 days of such event taking place) appoint another agent on terms acceptable to the Agent. Failing this, the Agent may appoint another agent for this purpose.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

 

7


EXECUTION PAGES

 

BORROWER       LOGO
SIGNED by Georgios Panagakis    )
duly authorised    )
for and on behalf of    )
LEFKADA SHIPPING CORPORATION    )
in the presence of:    )
Witness’ signature:    )    LOGO
Witness’ name:    )
Witness’ address:    )
  
  

 

LENDERS       LOGO
SIGNED by MARIA ELENI KOSSYFA    )
duly authorised    )
for and on behalf of    )
HAMBURG COMMERCIAL BANK AG    )
in the presence of:    )
Witness’ signature:    )    LOGO
Witness’ name:    )
Witness’ address:    )
  
  

 

AGENT       LOGO
SIGNED by MARIA ELENI KOSSYFA    )
duly authorised    )
for and on behalf of    )
HAMBURG COMMERCIAL BANK AG    )
in the presence of:    )
Witness’ signature:    )    LOGO
Witness’ name:    )
Witness’ address:    )
  
  

 

12


MANDATED LEAD ARRANGER       LOGO
SIGNED by MARIA ELENI KOSSYFA    )
duly authorised    )
for and on behalf of    )
HAMBURG COMMERCIAL BANK AG    )
in the presence of:    )
Witness’ signature:    )    LOGO
Witness’ name:    )
Witness’ address:    )
  
  

 

SECURITY TRUSTEE       LOGO
SIGNED by MARIA ELENI KOSSYFA    )
duly authorised    )
for and on behalf of    )
HAMBURG COMMERCIAL BANK AG    )
in the presence of:    )
Witness’ signature:    )    LOGO
Witness’ name:    )
Witness’ address:    )
  
  

 

13


Appendix

Dated 8 October 2019

as amended and restated

on 16 October 2020

LEFKADA SHIPPING CORPORATION

as Borrower

and

THE BANKS AND FINANCIAL INSTITUTIONS

as Lenders

and

HAMBURG COMMERCIAL BANK AG

as Agent, Mandated Lead Arranger and Security Trustee

LOAN AGREEMENT

relating to

a senior secured post-delivery term loan facility of (originally) up to US$31,800,000

to provide finance secured on one 2011-built very large crude carrier

 

LOGO


Index

 

Clause        Page  

1

  Interpretation      3  

2

  Facility      22  

3

  Position of the Lenders      22  

4

  Drawdown      23  

5

  Interest      24  

6

  Interest Periods      26  

7

  Default Interest      27  

8

  Repayment and Prepayment      28  

9

  Conditions Precedent      30  

10

  Representations and Warranties      31  

11

  General Undertakings      35  

12

  Corporate Undertakings      40  

13

  Insurance      41  

14

  Ship Covenants      48  

15

  Security Cover      54  

16

  Payments and Calculations      56  

17

  Application of Receipts      58  

18

  Application of Earnings      59  

19

  Events of Default      61  

20

  Fees and Expenses      67  

21

  Indemnities      68  

22

  No Set-Off or Tax Deduction      71  

23

  Illegality, etc.      74  

24

  Increased Costs      74  

25

  Set-Off      76  

26

  Transfers and Changes in Lending Offices      77  

27

  Variations and Waivers      82  

28

  Notices      85  

29

  Supplemental      87  

30

  Law and Jurisdiction      88  

Schedules

  

Schedule 1 Lenders and Commitments

     89  

Schedule 2 Drawdown Notice

     90  

Schedule 3 Condition Precedent Documents

     91  

Part A

     91  

Part B

     93  

Schedule 4 Mandatory Cost Formula

     95  

Schedule 5 Transfer Certificate

     97  

Schedule 6 Power of Attorney

     101  

Schedule 7 Form of Compliance Certificate

     102  

Schedule 8 Additional Provisions

     103  

Execution

  

Execution Pages

     104  

 

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THIS AGREEMENT is made on 8 October 2019 as amended and restated by an amending and restating agreement dated 16 October 2020

PARTIES

 

(1)

LEFKADA SHIPPING CORPORATION, a corporation incorporated in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, the Marshall Islands MH96960, as Borrower;

 

(2)

THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1, as Lenders;

 

(3)

HAMBURG COMMERCIAL BANK AG acting through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany, as Agent;

 

(4)

HAMBURG COMMERCIAL BANK AG acting through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany, as Mandated Lead Arranger; and

 

(5)

HAMBURG COMMERCIAL BANK AG acting through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany, as Security Trustee.

BACKGROUND

 

(A)

By a loan agreement dated 8 October 2019 (the “Original Loan Agreement”), the Lenders have agreed to make available to the Borrower a senior secured post-delivery term loan facility in one advance in an amount of (originally) up to the lesser of (A) US$31,800,000 and (B) 60 per cent. of the Initial Market Value of the Ship (as defined below) to partly finance the Market Value of the Ship, in respect of which the principal amount outstanding under the term facility on the Effective Date is $28,416,000.

 

(B)

By the Amending and Restating Agreement, the Lenders and the Borrower agreed to certain amendments to this Agreement and the other Finance Documents.

 

(C)

This Agreement sets out the terms and conditions of the Original Loan Agreement as amended and restated by the Amending and Restating Agreement.

OPERATIVE PROVISIONS

 

1

INTERPRETATION

 

1.1

Definitions

Subject to Clause 1.5, in this Agreement:

Account” means each of the Earnings Account, the Minimum Liquidity Account and the Retention Account and, in the plural, means all of them.

Account Bank” means Hamburg Commercial Bank AG, acting in such capacity through its office at Gerhart-Hauptmann-Platz 50, 20095 Hamburg, Germany, or any successor;

Account Pledge” means, in relation to each Account, a pledge agreement creating security in respect of that Account in the Agreed Form and, in the plural, means all of them;

Additional Minimum Liquidity” has the meaning given in Schedule 8;

 

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Affected Lender” has the meaning given in Clause 5.7;

Agency and Trust Agreement” means the agency and trust agreement executed or to be executed between the Borrower and the Creditor Parties in the Agreed Form;

Agent” means Hamburg Commercial Bank AG, acting in such capacity through its office at Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Germany, or any successor of it appointed under clause 5 of the Agency and Trust Agreement;

Agreed Form” means in relation to any document, that document in the form approved in writing by the Agent (acting on the instructions of the Majority Lenders) or as otherwise approved in accordance with any other approval procedure specified in any relevant provisions of any Finance Document;

Amending and Restating Agreement” means the amending and restating agreement dated 16 October 2020 and made between, amongst others, the Borrower, the Lenders, the Agent, the Mandated Lead Arranger and the Security Trustee;

Applicable Lender” has the meaning given in Clause 5.2;

Approved Broker” means each of Arrow Valuations Ltd, Barry Rogliano Salles, H. Clarkson & Co. Ltd., Fearnleys, Maersk Brokers K/S, SSY Valuations Services Ltd. and Howe Robinson & Co Ltd London and, in the plural, means all of them;

“Approved Flag” means the Hong Kong flag, the Liberian flag or such other flag as the Agent may approve (with the authorisation of the Majority Lenders) as the flag on which the Ship is or, as the case may be, shall be registered;

“Approved Flag State” means Hong Kong, Liberia or any other country in which the Agent may approve (with the authorisation of the Majority Lenders) that the Ship is or, as the case may be, shall be registered;

“Approved Manager” means Navios Tankers Management Inc., a corporation incorporated in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, the Marshall Islands MH96960 or any other company which is a subsidiary or affiliate of Navios Maritime Holdings Inc. or of Angeliki Frangou or any other company which the Agent (acting on the instructions of the Majority Lenders) may approve from time to time as the commercial and/or technical manager of the Ship;

Approved Manager’s Undertaking” means, in relation to the Ship, a letter of undertaking including (inter alia) an assignment of the Approved Manager’s rights, title and interest in the Insurances of the Ship executed or to be executed by the Approved Manager in favour of the Security Trustee in the Agreed Form agreeing certain matters in relation to the Approved Manager serving as manager and subordinating its rights against the Ship and the Borrower to the rights of the Creditor Parties under the Finance Documents and, in the plural, means all of them;

Assignable Charter” means any time charterparty, consecutive voyage charter or contract of affreightment in respect of the Ship having a duration (or capable of exceeding a duration) equal or more than 12 months and any guarantee of the obligations of the charterer under such charter or any bareboat charter in respect of the Ship and any guarantee of the obligations of the charterer under such bareboat charter, entered or to be entered into by the Borrower and a charterer or, as the context may require, bareboat charterer and, in the plural, means all of them;

 

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“Availability Period” means the period commencing on the date of this Agreement and ending on:

 

  (a)

30 October 2019 (or such later date as the Agent may, with the authorisation of the Lenders, agree with the Borrower); or

 

  (b)

if earlier, the date on which the Total Commitments are fully borrowed, cancelled or terminated;

Balloon Instalment” has the meaning given in Clause 8.1;

Basel III” means, together:

 

  (a)

the agreements on capital requirements, a leverage ratio and liquidity standards contained in “Basel III: A global regulatory framework for more resilient banks and banking systems”, “Basel III: International framework for liquidity risk measurement, standards and monitoring” and “Guidance for national authorities operating the countercyclical capital buffer” published by the Basel Committee on Banking Supervision in December 2010, each as amended, supplemented or restated;

 

  (b)

the rules for global systemically important banks contained in “Global systemically important banks: assessment methodology and the additional loss absorbency requirement—Rules text” published by the Basel Committee on Banking Supervision in November 2011, as amended, supplemented or restated; and

 

  (c)

any further guidance or standards published by the Basel Committee on Banking Supervision relating to “Basel III”;

Borrower” means Lefkada Shipping Corporation, a corporation incorporated in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, the Marshall Islands MH96960;

Break Costs” has the meaning given in Clause 21.2;

Business Day” means a day (other than a Saturday or Sunday) on which banks are open for general business:

 

  (a)

in Hamburg, Piraeus, Athens and London regarding the fixing of any interest rate which is required to be determined under this Agreement or any Finance Document;

 

  (b)

in Hamburg, Piraeus and New York in respect of any payment which is required to be made under a Finance Document; and

 

  (c)

in Hamburg, Athens and Piraeus regarding any other action to be taken under this Agreement or any other Finance Document;

Cancellation Notice” has the meaning given in Clause 8.6;

Change of Control” means, in relation to:

 

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  (a)

the Borrower, a change in:

 

  (i)

the beneficial ownership of any of the shares in the Borrower; or

 

  (ii)

the legal ownership of any of those shares; or

 

  (b)

the Corporate Guarantor, a change which results in Mrs Angeliki Frangou either directly or indirectly (through entities owned and controlled by her or trusts or foundations of which she is the beneficiary) and/or Navios Maritime Holdings Inc. or any of its affiliates being the ultimate beneficial owner of, or having ultimate control of the voting rights attaching to, less than 20 per cent. of all the issued shares or units as the case may be in the Corporate Guarantor;

Charterparty Assignment” means an assignment of the rights of the Borrower under any Assignable Charter and any guarantee of such Assignable Charter executed or to be executed by the Borrower in favour of the Security Trustee in the Agreed Form and, in the plural, means all of them;

Code” means the US Internal Revenue Code of 1986;

Commitment” means, in relation to a Lender, the amount set opposite its name in Schedule 1, or, as the case may require, the amount specified in the relevant Transfer Certificate, as that amount may be reduced, cancelled or terminated in accordance with this Agreement (and “Total Commitments” means the aggregate of the Commitments of all the Lenders);

Compliance Certificate” means a certificate in the form set out in Schedule 7 and in Schedule 1 of the Corporate Guarantee (or in any other form which the Agent approves or requires) to be provided at the times and in the manner set out in Clause 11.20;

Contractual Currency” has the meaning given in Clause 21.6;

Contribution” means, in relation to a Lender, the part of the Loan which is owing to that Lender;

Corporate Guarantee” means a guarantee of the obligations of the Borrower under this Agreement and the other Finance Documents to which each Borrower is a party, in the Agreed Form;

Corporate Guarantor” means Navios Maritime Acquisition Corporation, a corporation incorporated in the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands, MH96960;

Correction Rate” means, at any relevant time in relation to an Applicable Lender, the amount (expressed as a rate per annum) by which that Lender’s Cost of Funding exceeds LIBOR;

Cost of Funding” means, in relation to a Lender, the rate per annum determined by that Lender to be the rate at which deposits in Dollars are offered to that Lender by leading banks in the Relevant Interbank Market at that Lender’s request at or about the Specified Time on the Quotation Date for an Interest Period and for a period equal to that Interest Period and for delivery on the first Business Day of it, or, if that Lender uses other ways to fund deposits in Dollars, such rate as determined by that Lender to be the Lender’s cost of funding deposits in Dollars for that Interest Period, such determination being conclusive and binding in the absence of manifest error;

 

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Creditor Party” means the Agent, the Security Trustee, the Mandated Lead Arranger or any Lender, whether as at the date of this Agreement or at any later time and, in the plural, means all of them;

Deed of Covenant” means the deed of covenant collateral to the Mortgage;

Disruption Event” means either or both of:

 

  (a)

a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Loan (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or

 

  (b)

the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other, Party:

 

  (i)

from performing its payment obligations under the Finance Documents; or

 

  (ii)

from communicating with other Parties in accordance with the terms of the Finance Documents,

and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted;

Dollars” and “$” means the lawful currency for the time being of the United States of America;

Drawdown Date” means the date requested by the Borrower for the Loan to be borrowed, or (as the context requires) the date on which the Loan is actually borrowed;

Drawdown Notice” means the notice in the form set out in Schedule 2 (or in any other form which the Agent approves or reasonably requires);

Earnings” means all moneys whatsoever which are now, or later become, payable (actually or contingently) to the Borrower or the Security Trustee and which arise out of the use or operation of the Ship, including (but not limited to):

 

  (a)

except to the extent that they fall within paragraph (b);

 

  (i)

all freight, hire and passage moneys;

 

  (ii)

compensation payable to the Borrower or the Security Trustee in the event of requisition of the Ship for hire;

 

  (iii)

remuneration for salvage and towage services;

 

  (iv)

demurrage and detention moneys;

 

  (v)

damages for breach (or payments for variation or termination) of any charterparty or other contract for the employment of the Ship; and

 

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  (vi)

all moneys which are at any time payable under any Insurances in respect of loss of hire; and

 

  (b)

if and whenever the Ship is employed on terms whereby any moneys falling within paragraphs (a)(i) to (vi) are pooled or shared with any other person, that proportion of the net receipts of the relevant pooling or sharing arrangement which is attributable to the Ship;

Earnings Account” means an account in the name of the Borrower with the Account Bank designated “Lefkada Shipping Corporation - Earnings Account”, or any other account (with that or another office of the Account Bank) which replaces such account and is designated by the Agent as that Earnings Account for the purposes of this Agreement;

Effective Date” means the date on which the Agent confirms in writing to the Borrower that the conditions precedent listed in clause 3 of the Amending and Restating Agreement have been satisfied.

Environmental Claim” means:

 

  (a)

any claim by any governmental, judicial or regulatory authority which arises out of an Environmental Incident or an alleged Environmental Incident or which relates to any Environmental Law; or

 

  (b)

any claim by any other person which relates to an Environmental Incident or to an alleged Environmental Incident,

and “claim” means a claim for damages, compensation, fines, penalties or any other payment of any kind whether or not similar to the foregoing; an order or direction to take, or not to take, certain action or to desist from or suspend certain action; and any form of enforcement or regulatory action, including the arrest or attachment of any asset;

Environmental Incident” means:

 

  (a)

any release of Environmentally Sensitive Material from the Ship; or

 

  (b)

any incident in which Environmentally Sensitive Material is released from a vessel other than the Ship and which involves a collision between the Ship and such other vessel or some other incident of navigation or operation, in either case, in connection with which the Ship is actually or potentially liable to be arrested, attached, detained or injuncted and/or the Ship and/or the Borrower and/or any operator or manager of the Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action; or

 

  (c)

any other incident in which Environmentally Sensitive Material is released otherwise than from the Ship and in connection with which the Ship is actually or potentially liable to be arrested and/or where the Borrower and/or any operator or manager of the Ship is at fault or allegedly at fault or otherwise liable to any legal or administrative action;

Environmental Law” means any law, regulation, convention and agreement relating to pollution or protection of the environment, to the carriage of Environmentally Sensitive Material or to actual or threatened releases of Environmentally Sensitive Material;

 

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Environmentally Sensitive Material” means oil, oil products and any other substance (including any chemical, gas or other hazardous or noxious substance) which is (or is capable of being or becoming) polluting, toxic or hazardous;

Event of Default” means any of the events or circumstances described in Clause 19.1;

FATCA” means:

 

  (a)

sections 1471 to 1474 of the Code or any associated regulations;

 

  (b)

any treaty, law or regulation of any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of any law or regulation referred to in paragraph (a) above; or

 

  (c)

any agreement pursuant to the implementation of any treaty, law or regulation referred to in paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction;

FATCA Deduction” means a deduction or withholding from a payment under a Finance Document required by FATCA;

FATCA Exempt Party” means a Party that is entitled to receive payments free from any FATCA Deduction;

Final Repayment Date” means 18 October 2024;

Finance Documents” means together:

 

  (a)

this Agreement;

 

  (b)

the Agency and Trust Agreement;

 

  (c)

the Account Pledges;

 

  (d)

the Corporate Guarantee;

 

  (e)

the Shares Security Deed;

 

  (f)

the Mortgage;

 

  (g)

the Second Mortgage;

 

  (h)

the Deed of Covenant;

 

  (i)

the Second Deed of Covenant;

 

  (j)

the General Assignment;

 

  (k)

any Charterparty Assignment;

 

  (l)

the Approved Manager’s Undertaking; and

 

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  (m)

any other document (whether creating a Security Interest or not) which is executed at any time by the Borrower, the Corporate Guarantor, the Approved Manager or any other person as security for, or to establish any form of subordination or priorities arrangement in relation to, any amount payable to the Lenders under this Agreement or any of the other documents referred to in this definition and, in the singular, means any of them;

Financial Indebtedness” means, in relation to a person (the “debtor”), any actual or contingent liability of the debtor:

 

  (a)

for principal, interest or any other sum payable in respect of any moneys borrowed or raised by the debtor;

 

  (b)

under any loan stock, bond, note or other security issued by the debtor;

 

  (c)

under any acceptance credit, guarantee or letter of credit facility made available to the debtor;

 

  (d)

under a financial lease, a deferred purchase consideration arrangement (in each case, other than in respect of assets or services obtained on normal commercial terms in the ordinary course of business) or any other agreement having the commercial effect of a borrowing or raising of money by the debtor;

 

  (e)

under any foreign exchange transaction, any interest or currency swap, exchange or any other kind of derivative transaction entered into by the debtor or, if the agreement under which any such transaction is entered into requires netting of mutual liabilities, the liability of the debtor for the net amount; or

 

  (f)

under receivables sold or discounted (other than any receivables to the extent that they are sold on a non-recourse basis); or

 

  (g)

under a guarantee, indemnity or similar obligation entered into by the debtor in respect of a liability of another person which would fall within (a) to (f) if the references to the debtor referred to the other person;

Financial Year” means, in relation to the Corporate Guarantor and the Group, each period of one year commencing on 1 January in respect of which consolidated accounts are or ought to be prepared;

General Assignment” means a general assignment of (inter alia) the Earnings, the Insurances and any Requisition Compensation relative to the Ship in the Agreed Form;

Group” means the Corporate Guarantor and all subsidiaries directly or indirectly owned by the Corporate Guarantor, including, but not limited to, the Shareholder and the Borrower and “member of the Group” shall be construed accordingly;

IACS” means the International Association of Classification Societies;

“Indenture” means the indenture dated as of 13 November 2013, as amended and supplemented by six supplemental indentures dated as of 8 January 2014, 20 February 2014, 31 March 2014, 28 May 2014, 4 December 2014, 17 October 2015, 7 March 2019, 12 March 2019 and 20 March 2019, respectively each entered into by the Corporate Guarantor and Navios Acquisition Finance (US) Inc. in respect of the 8.125% First Priority Ship Mortgage Notes due 2021;

 

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“Indenture Guarantee” means a guarantee executed, or as the case may be, to be executed by the Borrower as security for the obligations and liability of the Corporate Guarantor under the Indenture;

Initial Market Value” means the Market Value thereof calculated in accordance with the valuation(s) relative thereto referred to in paragraph 4 of Schedule 3, Part B;

Instalment” has the meaning given in Clause 8.1;

Insurances” means:

 

  (a)

all policies and contracts of insurance (including, without limitation, any loss of hire insurance) and any reinsurance, policies or contracts, including entries of the Ship in any protection and indemnity or war risks association, effected in respect of the Ship, its Earnings or otherwise in relation to it whether before, on or after the date of this Agreement; and

 

  (b)

all rights (including, without limitation, any and all rights or claims which the Borrower may have under or in connection with any cut-through clause relative to any reinsurance contract relating to the aforesaid policies or contracts of insurance) and other assets relating to, or derived from, any of the foregoing, including any rights to a return of a premium and any rights in respect of any claim whether or not the relevant policy, contract of insurance or entry has expired on or before the date of this Agreement;

Interest Period” means a period determined in accordance with Clause 6;

Interpolated Screen Rate” means, in relation to an Interest Period, the rate which results from interpolating on a linear basis between:

 

  (a)

the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than that Interest Period; and

 

  (b)

the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds that Interest Period,

each as of the Specified Time on the Quotation Date for that Interest Period;

ISM Code” means the International Safety Management Code (including the guidelines on its implementation), adopted by the International Maritime Organisation as the same may be amended or supplemented from time to time (and the terms “safety management system”, “Safety Management Certificate” and “Document of Compliance” have the same meanings as are given to them in the ISM Code);

ISPS Code” means the International Ship and Port Facility Security Code as adopted by the International Maritime Organisation, as the same may be amended or supplemented from time to time;

 

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ISSC” means a valid and current International Ship Security Certificate issued under the ISPS Code;

Lender” means, subject to Clause 26.6, a bank or financial institution listed in Schedule 1 and acting through its branch indicated in Schedule 1 (or through another branch notified to the Agent under Clause 26.16) or its transferee, successor or assign;

LIBOR” means, for an Interest Period:

 

  (a)

the rate per annum equal to the offered quotation for deposits in Dollars for a period equal to, or as near as possible equal to, the relevant Interest Period which appears on the Screen Rate; or

 

  (b)

(if no Screen Rate is available for that Interest Period), the applicable Interpolated Screen Rate for that Interest Period; or

 

  (c)

if no Screen Rate is available and it is not possible to calculate an Interpolated Screen Rate for that Interest Period, the rate per annum determined by the Agent to be the arithmetic mean (rounded upwards, if necessary, to the nearest fifth decimal point) of the rate(s) per annum notified to the Agent by each, or if there is only one Reference Bank, that Reference Bank as the rate at which deposits in Dollars are offered to that Reference Bank by leading banks in the Relevant Interbank Market at that Reference Bank’s request,

at or about the Specified Time on the Quotation Date for that Interest Period for a period equal to that Interest Period and for delivery on the first Business Day of it and, if any such rate is below zero, LIBOR will be deemed to be zero;

“Loan” means the principal amount for the time being outstanding under this Agreement being $28,416,000 on the Effective Date;

“LSW 1189” means the London Standard Wording for marine insurances which incorporates the German Direct Mortgage Clause;

“Major Casualty” means any casualty to the Ship in respect of which the claim or the aggregate of the claims against all insurers, before adjustment for any relevant franchise or deductible, exceeds $500,000 or the equivalent in any other currency;

“Majority Lenders” means:

 

  (a)

before the Loan is made, Lenders whose Commitments total 66 2/3 per cent. of the Total Commitments; and

 

  (b)

after the Loan is made, Lenders whose Contributions total 66 2/3 per cent. of the Loan;

“Mandated Lead Arranger” means Hamburg Commercial Bank AG, acting in such capacity through its office at Gerhart-Hauptmann-Platz 50, D-20095 Hamburg, Germany, or any successor;

“Mandatory Cost” means the percentage rate per annum calculated by the Agent in accordance with Schedule 4;

 

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“Margin” means:

 

  (a)

3.90 per cent. per annum; or

 

  (b)

in the event that the Indenture has a Standard & Poor’s rating of at least BB+ or a comparable rating by any other rating agency acceptable to the Agent (acting on the instructions of the Majority Lenders), 3.25 per cent. per annum.

“Market Value” means the market value of the Ship determined in accordance with Clause 15.3;

Material Adverse Change” means any event or series of events which, in the opinion of the Majority Lenders, is likely to have a Material Adverse Effect;

“Material Adverse Effect” means, in the reasonable opinion of the Majority Lenders, a material adverse effect on:

 

  (a)

the business, property, assets, liabilities, operations or condition (financial or otherwise) of the Borrower and/or any Security Party taken as a whole;

 

  (b)

the ability of the Borrower, the Approved Manager and/or any Security Party to (i) comply with or perform any of its obligations or (ii) discharge any of its liabilities, under any Finance Document as they fall due; or

 

  (c)

the validity, legality or enforceability of any Finance Document;

Maximum Loan Amount” means an amount up to the lesser of (i) $31,800,000 and (ii) 60 per cent. of the Initial Market Value of the Ship;

“Minimum Liquidity” has the meaning given in Schedule 8;

“Minimum Liquidity Account” means an account in the name of the Borrower with the Account Bank designated “Lefkada Shipping Corporation – Minimum Liquidity Account”, or any other account (with that or another office of the Account Bank) which replaces such account and is designated by the Agent as the Minimum Liquidity Account for the purposes of this Agreement;

Mortgage” means the first preferred or, as the case may be, priority ship mortgage on the Ship in the Agreed Form;

Negotiation Period” has the meaning given in Clause 5.10;

Notifying Lender” has the meaning given in Clause 21.2, Clause 23.1 or Clause 24.1 as the context requires;

Participating Member State” means any member state of the European Union that has the Euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union;

Party” means a party to a Finance Document;

Payment Currency” has the meaning given in Clause 21.6;

Permitted Security Interests” means:

 

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  (a)

Security Interests created by the Finance Documents;

 

  (b)

liens for unpaid master’s and crew’s wages in accordance with usual maritime practice;

 

  (c)

liens for salvage;

 

  (d)

liens arising by operation of law for not more than one month’s prepaid hire under any charter in relation to the Ship not prohibited by this Agreement;

 

  (e)

liens for master’s disbursements incurred in the ordinary course of trading and any other lien arising by operation of law or otherwise in the ordinary course of the operation, repair or maintenance of the Ship, provided such liens do not secure amounts more than 30 days overdue (unless the overdue amount is being contested by the Borrower in good faith by appropriate steps) and subject, in the case of liens for repair or maintenance, to in paragraph (d) of Clause 14.14;

 

  (f)

any Security Interest created in favour of a plaintiff or defendant in any proceedings or arbitration as security for costs and expenses while the Borrower is actively prosecuting or defending such proceedings or arbitration in good faith; and

 

  (g)

Security Interests arising by operation of law in respect of taxes which are not overdue for payment or in respect of taxes being contested in good faith by appropriate steps and in respect of which appropriate reserves have been made.

Pertinent Document” means:

 

  (a)

any Finance Document;

 

  (b)

any policy or contract of insurance contemplated by or referred to in Clause 13 or any other provision of this Agreement or another Finance Document;

 

  (c)

any other document contemplated by or referred to in any Finance Document; and

 

  (d)

any document which has been or is at any time sent by or to a Servicing Bank in contemplation of or in connection with any Finance Document or any policy, contract or document falling within paragraphs (b) or (c);

Pertinent Jurisdiction” in relation to a company, means:

 

  (a)

England and Wales;

 

  (b)

the country under the laws of which the company is incorporated or formed;

 

  (c)

a country in which the company has the centre of its main interests or which the company’s central management and control is or has recently been exercised;

 

  (d)

a country in which the overall net income of the company is subject to corporation tax, income tax or any similar tax;

 

  (e)

a country in which assets of the company (other than securities issued by, or loans to, related companies) having a substantial value are situated, in which the company maintains a branch or permanent place of business, or in which a Security Interest created by the company must or should be registered in order to ensure its validity or priority; and

 

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  (f)

a country the courts of which have jurisdiction to make a winding up, administration or similar order in relation to the company, whether as a main or territorial or ancillary proceedings, or which would have such jurisdiction if their assistance were requested by the courts of a country referred to in paragraphs (b) or (c);

Potential Event of Default” means an event or circumstance which, with the giving of any notice, the lapse of time, a reasonable determination of the Majority Lenders and/or the satisfaction of any other condition, would constitute an Event of Default;

“Prepayment Date” has the meaning given in Clause 15.2;

Prepayment Notice” has the meaning given in paragraph (b) of Clause 8.5;

Quotation Date” means, in relation to any Interest Period (or any other period for which an interest rate is to be determined under any provision of a Finance Document), the day on which quotations would ordinarily be given by leading banks in the Relevant Interbank Market for deposits in the currency in relation to which such rate is to be determined for delivery on the first day of that Interest Period or other period;

“Reference Banks” means, subject to Clause 26.19, together, the Hamburg branch of Hamburg Commercial Bank AG, the head office of any other bank which is a Lender at the relevant time (unless such Lender has advised the Agent in writing that it does not wish to be a Reference Bank) and any of their respective successors;

“Relevant Interbank Market” means the London interbank market;

Relevant Nominating Body” means any applicable central bank, regulator or other supervisory authority or a group of them, or any working group or committee sponsored or chaired by, or constituted at the request of, any of them or the Financial Stability Board;

Relevant Person” has the meaning given in Clause 19.9;

Replacement Benchmark” means a benchmark rate which is:

 

  (a)

formally designated, nominated or recommended as the replacement for a Screen Rate by:

 

  (i)

the administrator of that Screen Rate (provided that the market or economic reality that such benchmark rate measures is the same as that measured by that Screen Rate); or

 

  (ii)

any Relevant Nominating Body,

and if replacements have, at the relevant time, been formally designated, nominated or recommended under both paragraphs, the “Replacement Benchmark” will be the replacement under paragraph (ii) above;

 

  (b)

in the opinion of the Majority Lenders and the Borrower, generally accepted in the international or any relevant domestic syndicated loan markets as the appropriate successor to that Screen Rate; or

 

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  (c)

in the opinion of the Majority Lenders and the Borrower, an appropriate successor to a Screen Rate;

Repayment Date” means a date on which a repayment is required to be made under Clause 8;

Requisition Compensation” includes all compensation or other moneys payable by reason of any act or event such as is referred to in paragraph (b) of the definition of “Total Loss”;

Retention Account” means an account in the name of the Borrower with the Account Bank designated “Lefkada Shipping Corporation—Retention Account”, or any other account (with that or another office of the Account Bank) which replaces this account and is designated by the Agent as the Retention Account for the purposes of this Agreement;

Screen Rate” means the London interbank offered rate administered by the ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for Dollars for the relevant period displayed on pages LIBOR01 or LIBOR02 of the Reuters screen (or any replacement Reuters page which displays that rate) or on the appropriate page of such other information service which publishes that rate from time to time in place of Reuters. If such page or service ceases to be available, the Agent may specify another page or service displaying the relevant rate after consultation with the Borrower;

Screen Rate Replacement Event” means, in relation to a Screen Rate:

 

  (a)

the methodology, formula or other means of determining that Screen Rate has, in the opinion of the Majority Lenders and the Borrower, materially changed;

 

  (b)

 

  (i)

 

  (A)

the administrator of that Screen Rate or its supervisor publicly announces that such administrator is insolvent; or

 

  (B)

information is published in any order, decree, notice, petition or filing, however described, of or filed with a court, tribunal, exchange, regulatory authority or similar administrative, regulatory or judicial body which reasonably confirms that the administrator of that Screen Rate is insolvent,

provided that, in each case, at that time, there is no successor administrator to continue to provide that Screen Rate;

 

  (ii)

the administrator of that Screen Rate publicly announces that it has ceased or will cease, to provide that Screen Rate permanently or indefinitely and, at that time, there is no successor administrator to continue to provide that Screen Rate;

 

  (iii)

the supervisor of the administrator of that Screen Rate publicly announces that such Screen Rate has been or will be permanently or indefinitely discontinued; or

 

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  (iv)

the administrator of that Screen Rate or its supervisor announces that that Screen Rate may no longer be used; or

 

  (v)

in the opinion of the Majority Lenders and the Borrower, that Screen Rate is otherwise no longer appropriate for the purposes of calculating interest under this Agreement;

Second Deed of Covenant” means the second priority deed of covenant collateral to the Second Mortgage;

Second Mortgage” means the second preferred, or as the case may be, priority ship mortgage on the Ship in the Agreed Form;

Secured Liabilities” means all liabilities which the Borrower, the Security Parties or any of them have, at the date of this Agreement or at any later time or times, under or in connection with any Finance Document or any judgment relating to any Finance Document; and for this purpose, there shall be disregarded any total or partial discharge of these liabilities, or variation of their terms, which is effected by, or in connection with, any bankruptcy, liquidation, arrangement or other procedure under the insolvency laws of any country;

“Security Cover Ratio” means, at any relevant time, the aggregate of (i) the Market Value of the Ship, (ii) the net realisable value of any additional security provided at that time under Clause 15 and (iii) any balance on the Minimum Liquidity Account pertaining to the Additional Minimum Liquidity, at that time expressed as a percentage of the Loan;

Security Interest” means:

 

  (a)

a mortgage, charge (whether fixed or floating) or pledge, any maritime or other lien or any other security interest of any kind; and

 

  (b)

the rights of a plaintiff under an action in rem;

Security Party” means the Corporate Guarantor, the Shareholder and any other person (except a Creditor Party or the Approved Manager) who, as a surety or mortgagor, as a party to any subordination or priorities arrangement, or in any similar capacity, executes a document falling within the final paragraph of the definition of “Finance Documents”;

Security Period” means the period commencing on the date of this Agreement and ending on the date on which the Agent notifies the Borrower, the Security Parties and the other Creditor Parties that:

 

  (a)

all amounts which have become due for payment by the Borrower, the Approved Manager or any Security Party under the Finance Documents have been paid;

 

  (b)

no amount is owing or has accrued (without yet having become due for payment) under any Finance Document;

 

  (c)

neither the Borrower, the Approved Manager nor any Security Party has any future or contingent liability under Clauses 20, 21 or 22 or any other provision of this Agreement or another Finance Document; and

 

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  (d)

the Agent, the Mandated Lead Arranger, the Security Trustee and the Majority Lenders do not consider that there is a significant risk that any payment or transaction under a Finance Document would be set aside, or would have to be reversed or adjusted, in any present or possible future bankruptcy of the Borrower, the Approved Manager or a Security Party or in any present or possible future proceeding relating to a Finance Document or any asset covered (or previously covered) by a Security Interest created by a Finance Document;

Security Trustee” means Hamburg Commercial Bank AG, acting in such capacity through its office at Gerhart-Hauptmann-Platz 50, D-20095, Hamburg, Germany, or any successor of it appointed under clause 5 of the Agency and Trust Agreement;

Servicing Bank” means the Agent or the Security Trustee;

Shareholder” means Aegean Sea Maritime Holdings Inc., a corporation incorporated and existing under the laws of the Republic of the Marshall Islands whose registered address is at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, the Marshall Islands MH96960;

Shares Security Deed” means, in respect of all the issued shares in the Borrower, a pledge of such shares executed or to be executed by the Shareholder in favour of the Security Trustee in the Agreed Form;

Ship” shall have the meaning given to this term in Schedule 8;

Specified Time” means 11.00 a.m. London time;

Total Loss” means:

 

  (a)

actual, constructive, compromised, agreed or arranged total loss of the Ship;

 

  (b)

any expropriation, confiscation, requisition or acquisition of the Ship, whether for full or part consideration, a consideration less than its proper value, a nominal consideration or without any consideration, which is effected by any government or official authority or by any person or persons claiming to be or to represent a government or official authority unless it is within one month from the date of such occurrence redelivered to the full control of the Borrower excluding a requisition for hire for a fixed period not exceeding 90 days without any right to an extension;

 

  (c)

any condemnation of the Ship by any tribunal or by any person or person claiming to be a tribunal; and

 

  (d)

any arrest, capture, seizure, confiscation or detention of the Ship (including any hijacking or theft) unless it is within the Relevant Period redelivered to the full control of the Borrower;

Relevant Period” means:

 

  (i)

in the case of any arrest, capture, seizure, confiscation or detention of the Ship (including any hijacking or theft), other than piracy, within 90 days; and

 

  (ii)

in the case of piracy, if the relevant underwriters confirm to the Agent in writing prior to the end of the 90-day period referred to in (i) above that the Ship is subject to an approved piracy insurance cover, the earlier of 270 days after the date on which the Ship is captured by pirates and the date on which the piracy insurance cover expires;

 

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Total Loss Date” means:

 

  (a)

in the case of an actual loss of the Ship, the date on which it occurred or, if that is unknown, the date when the Ship was last heard of;

 

  (b)

in the case of a constructive, compromised, agreed or arranged total loss of the Ship, the earlier of:

 

  (i)

30 days after the date on which a notice of abandonment is given to the insurers; and

 

  (ii)

the date of any compromise, arrangement or agreement made by or on behalf of the Borrower with the Ship’s insurers in which the insurers agree to treat the Ship as a total loss; and

 

  (c)

in the case of any other type of total loss, on the date (or the most likely date) on which it appears to the Agent that the event constituting the total loss occurred;

Transfer Certificate” has the meaning given in Clause 26.2;

Trust Property” has the meaning given in clause 3.1 of the Agency and Trust Agreement;

“Underlying Documents” means any Assignable Charters and, in the singular, means any of them;

US” means the United States of America;

US GAAP” means generally accepted accounting principles as from time to time in effect in the US; and

US Tax Obligor” means:

 

  (a)

the Borrower which is resident for tax purposes in the US; or

 

  (b)

the Borrower or a Security Party some or all whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.

 

1.2

Construction of certain terms

In this Agreement:

administration notice” means a notice appointing an administrator, a notice of intended appointment and any other notice which is required by law (generally or in the case concerned) to be filed with the court or given to a person prior to, or in connection with, the appointment of an administrator;

approved” means, for the purposes of Clause 13, approved in writing by the Agent at its discretion;

 

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asset” includes every kind of property, asset, interest or right, including any present, future or contingent right to any revenues or other payment;

company” includes any partnership, joint venture and unincorporated association;

consent” includes an authorisation, consent, approval, resolution, licence, exemption, filing, registration, notarisation and legalisation;

contingent liability” means a liability which is not certain to arise and/or the amount of which remains unascertained;

document” includes a deed; also a letter or fax;

excess risks” means the proportion of claims for general average, salvage and salvage charges not recoverable under the hull and machinery policies in respect of the Ship in consequence of its insured value being less than the value at which the Ship is assessed for the purpose of such claims;

expense” means any kind of cost, charge or expense (including all legal costs, charges and expenses) and any applicable value added or other tax;

gross negligence” means a form of negligence which is distinct from ordinary negligence, in which the due diligence and care which are generally to be exercised have been disregarded to a particularly high degree, in which the plainest deliberations have not been made and that which should be most obvious to everybody has not been followed;

law” includes any order or decree, any form of delegated legislation, any treaty or international convention and any regulation or resolution of the Council of the European Union, the European Commission, the United Nations or its Security Council;

legal or administrative action” means any legal proceeding or arbitration and any administrative or regulatory action or investigation;

liability” includes every kind of debt or liability (present or future, certain or contingent), whether incurred as principal or surety or otherwise;

months” shall be construed in accordance with Clause 1.3;

obligatory insurances” means all insurances effected, or which the Borrower is obliged to effect in respect of the Ship, under Clause 13 or any other provision of this Agreement or another Finance Document;

parent company” has the meaning given in Clause 1.4;

person” includes any individual, any partnership, any company; any state, political sub-division of a state and local or municipal authority; and any international organisation;

policy” in relation to any insurance, includes a slip, cover note, certificate of entry or other document evidencing the contract of insurance or its terms;

 

20


protection and indemnity risks” means the usual risks covered by a protection and indemnity association managed in London, including pollution risks and the proportion (if any) of any sums payable to any other person or persons in case of collision which are not recoverable under the hull and machinery policies by reason of the incorporation in them of clause 1 of the Institute Time Clauses (Hulls) (1/10/82) or clause 8 of the Institute Time Clauses (Hulls) (1/11/1995) or the Institute Amended Running Down Clause (1/10/71) or any equivalent provision;

“regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency (monetary or otherwise), department, central bank, regulatory, self-regulatory or other authority or organisation;

subsidiary” has the meaning given in Clause 1.4;

successor” includes any person who is entitled (by assignment, novation, merger or otherwise) to any person’s rights under this Agreement or any other Finance Document (or any interest in those rights) or who, as administrator, liquidator or otherwise, is entitled to exercise those rights; and in particular references to a successor include a person to whom those rights (or any interest in those rights) are transferred or pass as a result of a merger, division, reconstruction or other reorganisation of it or any other person;

tax” includes any present or future tax, duty, impost, levy or charge of any kind which is imposed by any state, any political sub-division of a state or any local or municipal authority (including any such imposed in connection with exchange controls), and any connected penalty, interest or fine; and

war risks” includes the risk of mines and all risks excluded by clause 29 of the International Hull Clauses (1/11/02 or 1/11/03), clause 24 of the Institute Time Clauses (Hulls)(1/11/95) or clause 23 of the Institute Time Clauses (Hulls) (1/10/83).

 

1.3

Meaning of “month”

A period of one or more “months” ends on the day in the relevant calendar month numerically corresponding to the day of the calendar month on which the period started (“the numerically corresponding day”), but:

 

(a)

on the Business Day following the numerically corresponding day if the numerically corresponding day is not a Business Day or, if there is no later Business Day in the same calendar month, on the Business Day preceding the numerically corresponding day; or

 

(b)

on the last Business Day in the relevant calendar month, if the period started on the last Business Day in a calendar month or if the last calendar month of the period has no numerically corresponding day,

and “month” and “monthly” shall be construed accordingly.

 

1.4

Meaning of “subsidiary”

A company (S) is a subsidiary of another company (P) if a majority of the issued shares in S (or a majority of the issued shares in S which carry unlimited rights to capital and income distributions) are directly owned by P or are indirectly attributable to P and any company of which S is a subsidiary is a parent company of S.

 

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1.5

General Interpretation

In this Agreement:

 

(a)

references to, or to a provision of, a Finance Document or any other document are references to it as amended or supplemented, whether before the date of this Agreement or otherwise;

 

(b)

references to, or to a provision of, any law include any amendment, extension, re-enactment or replacement, whether made before the date of this Agreement or otherwise;

 

(c)

words denoting the singular number shall include the plural and vice versa; and

 

(d)

Clauses 1.1 to 1.5 apply unless the contrary intention appears.

 

1.6

Headings

In interpreting a Finance Document or any provision of a Finance Document, all clause, sub-clause and other headings in that and any other Finance Document shall be entirely disregarded.

 

2

FACILITY

 

2.1

Amount of facility

Subject to the other provisions of this Agreement, the Lenders shall make available to the Borrower a senior secured term loan facility of up to the lesser of (A) $31,800,000 and (B) 60 per cent. of the Initial Market Value of the Ship, in one advance, for the purpose stated in the preamble to this Agreement (for the avoidance of doubt, on the date of the Amending and Restating Agreement there is no further Commitment available by the Lenders as the Borrower has drawn the available amount).

 

2.2

Lenders’ participations in Loan

Subject to the other provisions of this Agreement, each Lender shall participate in the Loan in the proportion which, as at the Drawdown Date, its Commitment bears to the Total Commitments.

 

2.3

Purpose of Loan

The Borrower undertakes with each Creditor Party to use the Loan only for the purpose stated in the preamble to this Agreement.

 

3

POSITION OF THE LENDERS

 

3.1

Interests several

The rights of the Lenders under this Agreement are several.

 

3.2

Individual right of action

Each Lender shall be entitled to sue for any amount which has become due and payable by the Borrower to it under this Agreement without joining the Agent, the Security Trustee or any other Lender as additional parties in the proceedings.

 

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3.3

Proceedings requiring Majority Lender consent

Except as provided in Clause 3.2, no Lender may commence proceedings against the Borrower, the Approved Manager or any Security Party in connection with a Finance Document without the prior consent of the Majority Lenders.

 

3.4

Obligations several

The obligations of the Lenders under this Agreement are several; and a failure of a Lender to perform its obligations under this Agreement shall not result in:

 

(a)

the obligations of the other Lenders being increased; nor

 

(b)

the Borrower, the Approved Manager, any Security Party or any other Lender being discharged (in whole or in part) from its obligations under any Finance Document;

and in no circumstances shall a Lender have any responsibility for a failure of another Lender to perform its obligations under this Agreement.

 

4

DRAWDOWN

 

4.1

Request for the Loan

Subject to the following conditions, the Borrower may request the Loan to be borrowed by ensuring that the Agent receives the completed Drawdown Notice not later than 11.00 a.m. (Hamburg time) three Business Days prior to the relevant Drawdown Date.

 

4.2

Availability

The conditions referred to in Clause 4.1 are that:

 

(a)

the Drawdown Date has to be a Business Day during the Availability Period;

 

(b)

the Loan shall not exceed the Maximum Loan Amount;

 

(c)

any undrawn portion of the Total Commitments in respect of the Loan, upon the determination of the Initial Market Value of the Ship, shall be automatically cancelled as at the Drawdown Date; and

 

(d)

the amount of the Loan shall not exceed the Total Commitments.

 

4.3

Notification to Lenders of receipt of the Drawdown Notice

The Agent shall promptly notify the Lenders that it has received the Drawdown Notice and shall inform each Lender of:

 

(a)

the amount of the Loan and the Drawdown Date;

 

(b)

the amount of that Lender’s participation in the Loan; and

 

(c)

the duration of the first Interest Period in respect of the Loan.

 

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4.4

Drawdown Notice irrevocable

The Drawdown Notice must be signed by a duly authorised signatory of the Borrower; and once served, the Drawdown Notice cannot be revoked without the prior consent of the Agent, acting on the authority of the Lenders.

 

4.5

Lenders to make available Contributions

Subject to the provisions of this Agreement, each Lender shall, on and with value on the Drawdown Date, make available to the Agent for the account of the Borrower the amount due from that Lender on the Drawdown Date under Clause 2.2.

 

4.6

Disbursement of Loan

Subject to the provisions of this Agreement, the Agent shall on the Drawdown Date pay to the Borrower the amounts which the Agent receives from the Lenders under Clause 4.5 and that payment to the Borrower shall be made:

 

(a)

to the account which the Borrower specifies in the Drawdown Notice; and

 

(b)

in like funds as the Agent received the payments from the Lenders.

The payment by the Agent under this Clause 4.6 shall constitute the making of the Loan and the Borrower shall at that time become indebted, as principal and direct obligor, to each Lender in an amount equal to that Lender’s participation in the Loan.

 

5

INTEREST

 

5.1

Payment of normal interest

Subject to the provisions of this Agreement, interest on the Loan in respect of each Interest Period shall be paid by the Borrower on the last day of that Interest Period.

 

5.2

Normal rate of interest

Subject to the provisions of this Agreement, the rate of interest on the Loan in respect of an Interest Period shall be the aggregate of (i) the applicable Margin, (ii) the Mandatory Cost (if any), (iii) LIBOR for that Interest Period and (iv) if a Lender (the “Applicable Lender”) notifies the Agent at least 5 Business Days before the start of that Interest Period that its Cost of Funding exceeds LIBOR (including the amount of such excess) on the Quotation Date for that Interest Period, additionally in respect of that Applicable Lender’s Contribution in the Loan, the Correction Rate applicable to the Applicable Lender for that Interest Period.

 

5.3

Payment of accrued interest

In the case of an Interest Period of longer than three months (subject to the prior agreement of the Agent in accordance with paragraph (b) of Clause 6.2), accrued interest shall be paid every three months during that Interest Period and on the last day of that Interest Period.

 

5.4

Notification of Interest Periods and rates of normal interest

The Agent shall notify the Borrower and each Lender of:

 

(a)

each rate of interest; and

 

24


(b)

the duration of each Interest Period,

as soon as reasonably practicable after each is determined.

 

5.5

Obligation of Reference Banks to quote

A Reference Bank which is a Lender shall use all reasonable efforts to supply the quotation required of it for the purposes of fixing a rate of interest under this Agreement unless that Reference Bank ceases to be a Lender pursuant to Clause 26.19.

 

5.6

Absence of quotations by Reference Banks

If any Reference Bank fails to supply a quotation, the Agent shall determine the relevant LIBOR on the basis of the quotations supplied by the other Reference Bank(s) but if two or more of the Reference Banks fail (or, if at any time there is only one Reference Bank, that Reference Bank fails) to provide a quotation, the relevant rate of interest shall be set in accordance with the following provisions of this Clause 5.

 

5.7

Market disruption

The following provisions of this Clause 5 apply if:

 

(a)

no rate is quoted on the Screen Rate, it is not possible to calculate an Interpolated Screen Rate for that Interest Period and two or more of the Reference Banks do not (or, if at any time there is only one Reference Bank, that Reference Bank does not), before 1.00 p.m. (London time) on the Quotation Date for an Interest Period, provide a quotation to the Agent in order to fix LIBOR; or

 

(b)

at least three Business Days before the start of an Interest Period, the Agent is notified by a Lender (the “Affected Lender”) that for any reason it is unable to obtain Dollars in the Relevant Interbank Market in order to fund its Contribution (or any part of it) during the Interest Period.

 

5.8

Notification of market disruption

The Agent shall promptly notify the Borrower and each of the Lenders stating the circumstances falling within Clause 5.7 which have caused its notice to be given.

 

5.9

Suspension of drawdown