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: November 29, 2019
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
NAVIOS MARITIME ACQUISITION CORPORATION
FORM 6-K
TABLE OF CONTENTS
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F-1 |
This Report on Form 6-K is hereby incorporated by reference into the Navios Maritime Acquisition Corporation Registration Statements on Form F-3, File No. 333-214739.
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, 2019 and 2018 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 Acquisitions 2018 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 Acquisitions future dividends, expected cash flow generation and Navios Acquisitions 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 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 Acquisitions 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 Acquisitions 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.
Recent Developments
Sale of one 2002-built VLCC
On October 8, 2019, the Company completed the sale of the Nave Electron, a 2002-built VLCC vessel of 305,178 dwt, delivering the vessel to her new owners.
2
Debt
In October 2019, Navios Acquisition fully prepaid its Term Loan B facility, which was scheduled to mature in June 2020. The outstanding balance of the Term Loan B facility as of June 30, 2019 was $196.8 million. Navios Acquisition funded the repayment as follows:
| $153.0 million financing through sale-and-leaseback transactions. The sale and leaseback transactions have (a) an average amortization profile of approximately 17 years on an age-adjusted basis, (b) annual interest of LIBOR plus a margin ranging from 335 bps to 360 bps and (c) an average maturity of 6 years; |
| $31.8 million facility from a commercial bank in order to finance one VLCC. The facility bears an annual interest of LIBOR plus 280 bps, and matures in one year; and |
| $12.0 million from cash on the balance sheet. |
Following the completion of the repayment of the Term Loan B, Navios Acquisition has no debt maturities due until the third quarter of 2020.
In October and November 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.
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 $15.0 million. Total net proceeds of the above transactions, net of agents costs of $0.7 million and estimated offering costs $0.3 million, amounted to $14.0 million.
Liquidation of Navios Europe Inc. (Navios Europe I)
On November 22, 2019, an agreement was reached to liquidate Navios Europe I. As of September 30, 2019, Navios Acquisition had a receivable of $32.3 million from Navios Europe I. This receivable along with debt financing will be used to finance the acquisition. The agreement is subject to definitive documentation which is expected to be completed by the end of 2019.
The five product tankers owned by Navios Europe I that are included in the Acquisition are:
Vessels |
Type | Built | DWT | Charter Rate, net ($) |
Expected Expiration Date |
|||||||||||||
Perseus N |
MR1 Tanker | 2009 | 36,264 | 11,356 | 04/2020 | |||||||||||||
Star N |
MR1 Tanker | 2009 | 37,872 | 11,850 | 01/2020 | |||||||||||||
Hector N |
MR1 Tanker | 2008 | 38,402 | 11,850 | 01/2020 | |||||||||||||
Aurora N |
LR1 Tanker | 2008 | 63,495 | Floating rate | 02/2020 | |||||||||||||
Lumen N |
LR1 Tanker | 2008 | 63,599 | Floating rate | 02/2020 | |||||||||||||
Total: 5 vessels |
239,632 |
Dividend Policy
On November 5, 2019, the Board of Directors declared a quarterly cash dividend in respect of the third quarter of 2019 of $0.30 per share of common stock which will be paid on January 9, 2020, to stockholders of record as of December 17, 2019. 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 Acquisitions 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.
Fleet
As of November 28, 2019, our fleet consisted of a total of 41 double-hulled tanker vessels, aggregating approximately 5.5 million deadweight tons, or dwt. The fleet includes 13 VLCC tankers (over 200,000 dwt per ship) which transport crude oil, including the three bareboat chartered-in VLCC expected to be delivered in the third and fourth quarter of 2020 and third quarter of 2021, eight Long Range 1 (LR1) product tankers (60,000-79,999 dwt per ship), 18 Medium Range 2 (MR2) product tankers (30,000-59,999 dwt per ship), two chemical tankers (25,000 dwt per ship), which transport refined petroleum products and bulk liquid chemicals All our vessels are currently chartered-out to quality counterparties with an average remaining charter period of approximately one year. As of November 28, 2019, we had charters covering 98.3% of available days in 2019 and 53.8% of available days in 2020.
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Vessels |
Type | Year Built |
Dwt | Net Charter Rate (1) |
Profit Sharing Arrangements |
Expiration Date (2) |
||||||||||||||||
Owned Vessels |
||||||||||||||||||||||
Nave Polaris |
Chemical Tanker | 2011 | 25,145 | Floating Rate | (8) | None | February 2020 | |||||||||||||||
Nave Cosmos |
Chemical Tanker | 2010 | 25,130 | Floating Rate | (8) | None | February 2020 | |||||||||||||||
Nave Velocity |
MR2 Product Tanker | 2015 | 49,999 | $ | 16,047 | None | November 2020 | |||||||||||||||
Nave Sextans |
MR2 Product Tanker | 2015 | 49,999 | $ | 14,500 | 50%/50% | February 2020 | |||||||||||||||
Nave Pyxis |
MR2 Product Tanker | 2014 | 49,998 | $ | 14,500 | 50%/50% | March 2020 | |||||||||||||||
Nave Luminosity |
MR2 Product Tanker | 2014 | 49,999 | $ | 17,034 | (15) | None | December 2021 | ||||||||||||||
Nave Jupiter |
MR2 Product Tanker | 2014 | 49,999 | $ | 12,097 | 50%/50% | May 2020 | |||||||||||||||
Bougainville |
MR2 Product Tanker | 2013 | 50,626 | $ | 14,709 | (5) | 100% | September 2020 | ||||||||||||||
Nave Alderamin |
MR2 Product Tanker | 2013 | 49,998 | $ | 15,159 | None | November 2020 | |||||||||||||||
Nave Bellatrix |
MR2 Product Tanker | 2013 | 49,999 | $ | 11,850 | 50%/50% | February 2020 | |||||||||||||||
Nave Capella |
MR2 Product Tanker | 2013 | 49,995 | $ | 11,850 | 50%/50% | January 2020 | |||||||||||||||
Nave Orion |
MR2 Product Tanker | 2013 | 49,999 | $ | 13,379 | (3) | None | December 2019 | ||||||||||||||
Nave Titan |
MR2 Product Tanker | 2013 | 49,999 | $ | 14,813 | None | July 2020 | |||||||||||||||
Nave Aquila |
MR2 Product Tanker | 2012 | 49,991 | $ | 15,899 | (16) | None | November 2020 | ||||||||||||||
Nave Atria |
MR2 Product Tanker | 2012 | 49,992 | $ | 14,813 | None | October 2020 | |||||||||||||||
Nave Orbit |
MR2 Product Tanker | 2009 | 50,470 | $ | 14,000 | None | May 2020 | |||||||||||||||
Nave Equator |
MR2 Product Tanker | 2009 | 50,542 | $ | 12,250 | None | January 2020 | |||||||||||||||
$ | 16,250 | None | January 2022 | |||||||||||||||||||
Nave Equinox |
MR2 Product Tanker | 2007 | 50,922 | $ | 14,319 | ice-transit premium (4) | March 2020 | |||||||||||||||
Nave Pulsar |
MR2 Product Tanker | 2007 | 50,922 | $ | 14,566 | (6) | ice-transit premium (4) | May 2020 | ||||||||||||||
Nave Dorado |
MR2 Product Tanker | 2005 | 47,999 | $ | 13,331 | 50%/50% | December 2020 | |||||||||||||||
Nave Atropos |
LR1 Product Tanker | 2013 | 74,695 | Floating Rate | (13) | None | February 2020 | |||||||||||||||
Nave Rigel |
LR1 Product Tanker | 2013 | 74,673 | Floating Rate | None | December 2019 | ||||||||||||||||
$ | 16,088 | (9) | None | December 2021 | ||||||||||||||||||
Nave Cassiopeia |
LR1 Product Tanker | 2012 | 74,711 | Floating Rate | (13) | None | February 2020 | |||||||||||||||
Nave Cetus |
LR1 Product Tanker | 2012 | 74,581 | Floating Rate | None | December 2019 | ||||||||||||||||
$ | 16,088 | (9) | None | December 2021 | ||||||||||||||||||
Nave Estella |
LR1 Product Tanker | 2012 | 75,000 | $ | 15,183 | None | December 2019 | |||||||||||||||
$ | 17,036 | None | December 2020 | |||||||||||||||||||
Nave Andromeda |
LR1 Product Tanker | 2011 | 75,000 | Floating Rate | (13) | None | February 2020 | |||||||||||||||
Nave Ariadne |
LR1 Product Tanker | 2007 | 74,671 | Floating Rate | None | February 2020 | ||||||||||||||||
Nave Cielo |
LR1 Product Tanker | 2007 | 74,671 | Floating Rate | (13) | None | February 2020 | |||||||||||||||
Nave Buena Suerte |
VLCC | 2011 | 297,491 | $ | 20,475 | 50% above $20,475(11) | August 2020 | |||||||||||||||
$ | 48,153 | 50%/50% | June 2025 | |||||||||||||||||||
Nave Quasar |
VLCC | 2010 | 297,376 | $ | 20,475 | 50% above $20,475(11) | September 2020 | |||||||||||||||
Nave Synergy |
VLCC | 2010 | 299,973 | 48,153 | 50%/50% | August 2020 | ||||||||||||||||
Nave Spherical |
VLCC | 2009 | 297,188 | Floating Rate | (7) | None | December 2019 | |||||||||||||||
Floating Rate | (7),(17) | None | December 2022 | |||||||||||||||||||
Nave Neutrino |
VLCC | 2003 | 298,287 | $ | 19,158 | (12) | 50%/50% | November 2019 | ||||||||||||||
$ | 19,158 | (12) | 50%/50% | November 2020 | ||||||||||||||||||
Nave Photon |
VLCC | 2008 | 297,395 | Floating Rate | (7) | None | December 2019 | |||||||||||||||
$ | 48,153 | 50%/50% | July 2021 | |||||||||||||||||||
Nave Constellation |
VLCC | 2010 | 298,000 | Spot(14) | ||||||||||||||||||
Nave Universe |
VLCC | 2011 | 297,066 | Spot(14) | ||||||||||||||||||
Nave Celeste |
VLCC | 2003 | 298,717 | Spot | ||||||||||||||||||
Nave Galactic |
VLCC | 2009 | 297,168 | $ | 20,475 | 50% above $20,475(11) | October 2020 | |||||||||||||||
Vessels to be delivered |
||||||||||||||||||||||
TBN* |
VLCC | Q3 2020 | 310,000 | $ | 27,816 | (10) | None | Q3 2030 | ||||||||||||||
TBN* |
VLCC | Q4 2020 | 310,000 | $ | 27,816 | (10) | None | Q4 2030 | ||||||||||||||
TBN* |
VLCC | Q3 2021 | 310,000 | $ | 48,153 | 50%/50% | Q3 2026 |
(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 owners extension options not declared yet. |
(3) | Charterers option to extend the charter for one year at $15,159 net per day. |
(4) | The premium for the Nave Equinox and the Nave Pulsar when vessels are trading on ice or follow ice breaker is $1,900 per day. |
(5) | Rate can increase up to $20,288 net per day with a base rate of $15,086 net per day. |
4
(6) | Charterers option to extend the charter for one year at $16,590 net per day plus ice-transit premium. |
(7) | Rate based on VLCC pool earnings, evergreen upon notice. |
(8) | Rate based on chemical tankers pool earnings. |
(9) | Charterer has the option to either charter the vessel for a period of two years plus one optional year at a rate of $17,063 net per day or charter the vessel for three years at a rate of $16,088 net per day. |
(10) | Charterers option to extend the bareboat charter for five years at $29,751 net per day. |
(11) | 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. Charterers option to extend the charter for one year at $20,475 net per day. |
(12) | Contract provides 100% of BITR TD3C-TCE index plus $2,000 up to $38,513 and 50% thereafter with $19,158 floor. |
(13) | Rate based on LR1 pool earnings. |
(14) | On September 25, 2019, the U.S. Department of Treasurys 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. Both charter contracts have since been terminated and the two vessels are now employed in the open market. |
(15) | Charterers option to extend the charter for one year at $18,022 net per day. |
(16) | Charterers option to extend the charter for one year at $16,886 net per day. |
(17) | Contract provides 100% of BITR TD3C-TCE index plus $5,000 for a period of three years plus one optional year with 100% of BITR TD3C-TCE index plus $1,500. |
* | Bareboat chartered-in vessels with purchase option, expected to be delivered in the second half of 2020 and in the third quarter of 2021. |
Charter Policy and Industry Outlook
Our core fleet currently consists of 41 vessels, of which 13 are VLCCs (including three bareboat chartered-in VLCCs expected to be delivered one in each of the third and fourth quarter of 2020 and in the third quarter of 2021, respecively), 26 are product tankers, two are chemical tankers. All of our vessels are chartered-out to quality counterparties with an average remaining contract period of approximately one year. Many of our contracts have profit sharing arrangements (see fleet table above). While all of our vessels are currently chartered-out, we intend to deploy any vessels that would become opennot chartered-outto 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 Managers with participants in the maritime transportation industry, position us to identify and take advantage of attractive acquisition opportunities.
Factors Affecting Navios Acquisitions 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 Managers 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 Managers 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. |
5
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; and |
| the level of any dividend to our stockholders. |
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.
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 Companys 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 vessels 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 November 28, 2019, the average age of Navios Acquisitions owned fleet is 8.1 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, 2019 and 2018 that the Company believes may be useful in better understanding the Companys financial position and results of operations.
Three month period ended September 30, |
Nine month period ended September 30, |
|||||||||||||||
2019 (unaudited) |
2018 (unaudited) |
2019 (unaudited) |
2018 (unaudited) |
|||||||||||||
FLEET DATA |
||||||||||||||||
Available days(1) |
3,491 | 3,178 | 10,678 | 9,439 | ||||||||||||
Operating days(2) |
3,472 | 3,153 | 10,642 | 9,386 | ||||||||||||
Fleet utilization(3) |
99.4 | % | 99.2 | % | 99.7 | % | 99.4 | % | ||||||||
Vessels operating at period end |
39 | 35 | 39 | 35 | ||||||||||||
AVERAGE DAILY RESULTS |
||||||||||||||||
Time charter equivalent rate per day(4) |
$ | 15,349 | $ | 12,394 | $ | 16,888 | $ | 13,287 |
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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 Acquisitions 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. The shipping industry uses operating days to measure the aggregate number of days in a relevant period during which vessels actually generate revenues. |
(3) | Fleet utilization: Fleet utilization is the percentage of time that Navios Acquisitions vessels were available for generating revenue, and is determined by dividing the number of operating days during a relevant period by the number of available days during that period. The shipping industry uses fleet utilization to measure a companys efficiency in finding suitable employment for its vessels and minimizing the amount of days that its vessels are off hire for reasons other than scheduled repairs, dry dockings or special surveys. |
(4) | 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, 2019 compared to the Three Month Period ended September 30, 2018
The following table presents consolidated revenue and expense information for the three month periods ended September 30, 2019 and 2018. 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 |
Three Month period Ended September 30, 2019 (unaudited) |
Three Month period Ended September 30, 2018 (unaudited) |
||||||
Revenue |
$ | 58,965 | 41,589 | |||||
Time charter and voyage expenses |
(5,377 | ) | (9,560 | ) | ||||
Direct vessel expenses |
(2,439 | ) | (2,011 | ) | ||||
Management fees (entirely through related party transactions) |
(26,837 | ) | (23,340 | ) | ||||
General and administrative expenses |
(3,732 | ) | (3,157 | ) | ||||
Depreciation and amortization |
(17,216 | ) | (13,777 | ) | ||||
Loss on sale of vessels/ Impairment loss |
(39,976 | ) | | |||||
Interest income |
2,384 | 2,061 | ||||||
Interest expense and finance cost |
(22,849 | ) | (19,308 | ) | ||||
Equity in net earnings of affiliated companies |
936 | 4,522 | ||||||
Other income |
10 | 2 | ||||||
Other expense |
(265 | ) | (429 | ) | ||||
|
|
|
|
|||||
Net loss |
$ | (56,396 | ) | (23,408 | ) | |||
|
|
|
|
Revenue: Revenue for the three month period ended September 30, 2019 increased by $17.4 million, or 41.8%, to $59.0 million, as compared to $41.6 million for the same period of 2018. The increase was mainly attributable to an: (i) increase in revenue by $12.8 million due to the acquisition and resulting consolidation of Navios Maritime Midstream Partners LP (Navios Midtsream); and (ii) increase in market rates during the three month period ended September 30, 2019 as compared to the same period of 2018. Available days of the fleet increased to 3,491 days for the three month period ended September 30, 2019, as compared to 3,178 days for the three month period ended September 30, 2018, mainly as a result of the merger with Navios Midstream (the Merger) effective as of December 13, 2018. The time charter equivalent rate, or TCE Rate, increased to $15,349 for the three month period ended September 30, 2019, from $12,394 for the three month period ended September 30, 2018.
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Time charter and voyage expenses: Time charter and voyage expenses for the three month period ended September 30, 2019 decreased by $4.2 million, or 43.8%, to $5.4 million, as compared to $9.6 million for the same period of 2018. The decrease was mainly attributable to $7.4 million of backstop commitment to Navios Midstream incurred in the three month period ended September 30, 2018; partially mitigated by a: (i) $3.0 million increase in bunkers consumption and voyage expenses due to spot voyages incurred in the three month period ended September 30, 2019; and (ii) $0.2 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 were $2.4 million for the three month period ended September 30, 2019, as compared to $2.0 million for the three month period ended September 30, 2018.
Management fees: Management fees for the three month period ended September 30, 2019 increased by $3.5 million to $26.8 million as compared to $23.3 million for the three month period ended September 30, 2018. The increase was mainly due to the acquisition of Navios Midstream on December 13, 2018. Please see Related Party Transactions for discussion on the management fees.
General and administrative expenses: Total general and administrative expenses for the three month period ended September 30, 2019 increased by $0.5 million to $3.7 million compared to $3.2 million for the three month period ended September 30, 2018, mainly due to the increase in other general and administrative expenses as a result of the Merger. For the three month periods ended September 30, 2019 and 2018, the expenses charged by the Manager for administrative services were $2.8 million and $2.2 million, respectively.
Depreciation and amortization: Depreciation increased by $3.4 million to $17.2 million for the three month period ended September 30, 2019 as compared to $13.8 million for the three month period ended September 30, 2018. The increase was primarily due to the Merger with Navios Midstream on December 13, 2018. 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.
Interest income: Interest income for the three month period ended September 30, 2019 increased by $0.3 million to $2.4 million compared to $2.1 million for the three month period ended September 30, 2018. The increase was mainly attributable to the increase of $0.3 million due to the interest income accrued under the revolving loan granted to Navios Europe I and Navios Europe (II) Inc. (Navios Europe II).
Interest expense and finance cost: Interest expense and finance cost for the three month period ended September 30, 2019 increased by $3.5 million to $22.8 million, as compared to $19.3 million for the three month period ended September 30, 2018. The increase was mainly due to the increase of the average outstanding balance of our credit facilities (mainly the Term Loan B of Navios Midstream) and financing arrangements (other than the 2021 Notes) to $537.1 million for the three month period ended September 30, 2019 as compared to $361.0 million for the three month period ended September 30, 2018. In addition, the weighted average interest rate for the three month period ended September 30, 2019, increased to 7.05% compared to 6.98%, in the same period in 2018. As of September 30, 2019 and 2018, the outstanding balance under Navios Acquisitions total borrowings was $1,237.7 million and $1,027.8 million, respectively.
Loss on sale of vessels/ Impairment loss: The loss on sale of vessel/ impairment loss for the three month period ended September 30, 2019 amounted to $40.0 million as compared to $0 for the same period in 2018, 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.
Equity in net earnings of affiliated companies: Equity in net earnings of affiliated companies decreased by $3.6 million to $0.9 million for the three month period ended September 30, 2019, as compared to $4.5 million equity for the same period in 2018. In the three month period ended September 30, 2018, Navios Acquisition recognized earnings from its investment in Navios Midstream of $3.7 million.
Other expense: Other expense for the three month period ended September 30, 2019 was $0.3 million, as compared to $0.4 million for the same period of 2018.
For the Nine Month Period ended September 30, 2019 compared to the Nine Month Period ended September 30, 2018
The following table presents consolidated revenue and expense information for the nine month periods ended September 30, 2019 and 2018. 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 |
Nine Month period Ended September 30, 2019 (unaudited) |
Nine Month period Ended September 30, 2018 (unaudited) |
||||||
Revenue |
$ | 194,669 | 129,218 | |||||
Time charter and voyage expenses |
(14,340 | ) | (21,749 | ) | ||||
Direct vessel expenses |
(7,117 | ) | (5,251 | ) | ||||
Management fees (entirely through related party transactions) |
(81,224 | ) | (69,652 | ) | ||||
General and administrative expenses |
(15,677 | ) | (11,212 | ) | ||||
Depreciation and amortization |
(52,257 | ) | (41,763 | ) | ||||
(Loss)/ gain on sale of vessels/ Impairment loss |
(36,731 | ) | 25 | |||||
Interest income |
6,840 | 5,875 | ||||||
Interest expense and finance cost |
(69,474 | ) | (57,917 | ) | ||||
Equity in net earnings of affiliated companies |
2,670 | 4,463 | ||||||
Other income |
1,343 | 13 | ||||||
Other expense |
(787 | ) | (1,992 | ) | ||||
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Net loss |
$ | (72,085 | ) | (69,942 | ) | |||
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Revenue: Revenue for the nine month period ended September 30, 2019 increased by $65.5 million, or 50.7%, to $194.7 million, as compared to $129.2 million for the same period of 2018. The increase was mainly attributable to an: (i) increase in revenue by $46.0 million due to the acquisition and resulting consolidation of Navios Midstream; and (ii) increase in market rates during the nine month period ended September 30, 2019 as compared to the same period of 2018. Available days of the fleet increased from 9,439 days for the nine month period ended September 30, 2018, to 10,678 days for the nine month period ended September 30, 2019. The TCE Rate increased from $13,287 for the nine month period ended September 30, 2018, to $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, 2019 decreased by $7.4 million to $14.3 million as compared to $21.7 million for the nine month period ended September 30, 2018. The decrease was attributable to $17.9 million of backstop commitment to Navios Midstream incurred in the nine month period ended September 30, 2018, for which no similar expense has been recorded during the respective 2019 period subsequent to the Merger with Navios Midstream; partially mitigated by a (ii) $9.2 million increase in bunkers consumption and voyage expenses due to spot voyages incurred in the nine month period ended September 30, 2019; and (ii) a $1.3 million increase in broker commission costs.
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 $7.1 million for the nine month period ended September 30, 2019, as compared to $5.3 million for the nine month period ended September 30, 2018.
Management fees: Management fees for the nine month period ended September 30, 2019 increased by approximately $11.6 million to $81.2 million, as compared to $69.7 million for the nine month period ended September 30, 2018. The increase was mainly due to the acquisition of Navios Midstream on December 13, 2018. Please see Related Party Transactions for discussion on the management fees.
General and administrative expenses: Total general and administrative expenses for the nine month period ended September 30, 2019 increased by $4.5 million to $15.7 million compared to $11.2 million for the nine month period ended September 30, 2018, mainly due to the increase in legal and professional fees as a result of the Merger, other general and administrative expenses and compensation to the directors and officers of the Company. For the nine month periods ended September 30, 2019 and 2018, the expenses charged by the Manager for administrative services were $8.3 million and $6.6 million, respectively.
Depreciation and amortization: Depreciation increased by $10.5 million to $52.3 million for the nine month period ended September 30, 2019 as compared to $41.8 million for the nine month period ended September 30, 2018. The increase was primarily due to the Merger with Navios Midstream on December 13, 2018. 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.
(Loss)/ gain on sale of vessels/ Impairment loss: The loss on sale of vessel/ impairment loss for the nine month period ended September 30, 2019 amounted to $36.7 million as compared to $0.03 million gain on sale of vessel for the same period in 2018. The increase in loss on sale of vessels was mainly due to: (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.
Interest income: Interest income for the nine month period ended September 30, 2019 increased by $0.9 million to $6.8 million, as compared to $5.9 million for the nine month period ended September 30, 2018. The increase was mainly attributable to the increase by $1.2 million of the interest income accrued under the revolving loan granted to Navios Europe I and Navios Europe II.
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Interest expense and finance cost: Interest expense and finance cost amounted to $69.5 million for the nine month period ended September 30, 2019 as compared to $57.9 million for the same period in 2018. The increase was mainly due to the increase of the weighted average outstanding balance of our credit facilities and financing arrangements (other than the 2021 Notes) to $541.3 million for the nine month period ended September 30, 2019 as compared to $376.7 million for the nine month period ended September 30, 2018. The weighted average interest rate for the nine month period ended September 30, 2019 increased to 7.17% from 6.91%, during the nine month period ended September 30, 2018. As of September 30, 2019 and 2018, the outstanding balance under Navios Acquisitions credit facilities and financing arrangements was $1,237.7 million and $1,027.8 million, respectively.
Equity in net earnings of affiliated companies: Equity in net earnings of affiliated companies decreased by $1.8 million to $2.7 million equity for the nine month period ended September 30, 2019, as compared to $4.5 million equity for the nine month period ended September 30, 2018. In the nine month period ended September 30, 2018, Navios Acquisition recognized earnings from its investment in Navios Midstream of $2.2 million.
Other income: Other income for the nine month period ended September 30, 2019 was $1.3 million as compared to $0 for the same period in 2018.
Other expense: Other expense for the nine month period ended September 30, 2019 was $0.8 million as compared to $2.0 million for the same period in 2018.
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, 2019, Navios Acquisitions current assets totaled $163.2 million, while current liabilities totaled $174.4 million, resulting in a negative working capital position of $11.2 million, related to balloon payment due under our credit facilities. Navios Acquisitions cash forecast indicates that it will generate sufficient cash for at least the next 12 months following November 28, 2019 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 Acquisitions 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 Acquisitions common stock, for two years. Stock repurchases will be 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 will be determined by management based upon market conditions and other factors. Repurchases may be made pursuant to a program adopted under Rule 10b5-1 under the Exchange Act. The program does not require any minimum repurchase or any specific number or amount of shares of common stock and may be suspended or reinstated at any time in Navios Acquisitions discretion and without notice. The Board of Directors will review the program periodically. Repurchases are subject to restrictions under Navios Acquisitions credit facilities and indenture. As of November 28, 2019, under the $25.0 million stock repurchase program, Navios Acquisition had repurchased 735,251 shares since the program was initiated for approximately $7.5 million.
In October and November 2019 Navios Acquisition repurchased a total of $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.
On November 29, 2019, Navios Acquisition entered into a Continuous Offering Program Sales Agreement (the Sales Agreement) with S. Goldman Advisors LLC, as sales agent (the Agent), pursuant to which Navios Acquisition may issue and sell from time to time through the Agent shares of common stock having an aggregate offering price of up to $25.0 million. Sales of the units are to be made pursuant to the Companys shelf registration statement filed on Form F-3 (File No. 333-214739) with the U.S. Securities and
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Exchange Commission and declared effective on December 7, 2016. The Sales Agreement contains, among other things, customary representations, warranties and covenants by Navios Acquisition and indemnification obligations of Navios Acquisition and the Agent as well as certain termination rights for both Navios Acquisition and the Agent. The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement, a copy of which was filed as an exhibit to a Report on Form 6-K on November 29, 2019, and is incorporated by reference herein.
Cash Flow
Cash flows for the nine month period ended September 30, 2019 compared to the nine month period ended September 30, 2018:
The following table presents cash flow information for the nine month periods ended September 30, 2019 and 2018.
Nine Month Period Ended September 30, 2019 (unaudited) |
Nine Month Period Ended September 30, 2018 (unaudited) |
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Expressed in thousands of U.S. dollars |
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Net cash provided by/ (used in) operating activities |
$ | 21,058 | $ | (23,855 | ) | |||
Net cash provided by investing activities |
31,343 | 52,977 | ||||||
Net cash provided by/ (used in) financing activities |
3,862 | (67,267 | ) | |||||
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Net increase/ (decrease) in cash, cash equivalents and restricted cash |
$ | 56,263 | $ | (38,145 | ) | |||
Cash, cash equivalents and restricted cash, beginning of period |
46,609 | 86,458 | ||||||
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Cash, cash equivalents and restricted cash, end of period |
$ | 102,872 | $ | 48,313 |
Cash provided by/ (used in) operating activities for the nine month period ended September 30, 2019 as compared to the nine month period ended September 30, 2018:
Net cash provided by/ (used in) operating activities increased by $45.0 million to $21.1 million inflow for the period ended September 30, 2019 as compared to $23.9 million outflow for the period ended September 30, 2018. The increase is analyzed as follows:
The net loss for the nine month period ended September 30, 2019 was $72.1 million compared to net loss of $69.9 million for the nine month period ended September 30, 2018. 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 loss/ (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.
In determining net cash used in operating activities for the nine month period ended September 30, 2018, the net loss was adjusted for the effect of depreciation and amortization of $41.8 million, $2.9 million for amortization and write-off of deferred finance fees and bond premium, $5.3 million for the amortization of drydock and special survey costs, $0.8 million for stock based compensation, $0.03 million for gain on sale of vessel and $4.5 million for equity in net earnings of affiliated companies, net of dividends received.
The net cash outflow resulting from the change in operating assets, liabilities and payments for drydock and special survey costs of $0.1 million for the nine month period ended September 30, 2018 mainly resulted from a $15.9 million payment for drydock and special survey costs, a $6.3 million increase in prepaid expenses, a $2.7 million increase in the balance due from related parties, short-term and a $1.7 million decrease in deferred revenue. These were partially offset by a $14.2 million increase in accrued expenses, a $6.0 million decrease in the balance due from related parties, long-term, a $4.9 million increase in accounts payable, a $0.8 million increase in the balance due to related parties short-term, a $0.5 million decrease in other long term assets and a $0.1 million decrease in accounts receivable.
Cash provided by investing activities for the nine month period ended September 30, 2019 as compared to the nine month period ended September 30, 2018:
Net cash provided by investing activities decreased by $21.7 million to $31.3 million for the nine month period ended September 30, 2019 from $53.0 million for the nine month period ended September 30, 2018.
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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.
Net cash provided by investing activities for the nine month period ended September 30, 2018, resulted from: (i) $44.5 million net proceeds from sale of vessel; and (ii) $8.5 million from dividends received from affiliates.
Cash provided by/ (used in) financing activities for the nine month period ended September 30, 2019 as compared to the nine month period ended September 30, 2018:
Net cash provided by/ (used in) financing activities increased by $71.2 million to $3.9 million inflow for the period ended September 30, 2019 from $67.3 million outflow for the period ended September 30, 2018.
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.
Net cash used in financing activities for the nine month period ended September 30, 2018 resulted from: (i) $121.4 million of loan repayments; (ii) $9.2 million of dividends paid; and (iii) $6.2 million acquisition of treasury stock; partially mitigated by $69.5 million in proceeds from sale and leaseback arrangements, net of deferred finance costs.
Reconciliation of EBITDA and Adjusted EBITDA to Net Cash from Operating Activities
Three Month Period Ended September 30, 2019 (unaudited) |
Three Month Period Ended September 30, 2018 (unaudited) |
Nine Month Period Ended September 30, 2019 (unaudited) |
Nine Month Period Ended September 30, 2018 (unaudited) |
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Expressed in thousands of U.S. dollars |
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Net cash provided by/ (used in) operating activities |
$ | 19,513 | $ | 7,139 | $ | 21,058 | $ | (23,855 | ) | |||||||
Net (decrease)/ increase in operating assets |
(15,357 | ) | 571 | (9,914 | ) | 2,450 | ||||||||||
Net (increase)/ decrease in operating liabilities |
(5,689 | ) | (23,202 | ) | 7,413 | (18,250 | ) | |||||||||
Net interest cost |
20,465 | 17,247 | 62,634 | 52,042 | ||||||||||||
Amortization and write-off of deferred finance costs and bond premium |
(1,053 | ) | (879 | ) | (3,346 | ) | (2,860 | ) | ||||||||
Equity in net earnings of affiliates, net of dividends received |
936 | 4,522 | 2,670 | 4,463 | ||||||||||||
Payments for dry dock and special survey costs |
5,119 | 4,504 | 6,781 | 15,915 | ||||||||||||
Gain on sale of vessel |
| | 3,245 | 25 | ||||||||||||
Impairment loss |
(7,287 | ) | | (7,287 | ) | | ||||||||||
Stock-based compensation |
(234 | ) | (275 | ) | (694 | ) | (816 | ) | ||||||||
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EBITDA |
$ | 16,413 | $ | 9,627 | $ | 82,560 | $ | 29,114 | ||||||||
Net negative effect on equity/ (loss) in net earnings of affiliated companies due to sale of the Shinyo Kannika by Navios Midstream to an unaffiliated third party |
| | | 6,005 | ||||||||||||
Gain on sale of vessel |
| | (3,245 | ) | (25 | ) | ||||||||||
Impairment loss |
7,287 | | 7,287 | | ||||||||||||
Stock-based compensation |
234 | 275 | 694 | 816 | ||||||||||||
Adjusted EBITDA |
$ | 23,934 | $ | 9,902 | $ | 87,296 | $ | 35,910 | ||||||||
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Three Month Period Ended September 30, 2019 (unaudited) |
Three Month Period Ended September 30, 2018 (unaudited) |
Nine Month Period Ended September 30, 2019 (unaudited) |
Nine Month Period Ended September 30, 2018 (unaudited) |
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Net cash provided by/ (used in) operating activities |
$ | 19,513 | $ | 7,139 | $ | 21,058 | $ | (23,855 | ) | |||||||
Net cash provided by investing activities |
$ | 5,605 | $ | 1,575 | $ | 31,343 | $ | 52,977 | ||||||||
Net cash provided by/ (used in) financing activities |
$ | 35,792 | $ | (12,465 | ) | $ | 3,862 | $ | (67,267 | ) |
EBITDA, Adjusted EBITDA, Adjusted net (loss)/ income and Adjusted (loss)/ income per share (basic) are non-U.S. GAAP financial measures and should not be used in isolation or as substitution for Navios Acquisitions results calculated in accordance with U.S. generally accepted accounting principles (U.S. GAAP).
EBITDA represents net (loss)/income before interest and finance costs, before depreciation and amortization and before income taxes. Adjusted EBITDA in this document represents EBITDA excluding certain items as described under Financial Highlights. Adjusted net (loss)/ income and Adjusted (loss)/ income per share (basic) represent Net (loss)/ income and (loss)/ income per share (basic), excluding certain items as described under Financial Highlights. We use Adjusted EBITDA as liquidity measure and reconcile EBITDA and Adjusted EBITDA to net cash provided by/ (used in) operating activities, the most comparable U.S. GAAP liquidity measure. EBITDA is calculated as follows: net cash provided by/(used in) 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)/decrease in operating liabilities; (iii) net interest cost; (iv) amortization of deferred finance costs and other related expenses; (v) equity/ (loss) in net earnings of affiliates, net of dividends received; (vi) payments for dry dock and special survey costs; (vii) impairment charges; (viii) gain on sale of assets; (ix) gain/ (loss) on debt repayment; (x) stock- based compensation and (xi) transaction costs. 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 Acquisitions 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 Acquisitions 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 Acquisitions 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, 2019 increased by $14.0 million to $23.9 million, as compared to $9.9 million for the same period of 2018. The increase in Adjusted EBITDA was mainly due to a: (a) $17.4 million increase in revenue; (b) $4.2 million decrease in time charter and voyage expenses; and (c) $0.1 million decrease in other expense; partially mitigated by a: (i) $3.5 million increase in management fees due to the acquisition of Navios Midstream in December 2018 and to the amendment of the fees under the Management Agreement in May 2018; (ii) $3.6 million decrease in equity in net earnings of affiliated companies; and (iii) $0.6 million increase in general and administrative expenses (excluding stock-based compensation) mainly due to the acquisition of Navios Midstream.
Adjusted EBITDA affected by the items described in the table above, for the nine month period ended September 30, 2019 increased by $51.4 million to $87.3 million, as compared to $35.9 million for the same period of 2018. The increase in Adjusted EBITDA was mainly due to a: (a) $65.5 million increase in revenue; (b) $7.4 million decrease in time charter and voyage expenses; (c) $1.2 million decrease in other expense; and (d) $1.3 million increase in other income; partially mitigated by: (i) an $11.6 million increase in management fees due to the acquisition of Navios Midstream in December 2018 and to the amendment of the fees under the Management Agreement in May 2018; (ii) a $7.8 million decrease in equity in net earnings of affiliated companies (excluding the $6.0 million of negative effect on equity in net earnings of affiliated companies, relating to the sale of the Shinyo Kannika by Navios Midstream); and (iii) a $4.6 million increase in general and administrative expenses (excluding stock-based compensation) mainly due to the acquisition of Navios Midstream.
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%.
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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 and the exception of Navios Midstream subsidiaries.
The 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of Navios Acquisitions subsidiaries with the exception of Navios Acquisition Finance (a co-issuer of the 2021 Notes).
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 declines ratably until it reaches 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. The 2021 Co-Issuers were in compliance with the covenants as of September 30, 2019.
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 the same CUSIP number.
Guarantees
The Companys 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of the Companys subsidiaries with the exception of Navios Acquisition Finance (a co-issuer of the 2021 Notes) and the exception of Navios Midstream subsidiaries. The Companys 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 the exception of Navios Midstream subsidiaries, are 100% owned.
Credit Facilities
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 360 bps per annum. The facilities are repayable in either semi-annual or quarterly installments, followed by balloon payments with maturities, ranging from August 2020 to September 2026. See also Contractual obligations below.
Eurobank Ergasias S.A.: On October 26, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52.2 million, of which $51.6 million has been drawn (divided into two tranches of $26.1 million and $25.5 million, respectively) to partially finance the acquisition costs of two LR1 product tanker vessels. Each tranche of the facility is repayable in 32 quarterly installments of $0.35 million and $0.34 million, respectively, with a final balloon payment of $15.1 million and $14.7 million, respectively, to be repaid on the last repayment date. The repayment of each tranche started three months after the delivery date of the respective vessel. The loan bore interest at a rate of LIBOR plus 275 bps and required compliance with certain financial covenants. The outstanding balance under the facility was fully prepaid in March 2019.
BNP Paribas S.A. Bank and DVB Bank S.E.: Navios Acquisition assumed a loan agreement dated April 8, 2010, of up to $75.0 million (divided in three equal tranches of $25.0 million each) to partially finance the purchase price of three product tankers. Each of the tranches is repayable in 12 equal semi-annual installments of $0.8 million each with a final balloon payment of $16.0 million to be repaid on the last repayment date. It bore interest at a rate of LIBOR plus 250 bps. The loan also required compliance with certain financial covenants. The outstanding balance under the facility of $50.3 million was fully prepaid in April 2019.
Norddeutsche Landesbank Girozentrale: On December 29, 2011, Navios Acquisition entered into a loan agreement with Norddeutsche Landesbank Girozentrale of up to $28.1 million to partially finance the purchase price of one MR2 product tanker vessel. The facility was repayable in 32 quarterly installments of $0.4 million each with a final balloon payment of $15.6 million repayable on the last repayment date. The facility bore interest at a rate of LIBOR plus 300 bps per annum and also required compliance with certain financial covenants. The outstanding balance under the facility of $21.5 million was fully prepaid in June 2019.
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Amounts drawn under the facilities are secured by first preferred mortgages on Navios Acquisitions 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 Acquisitions vessels; changing the commercial and technical management of Navios Acquisitions vessels; selling Navios Acquisitions 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, 2019, no amount was available to be drawn from the Companys facilities.
Sale and Leaseback Agreements
On March 31, 2018, Navios Acquisition entered into a $71.5 million sale and leaseback agreement with unrelated third parties to refinance the outstanding balance of the existing facility on four product tankers. Navios Acquisition has a purchase obligation at the end of the lease term and under ASC 842-40, the transaction accounted for as a failed sale. The agreement will be repayable in 24 equal consecutive quarterly installments of $1.5 million each, with a repurchase obligation of $35.8 million on the last repayment date. The agreement matures in April 2024 and bears interest at LIBOR plus 305 bps per annum. In April 2018, the Company drew $71.5 million under this agreement. As of September 30, 2019, the outstanding balance under this agreement was $64.1 million. The Leasing Agreement requires compliance with certain financial covenants in line with Navios Acquisitions other credit facilities.
In March and April 2019, Navios Acquisition entered into sale and lease back agreements with unrelated third parties for $103.2 million in order to refinance $50.3 million outstanding on the existing facility on three product tankers and to finance two product tankers that were previously financed by Eurobank Ergasias S.A. and were fully prepaid in March 2019 by the amount of $32.2 million. Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transactions were determined to be failed sale. The agreements are repayable in 28 equal consecutive quarterly installments of $2.3 million each, with a final balloon payment of $39.7 million to be repaid on the last repayment date. The sale and leaseback agreements (Leasing Agreements) mature in March and April 2026 and bear interest at LIBOR plus 350 bps per annum. The Leasing Agreements require compliance with certain financial covenants in line with the other credit facilities of the Company.
In August, 2019, Navios Acquisition entered into a new $15.0 million sale and lease back agreement, with unrelated third parties in order to partly refinance the Term Loan B. Navios Acquisition has a purchase option in place and an assessment has been performed indicating that the likelihood of the vessel remaining in the property of the lessor is remote. In such a case, the buyer-lessor does not obtain control of the vessel and under ASC 842-40, the transaction was determined to be a failed sale. Navios Acquisition is obligated to make 60 consecutive monthly payments of approximately $0.2 million, commencing as of August 2019. The agreement matures in August 2024 and bears interest at LIBOR plus 240 bps per annum.
In September 2019, Navios Acquisition entered into new sale and lease back agreements with unrelated third parties for $47.2 million in order to partly refinance the Term Loan B. 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 $1.4 million each, with a purchase obligation of $19.2 million to be repaid on the last repayment date. The Leasing Agreements mature in September 2023 and September 2026 and bear interest at LIBOR plus a margin ranging from 350 bps to 360 per annum, depending on the vessel financed. The Leasing Agreements require compliance with certain financial covenants in line with the other credit facilities of the Company.
In October 2019, Navios Acquisition entered into:
i) Sale and lease back agreements with unrelated third parties for $90.8 million in order to refinance the Term Loan B. Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale. The agreements will be repaid through periods ranging from three to eight years in consecutive quarterly installments of up to $2.8 million each, with a repurchase obligation of up to $25.9 million in total. The leasing agreement bears interest at LIBOR plus a margin ranging from 335 bps to 355 bps per annum, depending on the vessel financed.
ii) Loan agreement with Hamburg Commercial Bank AG for $31.8 million in order to refinance the Term Loan B. The facility is repayable in four quarterly installments of $0.8 million each with a final balloon payment of $28.4 million repyable on the last repayment date. The facility matures in October 2020 and bears interest at LIBOR plus 280 bps per annum.
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Term Loan B
On June 18, 2015, Navios Midstream and Navios Maritime Midstream Partners Finance (US) Inc., as co-borrowers, completed the issuance of the $205.0 million Term Loan B (the Term Loan B). The Term Loan B is set to mature on June 18, 2020 and is repayable in equal quarterly installments of 0.25% of the initial principal amount of the Term Loan B, beginning on September 18, 2015, with a final payment of the aggregate principal amount of the Term Loan B, plus accrued and unpaid interest, due on the maturity. The Term Loan B bears interest at LIBOR plus 4.50% per annum.
Amounts drawn under the Term Loan B are secured by first preferred mortgages on Navios Midstreams vessels and other collateral and are guaranteed by each vessel-owning subsidiary under Navios Midstream.
In the first quarter of 2018, the Nave Galactic substituted for the Shinyo Kannika under the Term Loan B.
In March 2019, Navios Acquisition acquired the following VLCCs from Navios Midstream: Shinyo Kieran, Shinyo Saowalak, Nave Celeste and the Nave Galactic. In addition, Navios Acquisition sold to Navios Midstream the following vessels: Nave Orbit, Nave Equator, Nave Buena Suerte, Nave Ariadne, Nave Cielo, Nave Atropos, Nave Pulsar, Nave Equinox, Nave Pyxis and Bougainville. The vessels that were sold from Navios Midstream were released as collaterals from Term Loan B and were replaced by the ones acquired, whereas the vessels sold from Navios Acquisition were released as collaterals from ship mortgage notes and were replaced by the ones acquired.
On June 26, 2019, Navios Midstream acquired from Navios Acquisition the Nave Velocity for a purchase price of $31.3 million, offered as collateral under the Term Loan B, in substitution of an equivalent amount of cash collateral the was previously retained as restricted cash.
As a result of the above refinancing, as of September 30, 2019, an amount of $111.6 million was reclassified from Current portion of long-term debt, net of deferred finance cost to Long term debt, net of current portion, premium and net of deferred finance cost.
The financing arrangements include, among other things, compliance with loan to value ratios and certain financial covenants: (i) minimum liquidity at the higher of $40.0 million or $1.0 million per vessel; (ii) net worth ranging from $50.0 million to $135.0 million; 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 credit facilities if such covenants are not complied with, including the loan to value ratios for which the Company may provide sufficient additional security to prevent such an event.
The Term Loan B required maintenance of a loan to value ratio of no greater than 0.85 to 1.0 and a minimum interest coverage ratio of at least 3.75 to 1.0, and other restrictive covenants including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Term Loan B also provided for excess cash flow prepayments and customary events of default.
As of September 30, 2019, a balance of $182.2 million was outstanding under the Term Loan B and in October 2019, the outstanding balance of Term Loan B was fully prepaid. As of December 31, 2018, the outstanding balance of the Term Loan B was $197.8 million.
As of September 30, 2019, the Company was in compliance with its covenants.
Amounts drawn under the facilities are secured by first preferred mortgages on Navios Acquisitions 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 Acquisitions vessels; changing the commercial and technical management of Navios Acquisitions vessels; selling Navios Acquisitions 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.
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 Companys financial position, results of operations or liquidity.
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Contractual Obligations
The following table summarizes our long-term contractual obligations as of September 30, 2019:
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) |
$ | 125,758 | $ | 893,283 | $ | 116,003 | $ | 102,611 | $ | 1,237,655 | ||||||||||
Lease Obligations (Time Charters) for vessels to be delivered(2) |
15,297 | 50,152 | 50,220 | 185,443 | 301,112 | |||||||||||||||
Total contractual obligations |
$ | 141,055 | 943,435 | 166,223 | 288,054 | $ | 1,538,767 |
(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 360 bps per annum to 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 third and fourth quarter of 2020. 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 third quarter of 2021. |
Navios Maritime Holdings Inc. (Navios Holdings), Navios Acquisition and Navios Maritime Partners L.P. (Navios Partners) have made available to Navios Europe I revolving loans up to $24.1 million to fund working capital requirements (collectively, the Navios Revolving Loans I). In December 2018, the availability under the Revolving Loans I was increased by $30.0 million. As of September 30, 2019, the amount undrawn under the Navios Revolving Loans I was $2.0 million, of which Navios Acquisition may be required to fund an amount ranging from $0 to $2.0 million. See Note 7 for the investment in Navios Europe I.
Navios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe II revolving loans up to $57.5 million to fund working capital requirements (collectively, the Navios Revolving Loans II). As of September 30, 2019, the amount undrawn under the Navios Revolving Loans II was $4.5 million, of which Navios Acquisition may be required to fund an amount ranging from $0 to $4.5 million. See Note 7 for the investment in Navios Europe II.
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 $0.01 million.
Related Party Transactions
Management fees: Pursuant to the Management Agreement dated May 28, 2010 as amended in May 2012, May 2014 and May 2016, the Manager, provided commercial and technical management services to Navios Acquisitions vessels for a fixed daily fee of: (a) $6,350 per MR2 product tanker and chemical tanker vessel; (b) $7,150 per LR1 product tanker vessel; and (c) $9,500 per VLCC, through May 2018.
Navios Acquisition fixed the fees for commercial and technical ship management services of its fleet for two additional years from May 29, 2018 until December 31, 2019, at a daily fee of: (a) $6,500 per MR2 product tanker and chemical tanker vessel; (b) $7,150 per LR1 product tanker vessel; and (c) $9,500 per VLCC.
Following the Merger with Navios Midstream, completed on December 13, 2018, the Management Agreement also covers vessels acquired.
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 management fees are fixed for two years commencing from January 1, 2020 at: (a) $6,825 per day per MR2 product tanker and chemical tanker vessel; (b) $7,225 per day per LR1 product tanker vessel; and (c) $9,650 per day per VLCC. The agreement also provides for a technical and commercial management fee of $50 per day per vessel and an annual increase of 3% for the remaining period unless agreed otherwise and provides for payment of a termination fee, equal to the fees charged
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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.
Drydocking expenses are reimbursed at cost for all vessels.
For the nine month periods ended September 30, 2019 and 2018 certain extraordinary fees and costs related to regulatory requirements, including ballast water treatment system installation and exhaust gas cleaning system installation and under Companys Management Agreement amounted to $13.1 million and $0, respectively, and are presented under Vessels additions in the condensed Consolidated Statements of Cash Flows.
Total management fees for the three month periods ended September 30, 2019 and 2018 amounted to $26.8 million and $23.3 million, respectively. Total management fees for the nine month periods ended September 30, 2019 and 2018 amounted to $81.2 million and $69.7 million, respectively.
General and administrative expenses: Pursuant to the Administrative Services Agreement, 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 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 Merger with Navios Midstream, completed on December 13, 2018, the Administrative Services Agreement also covers the vessels acquired.
For each of the three month periods ended September 30, 2019 and 2018 the expense arising from administrative services rendered by the Manager amounted to $2.8 million and $2.2 million, respectively. For each of the nine month periods ended September 30, 2019 and 2018 the expense arising from administrative services rendered by the Manager amounted to $8.4 million and $6.6 million, respectively.
Balance due from related parties (excluding Navios Europe I, Navios Europe II): Balance due from related parties as of September 30, 2019 and December 31, 2018 was $6.6 million and $15.8 million, respectively, and included the short-term and long-term amounts due from the Manager. The balances mainly consisted of administrative expenses and special survey and dry docking expenses for certain vessels of the Companys fleet, as well as management fees, in accordance with the Management Agreement.
Balance due to related parties, short-term: Amounts due to related parties, short-term as of September 30, 2019 and December 31, 2018 was $6.1 million and $12.0 million, respectively, and mainly consisted of payables to the Manager.
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 Acquisitions 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.
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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 will allow 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 will grant 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 will agree (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 will 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.
Backstop Agreement: On November 18, 2014, Navios Acquisition entered into backstop agreements with Navios Midstream. In accordance with the terms of the backstop agreements, Navios Acquisition has provided backstop commitments for a two-year period as of the redelivery of each of the Nave Celeste, the Shinyo Ocean and the Shinyo Kannika from their original charters, at a net rate of $35,000, $38,400 and $38,025, respectively. Backstop commitments were triggered if the actual rates achieved were below the backstop rates. As of December 31, 2018, the accrued liability under the Backstop Agreements is eliminated as intercompany balance following the Merger with Navios Midstream. The backstop commitment for the Shinyo Kannika was terminated in relation to the sale of this vessel in March 2018. Navios Acquisition agreed to extend the backstop commitment of the Shinyo Kannika to the Nave Galactic, following the sale of the latter to Navios Midstream in March 2018.
In January and February 2019, all Backstop Agreements expired pursuant to their initial terms.
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 I: Navios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe I revolving loans up to $24.1 million to fund working capital requirements. In December 2018, the availability under the Navios Revolving Loans I was increased by $30.0 million.
Balance due from Navios Europe I as of September 30, 2019 was $27.6 million (December 31, 2018: $22.7 million) which included the Navios Revolving Loans I of $13.8 million (December 31, 2018: $11.8 million), the non-current amount of $5.1 million (December 31, 2018: $4.2 million) related to the accrued interest income earned under the Navios Term Loans I under the caption Due from related parties, long-term and the accrued interest income earned under the Navios Revolving Loans I of $8.6 million (December 31, 2018: $6.6 million) under the caption Due from related parties, short-term.
The Navios Revolving Loans I and the Navios Term Loans I earn interest and an annual preferred return, respectively, at 12.7% per annum, on a quarterly compounding basis and are repaid from free cash flow (as defined in the loan agreement) to the fullest extent possible at the end of each quarter. There are no covenant requirements or stated maturity dates. As of September 30, 2019, the amount undrawn under the Navios Revolving Loans I was $2.0 million, of which Navios Acquisition may be required to fund an amount ranging from $0 to $2.0 million.
On November 22, 2019, an agreement was reached to liquidate Navios Europe I (see also Recent Developments).
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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.
Balance due from Navios Europe II as of September 30, 2019 was $44.9 million (December 31, 2018: $38.5 million) which included the Navios Revolving Loans II of $20.7 million (December 31, 2018: $20.7 million), the non-current amount of $7.6 million (December 31, 2018: $5.8 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 (December 31, 2018: $12.0 million) under the caption Due from related parties, short-term.
The Navios Revolving Loans II and the Navios Term Loans II earn interest and an annual preferred return, respectively, at 18% per annum, on a quarterly compounding basis and are repaid from free cash flow (as defined in the loan agreement) to the fullest extent possible at the end of each quarter. There are no covenant requirements or stated maturity dates. As of September 30, 2019, the amount undrawn under the Navios Revolving Loans II was $4.5 million, of which Navios Acquisition may be required to fund an amount ranging from $0 to $4.5 million.
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 operations.
Interest Rate Risk
As of September 30, 2019, Navios Acquisition had a total of $1,237.7 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 nine month period ended September 30, 2019, we paid interest on our outstanding debt at a weighted average interest rate of 7.17%. A 1% increase in LIBOR would have increased our interest expense for the nine month period ended September 30, 2019 by $4.1 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. Our major customers during the year ended December 31, 2018 and the nine month period ended September 30, 2019 were: Navig8 Chemicals Shipping and Trading Co (Navig8), COSCO Dalian and Mansel LTD (Mansel). For the nine month period ended September 30, 2019, Navig8, COSCO Dalian and Mansel accounted for 33.0%, 13.6% and 10.5%, respectively, of Navios Acquisitions revenue. For the year ended December 31, 2018, Navig8 and Mansel accounted for 39.2% and 12.1%, respectively, of Navios Acquisitions 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 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.
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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.
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. In addition, in April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial InstrumentsCredit Losses, Financial InstrumentsCredit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments, the amendments of which clarify the modification of accounting for available for sale debt securities excluding applicable accrued interest, which must be individually assessed for credit losses when fair value is less than the amortized cost basis. The effective date and transition requirements for the amendments in this Update are the same as the effective dates and transition requirements in Update 2016-13, as amended by this Update.
The Company is currently assessing the impact of the aforementioned accounting guidance will have on its consolidated financial statements.
Critical Accounting Policies
Navios Acquisitions 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 Companys Annual Report on Form 20-F for the year ended December 31, 2018 filed with the SEC on April 19, 2019.
Exhibit No. |
Exhibit | |
4.1 | Loan Agreement, dated October 8, 2019, among Lefkada Shipping Corporation, as borrower, the lenders party thereto, and Hamburg Commercial Bank AG as agent, mandated lead arranger and security trustee. |
21
NAVIOS MARITIME ACQUISITION CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 2019 AND DECEMBER 31, 2018 |
F-2 | |||
F-3 | ||||
F-4 | ||||
F-5 | ||||
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
F-6 |
NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. Dollars except share data)
Notes | September 30, 2019 (unaudited) |
December 31, 2018 |
||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents |
3 | $ | 102,326 | $ | 44,009 | |||||||
Restricted cash |
3 | 546 | 2,600 | |||||||||
Accounts receivable, net |
13,237 | 25,100 | ||||||||||
Due from related parties, short term |
12 | 25,328 | 18,926 | |||||||||
Prepaid expenses and other current assets |
4 | 21,788 | 13,343 | |||||||||
Total current assets |
163,225 | 103,978 | ||||||||||
Vessels, net |
5 | 1,297,920 | 1,383,605 | |||||||||
Intangible assets other than goodwill |
6 | | 36,645 | |||||||||
Goodwill |
1,579 | 1,579 | ||||||||||
Other long-term assets |
10 | 5,456 | | |||||||||
Deferred dry dock and special survey costs, net |
32,932 | 32,161 | ||||||||||
Investment in affiliates |
7 | 11,400 | 11,400 | |||||||||
Due from related parties, long-term |
7,12 | 59,828 | 58,016 | |||||||||
Total non-current assets |
1,409,115 | 1,523,406 | ||||||||||
Total assets |
$ | 1,572,340 | $ | 1,627,384 | ||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Accounts payable |
$ | 13,365 | $ | 12,621 | ||||||||
Accrued expenses |
9 | 25,617 | 13,205 | |||||||||
Due to related parties, short-term |
12 | 6,073 | 12,029 | |||||||||
Deferred revenue |
1,614 | 3,340 | ||||||||||
Current portion of long-term debt, net of deferred finance costs |
10 | 123,648 | 50,964 | |||||||||
Dividends payable |
8 | 4,119 | | |||||||||
Total current liabilities |
174,436 | 92,159 | ||||||||||
Long-term debt, net of current portion, premium and net of deferred finance costs |
10 | 1,101,668 | 1,154,873 | |||||||||
Total non-current liabilities |
1,101,668 | 1,154,873 | ||||||||||
Total liabilities |
$ | 1,276,104 | $ | 1,247,032 | ||||||||
Commitments and contingencies |
13 | | | |||||||||
Stockholders equity |
||||||||||||
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares of Series C issued and outstanding as of September 30, 2019 and 1,000 series C shares issued and outstanding as of December 31, 2018 |
14 | | | |||||||||
Common stock, $0.0001 par value; 250,000,000 shares authorized; 13,728,371 and 13,280,927 issued and outstanding as of September 30, 2019 and December 31, 2018, respectively |
14 | 1 | 1 | |||||||||
Additional paid-in capital |
14 | 510,304 | 522,335 | |||||||||
Accumulated deficit |
(214,069 | ) | (141,984 | ) | ||||||||
Total stockholders equity |
296,236 | 380,352 | ||||||||||
Total liabilities and stockholders equity |
$ | 1,572,340 | $ | 1,627,384 |
See unaudited condensed notes to consolidated financial statements.
F-2
NAVIOS MARITIME ACQUISITION CORPORATION
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, 2019 (unaudited) |
For the Three Months Ended September 30, 2018 (unaudited) |
For the Nine Months Ended September 30, 2019 (unaudited) |
For the Nine Months Ended September 30, 2018 (unaudited) |
||||||||||||||||
Revenue |
2,15 | $ | 58,965 | $ | 41,589 | $ | 194,669 | $ | 129,218 | |||||||||||
Time charter and voyage expenses |
(5,377 | ) | (9,560 | ) | (14,340 | ) | (21,749 | ) | ||||||||||||
Direct vessel expenses |
(2,439 | ) | (2,011 | ) | (7,117 | ) | (5,251 | ) | ||||||||||||
Management fees (entirely through related party transactions) |
12 | (26,837 | ) | (23,340 | ) | (81,224 | ) | (69,652 | ) | |||||||||||
General and administrative expenses |
12 | (3,732 | ) | (3,157 | ) | (15,677 | ) | (11,212 | ) | |||||||||||
Depreciation and amortization |
5,6 | (17,216 | ) | (13,777 | ) | (52,257 | ) | (41,763 | ) | |||||||||||
(Loss)/ gain on sale of vessels/ Impairment loss |
5,6 | (39,976 | ) | | (36,731 | ) | 25 | |||||||||||||
Interest income |
7,12 | 2,384 | 2,061 | 6,840 | 5,875 | |||||||||||||||
Interest expense and finance cost |
10 | (22,849 | ) | (19,308 | ) | (69,474 | ) | (57,917 | ) | |||||||||||
Equity in net earnings of affiliated companies |
7 | 936 | 4,522 | 2,670 | 4,463 | |||||||||||||||
Other income |
10 | 2 | 1,343 | 13 | ||||||||||||||||
Other expense |
(265 | ) | (429 | ) | (787 | ) | (1,992 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net loss |
$ | (56,396 | ) | $ | (23,408 | ) | $ | (72,085 | ) | $ | (69,942 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Dividend declared on restricted shares |
(65 | ) | (35 | ) | (196 | ) | (106 | ) | ||||||||||||
Undistributed loss attributable to Series C participating preferred shares |
| 1,196 | (13 | ) | 3,516 | |||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net loss attributable to common shareholders, basic |
16 | $ | (56,461 | ) | $ | (22,247 | ) | $ | (72,294 | ) | $ | (66,532 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net loss attributable to common shareholders, diluted |
16 | $ | (56,461 | ) | $ | (22,247 | ) | $ | (72,294 | ) | $ | (66,532 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||||||
Net loss per share, basic and diluted |
16 | $ | (4.18 | ) | $ | (2.34 | ) | $ | (5.38 | ) | $ | (6.87 | ) | |||||||
Weighted average number of shares, basic |
13,510,361 | 9,522,463 | 13,446,836 | 9,678,995 | ||||||||||||||||
Weighted average number of shares, diluted |
13,510,361 | 9,522,463 | 13,446,836 | 9,678,995 |
See unaudited condensed notes to consolidated financial statements.
F-3
NAVIOS MARITIME ACQUISITION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. dollars)
Notes | For the Nine Months Ended September 30, 2019 (unaudited) |
For the Nine Months Ended September 30, 2018 (unaudited) |
||||||||||
Operating Activities |
||||||||||||
Net loss |
$ | (72,085 | ) | $ | (69,942 | ) | ||||||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
5,6 | 52,257 | 41,763 | |||||||||
Amortization and write-off of deferred finance fees and bond premium |
10 | 3,346 | 2,860 | |||||||||
Amortization of dry dock and special survey costs |
7,065 | 5,251 | ||||||||||
Stock based compensation |
14 | 694 | 816 | |||||||||
Loss/ (gain) on sale of vessels/ Impairment loss |
5,6 | 36,731 | (25 | ) | ||||||||
Equity in net earnings of affiliates, net of dividends received |
7 | (2,670 | ) | (4,463 | ) | |||||||
Changes in operating assets and liabilities: |
||||||||||||
Decrease/ (increase) in prepaid expenses and other current assets |
1,595 | (6,266 | ) | |||||||||
Decrease in accounts receivable |
11,863 | 120 | ||||||||||
Increase in due from related parties, short-term |
(6,402 | ) | (2,718 | ) | ||||||||
Decrease in other long term assets |
| 450 | ||||||||||
Decrease in due from related parties, long-term |
2,858 | 5,964 | ||||||||||
(Decrease)/ increase in accounts payable |
(667 | ) | 4,930 | |||||||||
Increase in accrued expenses |
12,037 | 14,193 | ||||||||||
Payments for dry dock and special survey costs |
(6,781 | ) | (15,915 | ) | ||||||||
(Decrease)/ increase in due to related parties, short-term |
(17,057 | ) | 800 | |||||||||
Decrease in deferred revenue |
(1,726 | ) | (1,673 | ) | ||||||||
|
|
|
|
|||||||||
Net cash provided by/ (used in) operating activities |
$ | 21,058 | $ | (23,855 | ) | |||||||
|
|
|
|
|||||||||
Investing Activities |
||||||||||||
Vessels improvement |
5,12 | (13,108 | ) | | ||||||||
Loans to affiliates |
12 | (2,000 | ) | | ||||||||
Dividends received from affiliates |
| 8,477 | ||||||||||
Net cash proceeds from sale of vessels |
5 | 46,451 | 44,500 | |||||||||
|
|
|
|
|||||||||
Net cash provided by investing activities |
$ | 31,343 | $ | 52,977 | ||||||||
|
|
|
|
|||||||||
Financing Activities |
||||||||||||
Loan proceeds, net of deferred finance costs |
10 | 156,588 | 69,547 | |||||||||
Loan repayments |
10 | (144,120 | ) | (121,417 | ) | |||||||
Dividend paid |
8 | (8,240 | ) | (9,206 | ) | |||||||
Acquisition of treasury stock |
14 | (366 | ) | (6,191 | ) | |||||||
|
|
|
|
|||||||||
Net cash provided by/ (used in) financing activities |
$ | 3,862 | $ | (67,267 | ) | |||||||
|
|
|
|
|||||||||
Net increase/ (decrease) in cash, cash equivalents and restricted cash |
56,263 | (38,145 | ) | |||||||||
Cash, cash equivalents and restricted cash, beginning of period |
46,609 | 86,458 | ||||||||||
|
|
|
|
|||||||||
Cash, cash equivalents and restricted cash, end of period |
$ | 102,872 | $ | 48,313 | ||||||||
|
|
|
|
|||||||||
Supplemental disclosures of cash flow information |
||||||||||||
Cash interest paid, net of capitalized interest |
$ | 52,769 | $ | 41,034 | ||||||||
Non-cash investing activities |
||||||||||||
Accrued interest on loan to affiliate |
|
$ | 2,670 | $ | 2,273 | |||||||
Costs payable relating to sale of vessel |
|
$ | | $ | (200 | ) | ||||||
Non-cash financing activities |
|
|||||||||||
Stock based compensation |
|
$ | 694 | $ | 816 | |||||||
Accrued deferred finance costs |
|
$ | 375 | $ | 35 | |||||||
Other long term assets |
|
$ | 5,456 | $ | |
See unaudited condensed notes to consolidated financial statements.
F-4
NAVIOS MARITIME ACQUISITION CORPORATION
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, 2018 |
1,000 | $ | | 13,280,927 | $ | 1 | $ | 522,335 | $ | (141,984 | ) | $ | 380,352 | |||||||||||||||
Conversion of preferred stock to common (see Note 14) |
(1,000 | ) | | 511,733 | | | | | ||||||||||||||||||||
Stock based compensation (see Note 14) |
| | | | 229 | | 229 | |||||||||||||||||||||
Acquisition of treasury stock |
| | (64,289 | ) | | (366 | ) | | (366 | ) | ||||||||||||||||||
Dividend paid/ declared (see Note 8) |
| | | | (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 14) |
| | | | 231 | | 231 | |||||||||||||||||||||
Dividend paid/ declared (see Note 8) |
| | | | (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 14) |
| | | | 234 | | 234 | |||||||||||||||||||||
Dividend paid/ declared (see Note 8) |
| | | | (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 | |||||||||||||||
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, 2017 |
1,000 | $ | | 10,140,527 | $ | 1 | $ | 518,085 | $ | (55,611 | ) | $ | 462,475 | |||||||||||||||
Stock based compensation |
| | | | 269 | | 269 | |||||||||||||||||||||
Acquisition of treasury stock |
| | (334,784 | ) | | (4,115 | ) | | (4,115 | ) | ||||||||||||||||||
Dividend paid/ declared (see Note 8) |
| | | | (3,102 | ) | | (3,102 | ) | |||||||||||||||||||
Net loss |
| | | | | (24,466 | ) | (24,466 | ) | |||||||||||||||||||
Balance, March 31, 2018 (unaudited) |
1,000 | $ | | 9,805,743 | $ | 1 | $ | 511,137 | $ | (80,077 | ) | $ | 431,061 | |||||||||||||||
Stock based compensation |
| | | | 272 | | 272 | |||||||||||||||||||||
Acquisition of treasury stock |
| | (122,796 | ) | | (1,441 | ) | | (1,441 | ) | ||||||||||||||||||
Dividend paid/ declared (see Note 8) |
| | | | (3,065 | ) | | (3,065 | ) | |||||||||||||||||||
Net loss |
| | | | | (22,068 | ) | (22,068 | ) | |||||||||||||||||||
Balance, June 30, 2018 (unaudited) |
1,000 | $ | | 9,682,947 | $ | 1 | $ | 506,903 | $ | (102,145 | ) | $ | 404,759 | |||||||||||||||
Stock based compensation |
| | | | 275 | | 275 | |||||||||||||||||||||
Acquisition of treasury stock |
| | (70,758 | ) | | (635 | ) | | (635 | ) | ||||||||||||||||||
Dividend paid/ declared (see Note 8) |
| | | | (3,039 | ) | | (3,039 | ) | |||||||||||||||||||
Net loss |
| | | | | (23,408 | ) | (23,408 | ) | |||||||||||||||||||
Balance, September 30, 2018 (unaudited) |
1,000 | | 9,612,189 | 1 | 503,504 | (125,553 | ) | 377,952 |
See unaudited condensed notes to consolidated financial statements.
F-5
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 Companys 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.
In November 2014, Navios Maritime Midstream Partners L.P. (Navios Midstream), a company formed as a subsidiary of Navios Acquisition, completed an IPO of its units in the United States and was listed on the NYSE under the symbol NAP. (Refer to Note 7, Investment in affiliates). Navios Midstream was a publicly traded master limited partnership, through December 13, 2018, which owned, operated and acquired crude oil tankers, refined petroleum product tankers, chemical tankers and liquefied petroleum gas tankers under long-term employment contracts.
On December 13, 2018, the Company completed the merger (the Merger) contemplated by the previously announced Agreement and Plan of Merger, (the Merger Agreement), dated as of October 7, 2018, by and among Navios Acquisition, its direct wholly-owned subsidiary NMA Sub LLC (Merger Sub), Navios Midstream and Navios Midstream Partners GP LLC (the 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.
Under the terms of the transaction, Navios Acquisition acquired all of the outstanding publicly held common units of Navios Midstream though the issuance of 3,683,284 newly issued shares of Navios Acquisition common stock in exchange for the publicly held common units of Navios Midstream at an exchange ratio of 0.42 shares of Navios Acquisition for each Navios Midstream common unit. Following the Merger the results of operations of Navios Midstream are consolidated under Navios Acquisition.
As of September 30, 2019 and December 31, 2018, Navios Acquisition owned a 100% limited partner interest in Navios Midstream.
As of September 30, 2019, Navios Maritime Holdings Inc. (Navios Holdings) had 35.4% of the voting power and 36.0% of the economic interest in Navios Acquisition.
As of September 30, 2019, Navios Acquisition had 13,728,371 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 Acquisitions 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 Companys consolidated financial statements and notes included in Navios Acquisitions 2018 Annual Report filed on Form 20-F with the Securities and Exchange Commission (SEC).
F-6
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)
Reverse Stock Split:
On November 9, 2018, the Stockholders of Navios Acquisition approved a 1-for-15 reverse stock split of all outstanding common stock of the Company which was effected on November 14, 2018. The effect of the reverse stock split was to combine each 15 shares of outstanding common stock into one new share, with no change in authorized shares or par value per share, and to reduce the number of common stock shares outstanding from approximately 142.9 million shares to approximately 9.5 million shares. No fractional shares of common stock were issued in connection with the reverse stock split. Stockholders who would otherwise hold fractional shares of the Companys common stock received a cash payment in lieu thereof. All issued and outstanding shares of common stock, conversion terms of preferred stock, options to purchase common stock and per share amounts contained in the financial statements, in accordance with Staff Accounting Bulletin Topic 4C, have been retroactively adjusted to reflect the reverse split for all periods presented.
(ab) Recent accounting pronouncements
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.
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.
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. In addition, in April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial InstrumentsCredit Losses, Financial InstrumentsCredit Losses, Topic 815, Derivatives and Hedging, and Topic 825 Financial Instruments, the amendments of which clarify the modification of accounting for available for sale debt securities excluding applicable accrued interest, which must be individually assessed for credit losses when fair value is less than the amortized cost basis. The effective date and transition requirements for the amendments in this Update are the same as the effective dates and transition requirements in Update 2016-13, as amended by this Update. The Company is currently assessing the impact of the adoption of the new accounting standard on its consolidated financial statements and related disclosures.
(b) Principles of consolidation: The accompanying interim condensed 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 unaudited condensed 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 entitys 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 entitys 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 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.
F-7
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)
(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 Companys 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, 2019, the entities included in these consolidated financial statements were:
Navios Maritime Acquisition Corporation and Subsidiaries: |
Nature | Country of Incorporation |
2019 | 2018 | ||||||||||||
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 | 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 | 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 |
F-8
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)
Skiathos Shipping Corporation |
Vessel-Owning Company(8) | Marshall Is. | 1/1 - 9/30 | 1/1 - 9/30 | ||||||
Skopelos Shipping Corporation |
Vessel-Owning Company | Cayman Is. | 1/1 - 9/30 | 1/1 - 9/30 | ||||||
Syros Shipping Corporation |
Vessel-Owning Company(8) | Marshall Is. | 1/1 - 9/30 | 1/1 - 9/30 | ||||||
Thera Shipping Corporation |
Vessel-Owning Company | 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 | 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 |
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 | 1/23 - 9/30 | ||||||
Olivia Enterprises Corp. |
Vessel-Owning Company(10) | Marshall Is. | 1/1 - 9/30 | | ||||||
Cyrus Investments Corp. |
Vessel-Owning Company(10) | Marshall Is. | 1/1 - 9/30 | | ||||||
Doxa International Corp. |
Vessel-Owning Company(10) | Marshall Is. | 4/10 - 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 | | ||||||
Navios Maritime Midstream Partners L.P. |
Sub-Holding Company | Marshall Is. | 1/1 - 9/30 | | ||||||
Navios Maritime Midstream Partners Finance (US) Inc. |
Co-borrower | Delaware | 1/1 - 9/30 | | ||||||
Shinyo Kannika Limited |
Former Vessel- Owning Company(9) |
Hong Kong | 1/1 - 9/30 | | ||||||
Shinyo Ocean Limited |
Former Vessel- Owning Company(11) |
Hong Kong | 1/1 - 9/30 | | ||||||
Shinyo Saowalak Limited |
Vessel-Owning Company | British Virgin Is. | 1/1 - 9/30 | | ||||||
Shinyo Kieran Limited |
Vessel-Owning Company | British Virgin Is. | 1/1 - 9/30 | | ||||||
Shinyo Dream Limited |
Former Vessel-Owning Company(12) | Hong Kong | 1/1 - 9/30 | | ||||||
Sikinos Shipping Corporation |
Vessel-Owning Company | Marshall Is. | 1/1 - 9/30 | |
F-9
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)
(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 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 shipyards 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, to be delivered in the third and fourth quarter of 2020. In the first quarter of 2019, the Company exercised the option for a third VLCC newbuilding under a bareboat operating lease with an expected delivery in the third quarter of 2021. |
(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 April 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. |
(e) 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. Revenue is recognized when (or as) the Company transfers promised goods or services to its customers in amounts that reflect the consideration to which the company expects to be entitled to in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers control of the promised goods or services to its customers. 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 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.
The Companys contract revenues from time chartering and pooling arrangements are governed by ASC 842 Leases. 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. The Company early adopted the Standard during 2018. As a result of the adoption of these standards, there was no effect on the Companys opening retained earnings, unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of operations.
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 crews, maintenance and insurance are typically paid by the owner of the vessel. Revenues from time chartering of vessels amounted to $38,785 and $28,298 for the three month periods ended September 30, 2019 and 2018, respectively. For the nine month periods ended September 30, 2019 and 2018, revenues from time chartering of vessels amounted to $129,505 and $89,856, respectively. The majority of revenue from time chartering is usually collected in advance.
F-10
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 Companys 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 vessels 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 $13,898 and $11,583 for the three month periods ended September 30, 2019 and 2018, respectively. For the nine month periods ended September 30, 2019 and 2018, revenue operating in pooling arrangements amounted to $46,494 and $37,217, respectively. The majority of revenue from pooling arrangements is usually collected through the month they are incurred.
Revenue from voyage contracts
The Companys 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 charterers 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 $6,479 and $1,912 for the three month periods ended September 30, 2019 and 2018, respectively. For the nine month periods ended September 30, 2019 and 2018, revenues under voyage contracts amounted to $16,157 and $1,912, respectively. Capitalized costs as of September 30, 2019 and December 31, 2018 related to costs to fulfill the contract amounted to $401 and $505, respectively, and are included under caption Prepaid expenses and other current assets. Accounts receivable, net, as of September 30, 2019 that related to voyage contracts was $8,348(December 31, 2018: $7,269). 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 charterers 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, 2019 and 2018 amounted to $(197) and $(204), respectively. For the nine month periods ended September 30, 2019 and 2018, profit sharing revenues amounted to $2,513 and $233, 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 Companys vessels have the following options to extent or renew their charters:
Vessel |
Option | |
Nave Orion | Charterers option to extend the charter for one year at $15,159 net per day. | |
Nave Pulsar | Charterers option to extend the charter for one year at $16,590 net per day plus ice-transit premium. | |
Nave Rigel Nave Cetus |
Charterer has the option to either charter the vessel for a period of two years plus one optional year at a rate of $17,063 net per day or charter the vessel for three years at a rate of $16,088 net per day. | |
TBN 1 | Charterers option to extend the bareboat charter for five years at $29,751 net per day. | |
TBN 2 | Charterers option to extend the bareboat charter for five years at $29,751 net per day. |
F-11
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 3: CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents consisted of the following:
September 30, 2019 | December 31, 2018 | |||||||
Cash on hand and at banks |
$ | 97,283 | $ | 27,764 | ||||
Short-term deposits |
5,043 | 16,245 | ||||||
Restricted cash |
546 | 2,600 | ||||||
Total cash, cash equivalents and restricted cash |
$ | 102,872 | $ | 46,609 |
Short-term deposits and highly liquid funds relate to amounts held in banks for general financing purposes and represent deposits with an original maturity of less than three months.
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 Acquisitions credit facilities.
NOTE 4: PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
September 30, 2019 |
December 31, 2018 |
|||||||
Inventories |
$ | 6,491 | $ | 4,007 | ||||
Advances for working capital purposes |
9,250 | 8,250 | ||||||
Insurance claims |
4,934 | | ||||||
Voyage charters deferred contract costs and other |
1,113 | 1,086 | ||||||
|
|
|
|
|||||
Total prepaid expenses and other current assets |
$ | 21,788 | $ | 13,343 | ||||
|
|
|
|
NOTE 5: VESSELS, NET
Vessels |
Cost | Accumulated Depreciation |
Net Book Value |
|||||||||
Balance at December 31, 2017 |
$ | 1,505,013 | $ | (254,970 | ) | $ | 1,250,043 | |||||
Additions |
234,000 | (56,052 | ) | 177,948 | ||||||||
Disposals |
(51,739 | ) | 7,353 | (44,386 | ) | |||||||
Balance at December 31, 2018 |
$ | 1,687,274 | $ | (303,669 | ) | $ | 1,383,605 | |||||
Depreciation/ Additions |
13,108 | (48,300 | ) | (35,192 | ) | |||||||
Disposals |
(44,000 | ) | 794 | (43,206 | ) | |||||||
Impairment loss |
(7,287 | ) | | (7,287 | ) | |||||||
Balance at September 30, 2019 |
$ | 1,649,095 | $ | (351,175 | ) | $ | 1,297,920 |
F-12
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)
Additions of vessels
2019
As of September 30, 2019, certain extraordinary fees and costs related to vessels regulatory requirements, including ballast water treatment system installation, amounted to $13,108 (see Note 12 Transactions with related parties).
2018
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. The fair value of vessels acquired was $234,000.
The transaction resulted in a bargain purchase gain as a result of the share price of Navios Midstream trading at a discount to their net asset value (NAV). The fair value of the vessels was determined based on vessel valuations, obtained from independent third party shipbrokers, which are among other things, based on recent sales and purchase transactions of similar vessels. The fair value of the favorable lease terms (intangible assets) was determined by reference to market data and the discounted amount of expected future cash flows. The key assumptions that were used in the discounted cash flow analysis were as follows: (i) the contracted charter rate of the acquired charter over the remaining lease term compared to (ii) the current market charter rates for a similar contract and (iii) discounted using the Companys weighted average cost of capital of 9.10%.
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 (Loss)/ gain on sale of vessels/ Impairment loss.
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. The gain on sale of the vessel, including the insurance claim proceeds, amounted to $2,594, which is included in (Loss)/ gain on sale of vessels/ Impairment loss.
In August 2019, Navios Acquisition entered into an agreement to sell the Nave Electron, a 2002-built VLCC vessel of 305,178 dwt to an unaffiliated third party for a sale price of $25,250.
2018
On March 29, 2018, Navios Acquisition sold all the shares of the vessel-owning subsidiary of the Nave Galactic, a 2009-built VLCC vessel of 297,168 dwt to Navios Midstream for a sale price of $44,500, which was paid as of March 31, 2018. The gain on sale of the vessel, upon write-off of the unamortized dry-docking of $465 and working capital items of $376 (including costs of $200), was $25.
Impairment loss
2019
During the quarter ended September 30, 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 which is included in (Loss)/ gain on sale of vessels/ Impairment loss.
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 (see Note 5- Vessels, net).
F-13
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)
Intangible assets as of September 30, 2019 and December 31, 2018 consisted of the following:
Favorable lease terms |
Cost | Accumulated Amortization |
Net Book Value |
|||||||||
Balance at December 31, 2018 |
$ | 36,900 | $ | (255 | ) | $ | 36,645 | |||||
Additions |
| (3,957 | ) | (3,957 | ) | |||||||
Impairment |
(36,900 | ) | 4,212 | (32,688 | ) | |||||||
Balance at September 30, 2019 |
$ | | $ | | $ | |
On September 25, 2019, the U.S. Department of Treasurys 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. Subsequently to September 30, 2019 both charter contracts have been terminated and the two vessels are now employed in the open market. As a result an impairment loss of $32,688 has been recorded which is included in (Loss)/ gain on sale of vessels/ Impairment loss.
Amortization expense of favorable lease terms for the three and nine month periods ended September 30, 2019 and 2018 are presented in the following table:
Three Month Period Ended | Nine Month Period Ended | |||||||||||||||
September 30, 2019 |
September 30, 2018 |
September 30, 2019 |
September 30, 2018 |
|||||||||||||
Favorable lease terms charter-out |
$ | (1,319 | ) | $ | | $ | (3,957 | ) | $ | | ||||||
Total |
$ | (1,319 | ) | $ | | $ | (3,957 | ) | $ | |
NOTE 7: 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 as of September 30, 2019, Navios Holdings, Navios Acquisition and Navios Partners had a voting interest of 50%, 50% and 0%, respectively.
On an ongoing basis, Navios Europe I is 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.
The Navios Term Loans I will be repaid from the future sale of vessels owned by Navios Europe I and is deemed to be the initial investment by Navios Acquisition. Navios Acquisition evaluated its investment in Navios Europe I under ASC 810 and concluded that Navios Europe I is a VIE and that the Company is not the party most closely associated with Navios Europe I and, accordingly, is not the primary beneficiary of Navios Europe I.
Navios Acquisition further evaluated its investment in the common stock of Navios Europe I under ASC 323 and concluded that it has the ability to exercise significant influence over the operating and financial policies of Navios Europe I and, therefore, its investment in Navios Europe I is accounted for under the equity method.
As of September 30, 2019 and December 31, 2018, the estimated maximum potential loss by Navios Acquisition in Navios Europe I would have been $32,300 and $27,409, respectively, which represented the Companys carrying value of its investment of $4,750 (December 31, 2018: $4,750) the Companys portion of the carrying balance of the Navios Revolving Loans I including accrued interest on the Navios Term Loans I of $18,909 (December 31, 2018: $16,014), which is included under Due from related parties, long- term and the accrued interest income on the Navios Revolving Loans I in the amount of $8,641 (December 31, 2018: $6,645) which is included under Due from related parties, short-term. Refer to Note 12 for the terms of the Navios Revolving Loans I.
F-14
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)
Income recognized in Equity/ (loss) in net earnings of affiliated companies for the three month period ended September 30, 2019 was $311 (September 30, 2018: $274). Income recognized in Equity/ (loss) in net earnings of affiliated companies for the nine month period ended September 30, 2019 was $895 (September 30, 2018: $788).
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 will also make available to Navios Europe II revolving loans up to $57,500 to fund working capital requirements (collectively, the Navios Revolving Loans II).
On an ongoing basis, Navios Europe II is required to distribute cash flows (after payment 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.
The Navios Term Loans II will be repaid from the future sale of vessels owned by Navios Europe II and is deemed to be the initial investment by Navios Acquisition. Navios Acquisition evaluated its investment in Navios Europe II under ASC 810 and concluded that Navios Europe II is a VIE and that the Company is not the party most closely associated with Navios Europe II and, accordingly, is not the primary beneficiary of Navios Europe II.
Navios Acquisition further evaluated its investment in the common stock of Navios Europe II under ASC 323 and concluded that it has the ability to exercise significant influence over the operating and financial policies of Navios Europe II and, therefore, its investment in Navios Europe II is accounted for under the equity method.
As of September 30, 2019, the estimated maximum potential loss by Navios Acquisition in Navios Europe II would have been $51,558 (December 31, 2018: $45,115), which represented the Companys carrying value of the investment of $6,650 (December 31, 2018: $6,650), the Companys balance of the Navios Revolving Loans II including accrued interest on the Navios Term Loans II of $28,220 (December 31, 2018: $26,445), which is 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 (December 31, 2018: $12,020), which is included under Due from related parties, short-term. Refer to Note 12 for the terms of the Navios Revolving Loans II.
Income recognized in Equity/ (loss) in net earnings of affiliated companies for the three month period ended September 30, 2019 was $625. (September 30, 2018: $522). Income recognized in Equity/ (loss) in net earnings of affiliated companies for the nine month period ended September 30, 2019 was $1,775. (September 30, 2018: $1,485).
Navios Midstream
On October 13, 2014, the Company formed Navios Midstream under the laws of Marshall Islands. Navios Maritime Midstream Partners GP L.L.C. (the Navios Midstream General Partner), a wholly owned subsidiary of Navios Acquisition, was also formed on that date to act as the general partner of Navios Midstream and received a 2.0% general partner interest.
The Company evaluated its investment in Navios Midstream under ASC 810 and concluded that Navios Midstream was not a VIE. The Company further evaluated the power to control the board of directors of Navios Midstream under the voting interest model and concluded that it did maintain significant influence.
Following the deconsolidation of Navios Midstream, the Company accounted for all of its interest under the equity method.
F-15
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 June 18, 2018, in accordance with the terms of the Partnership Agreement all of the issued and outstanding 1,592,920 subordinated Series A units of Navios Midstream converted into Navios Midstreams existing common units on a one-for-one basis. Following their conversion into common units, these units have the same distribution rights as all other common units.
On December 13, 2018, Navios Acquisition completed the Merger contemplated by the previously announced Merger Agreement, dated as of October 7, 2018, by and among Navios Acquisition, 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.
Pursuant to the terms of the Merger Agreement, each outstanding common unit representing limited partner interests in Navios Midstream held by a common unit holder other than Navios Acquisition, Navios Midstream or their respective subsidiaries (the NAP Public Units) was converted into the right to receive 0.42 shares of NNA common stock. As a result of the Merger, 3,683,284 shares of NNA common stock were issued to former holders of NAP Public Units.
Following the completion of the Merger the results of operations of Navios Midstream are included in Navios Acquisitions unaudited condensed consolidated statements of operations.
NOTE 8: DIVIDENDS PAYABLE
On January 25, 2019, the Board of Directors declared a quarterly cash dividend in respect of the fourth quarter of 2018 of $0.30 per share of common stock of amount $4,121 which was paid on March 27, 2019 to stockholders of record as of February 27, 2019.
On May 10, 2019, the Board of Directors declared a quarterly cash dividend in respect of the first quarter of 2019 of $0.30 per share of common stock of amount $4,119 which was paid on June 27, 2019 to stockholders of record as of May 29, 2019.
On July 24, 2019, the Board of Directors declared a quarterly cash dividend in respect of the second quarter of 2019 of $0.30 per share of common stock of amount $4,119 which was paid on October 9, 2019, to stockholders of record as of September 25, 2019, and is included under caption Dividends payable.
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 Acquisitions 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.
NOTE 9: ACCRUED EXPENSES
Accrued expenses as of September 30, 2019 and December 31, 2018 consisted of the following:
September 30, 2019 |
December 31, 2018 |
|||||||
Accrued voyage expenses |
$ | 1,558 | $ | 1,067 | ||||
Accrued loan interest |
23,197 | 9,838 | ||||||
Accrued legal and professional fees |
862 | 2,300 | ||||||
Total accrued expenses |
$ | 25,617 | $ | 13,205 |
NOTE 10: BORROWINGS
September 30, 2019 |
December 31, 2018 |
|||||||
BNP Paribas S.A. and DVB Bank S.E. |
| 51,750 | ||||||
Eurobank Ergasias S.A. $52,200 |
| 32,841 | ||||||
Eurobank Ergasias S.A. $52,000 |
29,370 | 31,206 | ||||||
Norddeutsche Landesbank Girozentrale |
| 22,266 | ||||||
DVB Bank S.E. and Credit Agricole Corporate and Investment Bank |
40,234 | 42,578 | ||||||
Ship Mortgage Notes $670,000 |
670,000 | 670,000 |
F-16
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)
Deutsche Bank AG Filiale Deutschlandgeschäft and Skandinaviska Enskilda Banken AB |
41,091 | 46,846 | ||||||
BNP Paribas $44,000 |
30,000 | 32,000 | ||||||
HSH $24,000 |
18,852 | 20,568 | ||||||
Term Loan B |
182,158 | 197,824 | ||||||
Total credit facilities |
1,011,705 | 1,147,879 | ||||||
Sale and Leaseback Agreements$103,155 |
99,990 | |||||||
Sale and Leaseback Agreements$71,500 |
64,052 | |||||||
Sale and Leaseback Agreements$47,220 |
47,220 | |||||||
Sale and Leaseback Agreements$15,000 |
14,688 | |||||||
Total borrowings |
1,237,655 | 1,216,400 | ||||||
Less: Deferred finance costs, net |
(13,020 | ) | (11,453 | ) | ||||
Add: bond premium |
681 | 890 | ||||||
Less: current portion of long-term debt, net of deferred finance costs |
(123,648 | ) | (50,964 | ) | ||||
Total long-term borrowings, net of current portion, bond premium and deferred finance costs |
$ | 1,101,668 | $ | 1,154,873 |
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%.
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 Acquisitions 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 declines ratably until it reaches 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. The 2021 Co-Issuers were in compliance with the covenants as of September 30, 2019.
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 the same CUSIP number.
Guarantees
The Companys 2021 Notes are fully and unconditionally guaranteed on a joint and several basis by all of the Companys subsidiaries with the exception of Navios Acquisition Finance (a co-issuer of the 2021 Notes) and the exception of Navios Midstream subsidiaries. The Companys 2021 Notes are unregistered. The guarantees of the Companys subsidiaries that own mortgaged vessels are senior secured guarantees and the guarantees of Companys subsidiaries that do not own mortgaged vessels are senior unsecured guarantees.
F-17
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)
All subsidiaries, including Navios Acquisition Finance and the exception of Navios Midstream subsidiaries, are 100% owned.
Credit Facilities
Eurobank Ergasias S.A.: On October 26, 2010, Navios Acquisition entered into a loan agreement with Eurobank Ergasias S.A. of up to $52,200, of which $51,600 has been drawn (divided into two tranches of $26,100 and $25,500, respectively) to partially finance the acquisition costs of two LR1 product tanker vessels. Each tranche of the facility was repayable in 32 quarterly installments of $345 and $337, respectively, with a final balloon payment of $15,060 and $14,716, respectively, to be repaid on the last repayment date. The repayment of each tranche started three months after the delivery date of the respective vessel. The loan bore interest at a rate of LIBOR plus 275 bps and required compliance with certain financial covenants. The outstanding balance under the facility was fully prepaid in March 2019.
BNP Paribas S.A. Bank and DVB Bank S.E.: Navios Acquisition assumed a loan agreement dated April 8, 2010, of up to $75,000 (divided in three equal tranches of $25,000 each) to partially finance the purchase price of three product tankers. Each of the tranches was repayable in 12 equal semi-annual installments of $750 each with a final balloon payment of $16,000 to be repaid on the last repayment date. It bore interest at a rate of LIBOR plus 250 bps. The loan also required compliance with certain financial covenants. The outstanding amount of $50,250 was fully prepaid in April 2019.
Norddeutsche Landesbank Girozentrale: On December 29, 2011, Navios Acquisition entered into a loan agreement with Norddeutsche Landesbank Girozentrale of up to $28,125 to partially finance the purchase price of one MR2 product tanker vessel. The facility was repayable in 32 quarterly installments of $391 each with a final balloon payment of $15,625 repayable on the last repayment date. The facility bore interest at a rate of LIBOR plus 300 bps per annum and also required compliance with certain financial covenants. The outstanding balance under the facility of $21,485 was fully prepaid in June 2019.
Amounts drawn under the facilities are secured by first preferred mortgages on Navios Acquisitions 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 Acquisitions vessels; changing the commercial and technical management of Navios Acquisitions vessels; selling Navios Acquisitions 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, 2019 no amount was available to be drawn from the Companys facilities.
Sale and Leaseback Agreements
On March 31, 2018, Navios Acquisition entered into a $71,500 sale and leaseback agreement with unrelated third parties to refinance the outstanding balance of the existing facility on four product tankers. Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was accounted for as a failed sale. In accordance with ASC 842-40 the Company did not derecognize the respective vessels from its balance sheet and accounted for the amounts received under sale and lease back agreement as a financial liability. The facility is repayable in 24 equal consecutive quarterly installments of $1,490 each, with a repurchase obligation of $35,750 on the last repayment date. The facility matures in April 2024 and bears interest at LIBOR plus 305 bps per annum. In April 2018, the Company drew $71,500 under this agreement. As of September 30, 2019, the outstanding balance under this agreement was $64,052. The Leasing Agreements require compliance with certain financial covenants in line with Navios Acquisitions other credit facilities.
In March and April 2019, Navios Acquisition entered into sale and lease back agreements with unrelated third parties for $103,155 in order to refinance $50,250 outstanding on the existing facility on three product tankers and to finance two product tankers that were previously financed by Eurobank Ergasias S.A. and were fully prepaid in March 2019 by the amount of $32,159. 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 repayable in 28 equal consecutive quarterly installments
F-18
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)
of $2,267 each, with a purchase obligation of $39,675 to be repaid on the last repayment date. The sale and leaseback agreements (Leasing Agreements) mature in March and April 2026 and bear interest at LIBOR plus 350 bps per annum. The Leasing Agreements require compliance with certain financial covenants in line with the other credit facilities of the Company.
In August, 2019, the Company entered into a new Leasing Agreement of $15,000, with unrelated third parties in order to refinance one product tanker. Navios Acquisition has a purchase option in place and an assessment has been performed indicating that the likelihood of the vessel remaining in the property of the lessor is remote. In such a case, the buyer-lessor does not obtain control of the vessel and under ASC 842-40, the transaction was determined to be a failed sale. Navios Acquisition is obligated to make 60 consecutive monthly payments of approximately $156, commencing as of August 2019. The agreement matures in August 2024 and bear interest at LIBOR plus 240 bps per annum.
In September 2019, Navios Acquisition entered into new sale and lease back agreements with unrelated third parties for $47,220 in order to refinance three product tankers. Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale. The agreements will be repaid through periods ranging from four to seven years in consecutive quarterly installments of up to $1,362 each, with a purchase obligation of $19,200 to be repaid on the last repayment date. The Leasing Agreements mature in September 2023 and September 2026 and bear interest at LIBOR plus a margin ranging from 350 bps to 360 per annum, depending on the vessel financed. The Leasing Agreements require compliance with certain financial covenants in line with the other credit facilities of the Company.
In October 2019, Navios Acquisition entered into,
i) Sale and lease back agreements with unrelated third parties for $90,811 in order to finance six product tankers. Navios Acquisition has a purchase obligation to acquire the vessels at the end of the lease term and under ASC 842-40, the transaction was determined to be a failed sale. The agreements will be repaid through periods ranging from three to eight years in consecutive quarterly installments of up to $2,824 each, with a repurchase obligation of up to $25,810 in total. The sale and lease back arrangement bears interest at LIBOR plus a margin ranging from 335 bps to 355 bps per annum, depending on the vessel financed.
ii) Loan agreement with Hamburg Commercial Bank AG for $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 repyable on the last repayment date. The facility matures in October 2020 and bears interest at LIBOR plus 280 bps per annum.
As a result of the refinancing, as of September 30, 2019, an amount of $111,593 was reclassified from Current portion of long-term debt, net of deferred finance cost to Long term debt, net of current portion, premium and net of deferred finance cost.
Term Loan B
On June 18, 2015, Navios Midstream and Navios Maritime Midstream Partners Finance (US) Inc., as co-borrowers, completed the issuance of the $205,000 Term Loan B (the Term Loan B). The Term Loan B is set to mature on June 18, 2020 and is repayable in equal quarterly installments of 0.25% of the initial principal amount of the Term Loan B, beginning on September 18, 2015, with a final payment of the aggregate principal amount of the Term Loan B, plus accrued and unpaid interest, due on the maturity. The Term Loan B bears interest at LIBOR plus 4.50% per annum.
Amounts drawn under the Term Loan B are secured by first preferred mortgages on Navios Midstreams vessels and other collateral and are guaranteed by each vessel-owning subsidiary under Navios Midstream.
In the first quarter of 2018, the Nave Galactic substituted for the Shinyo Kannika under the Term Loan B.
In March 2019, Navios Acquisition acquired the following VLCCs from Navios Midstream: Shinyo Kieran, Shinyo Saowalak, Nave Celeste and the Nave Galactic. In addition, Navios Acquisition sold to Navios Midstream the following vessels: Nave Orbit, Nave Equator, Nave Buena Suerte, Nave Ariadne, Nave Cielo, Nave Atropos, Nave Pulsar, Nave Equinox, Nave Pyxis and Bougainville. The vessels that were sold from Navios Midstream were released as collaterals from Term Loan B and were replaced by the ones acquired, whereas the vessels sold from Navios Acquisition were released as collaterals from ship mortgage notes and were replaced by the ones acquired.
On June 26, 2019, Navios Midstream acquired from Navios Acquisition the Nave Velocity, offered as collateral under the Term Loan B, in substitution of an equivalent amount of cash collateral that was previously retained as restricted cash.
F-19
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 August 2019, the Company has agreed to enter into certain financing arrangements with the purpose to refinance its Term Loan B facility of $182,158 outstanding as of September 30, 2019, maturing in June 2020. In October 2019, Navios Acquisition fully prepaid its Term Loan B facility.
The maturity table below reflects the principal payments of all notes, credit facilities and the Leasing Agreements outstanding as of September 30, 2019 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, 2019 |
||||
Long-Term Debt Obligations: |
||||
12 month period ending |
||||
September 30, 2020 |
125,758 | |||
September 30, 2021 |
133,641 | |||
September 30, 2022 |
759,642 | |||
September 30, 2023 |
50,116 | |||
September 30, 2024 |
65,887 | |||
September 30, 2025 and thereafter |
102,611 | |||
Total |
$ | 1,237,655 |
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) 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 credit facilities 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.
The Term Loan B required maintenance of a loan to value ratio of no greater than 0.85 to 1.0 and a minimum interest coverage ratio of at least 3.75 to 1.0, and other restrictive covenants including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. The Term Loan B also provides for excess cash flow prepayments and customary events of default.
As of September 30, 2019, a balance of $182,158 was outstanding under the Term Loan B. As of December 31, 2018, the outstanding balance of the Term Loan B was $197,824.
As of September 30, 2019, the Company was in compliance with its covenants.
NOTE 11: 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.
F-20
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)
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.
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, 2019 | December 31, 2018 | |||||||||||||||
Book Value | Fair Value | Book Value | Fair Value | |||||||||||||
Cash and cash equivalents |
$ | 102,326 | $ | 102,326 | $ | 44,009 | $ | 44,009 | ||||||||
Restricted cash |
$ | 546 | $ | 546 | $ | 2,600 | $ | 2,600 | ||||||||
Accounts receivable |
$ | 13,237 | $ | 13,237 | $ | 25,100 | $ | 25,100 | ||||||||
Accounts payable |
$ | 13,365 | $ | 13,365 | $ | 12,621 | $ | 12,621 | ||||||||
Ship mortgage notes and premium |
$ | 664,961 | $ | 514,433 | $ | 663,399 | $ | 511,331 | ||||||||
Other long-term debt, net of deferred finance costs |
$ | 560,355 | $ | 567,655 | $ | 542,438 | $ | 535,519 | ||||||||
Due from related parties, long-term |
$ | 59,828 | $ | 59,828 | $ | 58,016 | $ | 58,016 |
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, 2019 and December 31, 2018.
Fair Value Measurements at September 30, 2019 Using |
||||||||||||||||
Total | Level I | Level II | Level III | |||||||||||||
Cash and cash equivalents |
$ | 102,326 | $ | 102,326 | $ | | $ | | ||||||||
Restricted cash |
$ | 546 | $ | 546 | $ | | $ | | ||||||||
Accounts receivable |
$ | 13,237 | $ | 13,237 | $ | | $ | | ||||||||
Accounts payable |
$ | 13,365 | $ | 13,365 | $ | | $ | | ||||||||
Ship mortgage notes and premium |
$ | 514,433 | $ | 514,433 | $ | | $ | | ||||||||
Other long-term debt(1) |
$ | 567,655 | $ | | $ | 567,655 | $ | | ||||||||
Due from related parties, long-term(2) |
$ | 59,828 | $ | | $ | 59,828 | $ | | ||||||||
Fair Value Measurements at December 31, 2018 Using | ||||||||||||||||
Total | Level I | Level II | Level III | |||||||||||||
Cash and cash equivalents |
$ | 44,009 | $ | 44,009 | $ | | $ | | ||||||||
Restricted cash |
$ | 2,600 | $ | 2,600 | $ | | $ | | ||||||||
Accounts receivable |
$ | 25,100 | $ | 25,100 | $ | | $ | | ||||||||
Accounts payable |
$ | 12,621 | $ | 12,621 | $ | | $ | | ||||||||
Ship mortgage notes and premium |
$ | 511,331 | $ | 511,331 | $ | | $ | | ||||||||
Other long-term debt(1) |
$ | 535,519 | $ | | $ | 535,519 | $ | | ||||||||
Due from related parties, long-term(2) |
$ | 58,016 | $ | | $ | 58,016 | $ | |
(1) | The fair value of the Companys 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 Companys creditworthiness. |
(2) | The fair value of the Companys 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 counterpartys creditworthiness. |
F-21
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 12: TRANSACTIONS WITH RELATED PARTIES
Management fees: Pursuant to the management agreement with the Manager (the Management Agreement) dated May 28, 2010 as amended in May 2012, May 2014 and May 2016, the Manager provided commercial and technical management services to Navios Acquisitions vessels for a fixed daily fee of: (a) $6.35 per MR2 product tanker and chemical tanker vessel; (b) $7.15 per LR1 product tanker vessel; and (c) $9.5 per VLCC, through May 2018.
Navios Acquisition fixed the fees for commercial and technical ship management services of its fleet for two additional years from May 29, 2018 until December 31, 2019, at 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.
Following the Merger with Navios Midstream, completed on December 13, 2018, the Management Agreement also covers vessels acquired.
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 management fees are fixed for two years commencing from January 1, 2020 at: (a) $6,825 per day per MR2 product tanker and chemical tanker vessel; (b) $7,225 per day per LR1 product tanker vessel; and (c) $9,650 per day per VLCC. The agreement also provides for a technical and commercial management fee of $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.
For the nine month periods ended September 30, 2019 and 2018 certain extraordinary fees and costs related to regulatory requirements, including ballast water treatment system installation and exhaust gas cleaning system installation and under Companys Management Agreement amounted to $13,108 and $0, respectively, and are presented under Vessels additions in the condensed Consolidated Statements of Cash Flows. (Please refer to Note 5)
Total management fees for the three month periods ended September 30, 2019 and 2018 amounted to $26,837 and $23,340, respectively. Total management fees for the nine month periods ended September 30, 2019 and 2018 amounted to $81,224 and $69,652, respectively.
General and administrative expenses: On May 28, 2010, Navios Acquisition entered into an administrative services agreement with the Manager (the Administrative Services Agreement), 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 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 Merger with Navios Midstream, completed on December 13, 2018, the Administrative Services Agreement also covers the vessels acquired.
F-22
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)
For each of the three month periods ended September 30, 2019 and 2018 the expense arising from administrative services rendered by the Manager amounted to $2,760 and $2,188, respectively. For each of the nine month periods ended September 30, 2019 and 2018 the expense arising from administrative services rendered by the Manager amounted to $8,386 and $6,623, respectively.
Balance due from related parties (excluding Navios Europe I, Navios Europe II): Balance due from related parties as of September 30, 2019 and December 31, 2018 was $6,625 and $15,818, respectively, and included the short-term and long-term amounts due from the Manager. The balances mainly consisted of administrative expenses and special survey and dry docking expenses for certain vessels of the Companys fleet, as well as management fees, in accordance with the Management Agreement.
Balance due to related parties, short-term: Amounts due to related parties, short-term as of September 30, 2019 and December 31, 2018 was $6,073 and $12,029, respectively, and mainly consisted of payables to the Manager.
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. Please refer to Navios Midstream under Note 7 Investment in Affiliates.
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 Acquisitions 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.
F-23
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)
Backstop Agreement: On November 18, 2014, Navios Acquisition entered into backstop agreements with Navios Midstream (Backstop Agreements). In accordance with the terms of the Backstop Agreements, Navios Acquisition has provided backstop commitments for a two-year period as of the redelivery of each of the Nave Celeste, the Shinyo Ocean and the Shinyo Kannika from their original charters, at a net rate of $35, $38.4 and $38, respectively. Backstop commitments were triggered if the actual rates achieved were below the backstop rates. As of December 31, 2018, the accrued liability under the Backstop Agreements is eliminated as intercompany balance following the Merger with Navios Midstream. The backstop commitment for the Shinyo Kannika was terminated in relation to the sale of this vessel in March 2018. Navios Acquisition agreed to extend the backstop commitment of the Shinyo Kannika to the Nave Galactic, following the sale of the latter to Navios Midstream in March 2018.
In January and February 2019, all Backstop Agreements expired pursuant to their initial terms.
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 I: Navios Holdings, Navios Acquisition and Navios Partners have made available to Navios Europe I revolving loans up to $24,100 to fund working capital requirements. In December 2018, the availability under the Navios Revolving Loans I was increased by $30,000. See Note 7 for the Investment in Navios Europe I.
Balance due from Navios Europe I as of September 30, 2019 was $27,550 (December 31, 2018: $22,659) which included the Navios Revolving Loans I of $13,770 (December 31, 2018: $11,770), the non-current amount of $5,139 (December 31, 2018: $4,244) related to the accrued interest income earned under the Navios Term Loans I under the caption Due from related parties, long-term and the accrued interest income earned under the Navios Revolving Loans I of $8,641 (December 31, 2018: $6,645) under the caption Due from related parties, short-term.
The Navios Revolving Loans I and the Navios Term Loans I earn interest and an annual preferred return, respectively, at 12.7% per annum, on a quarterly compounding basis and are repaid from free cash flow (as defined in the loan agreement) to the fullest extent possible at the end of each quarter. There are no covenant requirements or stated maturity dates. As of September 30, 2019, the amount undrawn under the Navios Revolving Loans I was $2,000, of which Navios Acquisition may be required to fund an amount ranging from $0 to $2,000.
On November 22, 2019, an agreement was reached to liquidate Navios Europe I (see also Note 18Subsequent Events).
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 7 for the Investment in Navios Europe II.
Balance due from Navios Europe II as of September 30, 2019 was $44,908 (December 31, 2018: $38,465) which included the Navios Revolving Loans II of $20,662 (December 31, 2018: $20,662), the non-current amount of $7,558 (December 31, 2018: $5,783) 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 (December 31, 2018: $12,020) under the caption Due from related parties, short-term.
The Navios Revolving Loans II and the Navios Term Loans II earn interest and an annual preferred return, respectively, at 18% per annum, on a quarterly compounding basis and are repaid from free cash flow (as defined in the loan agreement) to the fullest extent possible at the end of each quarter. There are no covenant requirements or stated maturity dates. As of As of September 30, 2019, the amount undrawn under the Navios Revolving Loans II was $4,503, of which Navios Acquisition may be required to fund an amount ranging from $0 to $4,503.
F-24
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 13: 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 delivering in the third and fourth quarter of 2020, respectively. 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 third quarter of 2021.
The future minimum commitments as of September 30, 2019 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, 2020 |
$ | 15,297 | ||
September 30, 2021 |
25,076 | |||
September 30, 2022 |
25,076 | |||
September 30, 2023 |
25,144 | |||
September 30, 2024 |
25,076 | |||
September 30, 2025 and thereafter |
185,443 | |||
Total |
$ | 301,112 |
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 Companys financial position, results of operations or liquidity.
NOTE 14: PREFERRED AND COMMON STOCK
Preferred Stock
Series C Convertible Preferred Stock
On March 30, 2011, pursuant to an Exchange Agreement Navios Holdings exchanged 511,733 shares of Navios Acquisitions common stock it held for 1,000 non-voting Series C Convertible Preferred Stock of Navios Acquisition. Each holder of shares of Series C Convertible Preferred Stock shall be entitled at their option at any time, after March 31, 2013 to convert all or any of the outstanding shares of Series C Convertible Preferred Stock into a number of fully paid and non-assessable shares of Common Stock determined by multiplying each share of Series C Convertible Preferred Stock to be converted by 512, subject to certain limitations. Upon the declaration of a common stock dividend, the holders of the Series C Convertible Preferred Stock are entitled to receive dividends on the Series C Convertible Preferred Stock in an amount equal to the amount that would have been received in the number of shares of Common Stock into which the Shares of Series C Convertible Preferred Stock held by each holder thereof could be converted. For the purpose of calculating earnings / (loss) per share this preferred stock is treated as in-substance common stock and is allocated income / (losses) and considered in the diluted calculation.
The Company was authorized to issue up to 10,000,000 shares of $0.0001 par value preferred stock in total with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors.
As of December 31, 2018 the Companys issued and outstanding preferred stock consisted of the 1,000 Series C Convertible Preferred Stock.
On February 7, 2019, all of the outstanding Series C convertible preferred shares of Navios Acquisition were converted into 511,733 shares of common stock of Navios Acquisition. As of September 30, 2019, no shares of Series C Convertible Preferred Stock were issued and outstanding.
Common Stock and Puttable Common Stock
The Board of Directors of Navios Acquisition has approved 1-for-15 reverse stock split of its issued and outstanding shares of common stock and on November 9, 2018, and the reverse stock split was approved by Navios Acquisitions stockholders. The reverse stock split was effective on November 14, 2018 and the common stock commenced trading on such date on a split adjusted basis. Please refer to Note 2.
F-25
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 February 2018, the Board of Directors of Navios Acquisition authorized a stock repurchase program for up to $25,000 of Navios Acquisitions common stock, for two years. Stock repurchases will be 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 will be determined by management based upon market conditions and other factors. Repurchases may be made pursuant to a program adopted under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The program does not require any minimum repurchase or any specific number or amount of shares of common stock and may be suspended or reinstated at any time in Navios Acquisitions discretion and without notice. The Board of Directors will review the program periodically. Repurchases will be subject to restrictions under Navios Acquisitions credit facilities and indenture. As of September 30, 2019, the Company had repurchased and cancelled 735,251 shares of common stock, at a total cost of approximately $7,493.
Under the terms of the Merger with Navios Midstream on December 13, 2018, Navios Acquisition acquired all of the outstanding publicly held common units of Navios Midstream though the issuance of 3,683,284 newly issued shares of Navios Acquisition common stock in exchange for the publicly held common units of Navios Midstream at an exchange ratio of 0.42 shares of Navios Acquisition for each Navios Midstream common unit.
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.
As of September 30, 2019, the Company was authorized to issue 250,000,000 shares of $0.0001 par value common stock of which 13,728,371 were issued and outstanding.
Stock based compensation
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 stock-holders 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 $694).
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 amounted to $91 and $0 for the three month periods ended September 30, 2019 and 2018, respectively, and it is reflected in general and administrative expenses on the statement of operations. The recognized compensation expense for the period is presented as adjustment to reconcile net (loss)/ income to net cash provided by operating activities on the statements of cash flows. For the nine month period ended September 30, 2019 and 2018, the effect of compensation expense arising from the stock-based arrangement described above amounted to $270 and $0, respectively.
There were no restricted stock or stock options exercised, forfeited or expired during the nine month period ended September 30, 2019.
Restricted shares outstanding and not vested were 129,269 shares as of September 30, 2019 and December 31, 2018.
The estimated compensation cost relating to service conditions of non-vested restricted stock, not yet recognized was $411 as of September 30, 2019 and is expected to be recognized over the weighted average time to vest of 3.2 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.
F-26
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 holders of restricted stock are entitled to dividends paid on the same schedule as paid to the stock holders 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 amounted to $143 and $275 for the three month periods ended September 30, 2019 and 2018, respectively, and it is reflected in general and administrative expenses on the statement of operations. The recognized compensation expense for the period is presented as adjustment to reconcile net (loss)/ income to net cash provided by operating activities on the statements of cash flows. For the nine month period ended September 30, 2019 and 2018, the effect of compensation expense arising from the stock-based arrangement described above amounted to $424 and $816, respectively.
There were no restricted stock or stock options exercised, forfeited or expired during the nine month period ended September 30, 2019.
Restricted shares outstanding and not vested were 88,741 as of September 30, 2019.
The estimated compensation cost relating to service conditions of non-vested restricted stock, not yet recognized was $550 as of September 30, 2019 and is expected to be recognized over the weighted average time to vest of 2.2 years.
Stock options
The weighted average contractual life of the 100,000 stock options outstanding, that were issued in October 2013 and vested ratably through a three year period, was 4.1 years as of September 30, 2019. There was no effect of compensation expense arising from the stock options as of September 30, 2019.
NOTE 15: 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 Acquisitions 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.
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, 2019 (unaudited) |
Three Month Period ended September 30, 2018 (unaudited) |
Nine Month Period ended September 30, 2019 (unaudited) |
Nine Month Period ended September 30, 2018 (unaudited) |
|||||||||||||
Asia |
$ | 45,150 | $ | 24,237 | $ | 146,934 | $ | 77,028 | ||||||||
Europe |
5,715 | 7,512 | 14,863 | 22,213 | ||||||||||||
United States |
8,100 | 9,840 | 32,872 | 29,977 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 58,965 | $ | 41,589 | $ | 194,669 | $ | 129,218 | ||||||||
|
|
|
|
|
|
|
|
F-27
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 16: (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, 2019 |
For the Three Months Ended September 30, 2018 |
For the Nine Months Ended September 30, 2019 |
For the Nine Months Ended September 30, 2018 |
|||||||||||||
Numerator: |
||||||||||||||||
Net loss |
$ | (56,396 | ) | $ | (23,408 | ) | $ | (72,085 | ) | $ | (69,942 | ) | ||||
Less: |
||||||||||||||||
Dividend declared on restricted shares |
(65 | ) | (35 | ) | (196 | ) | (106 | ) | ||||||||
Undistributed loss attributable to Series C participating preferred shares |
| 1,196 | (13 | ) | 3,516 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss attributable to common stockholders, basic |
$ | (56,461 | ) | $ | (22,247 | ) | $ | (72,294 | ) | $ | (66,532 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Plus: |
||||||||||||||||
Dividend declared on restricted shares |
| | | | ||||||||||||
Net loss attributable to common stockholders, diluted |
$ | (56,461 | ) | $ | (22,247 | ) | $ | (72,294 | ) | $ | (66,532 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Denominator: |
||||||||||||||||
Denominator for basic net loss per share weighted average shares |
13,510,361 | 9,522,463 | 13,446,836 | 9,678,995 | ||||||||||||
Series A preferred stock |
| | | | ||||||||||||
Restricted shares |
| | | | ||||||||||||
Denominator for diluted net loss per share adjusted weighted average shares |
13,510,361 | 9,522,463 | 13,446,836 | 9,678,995 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss per share, basic and diluted |
$ | (4.18 | ) | $ | (2.34 | ) | $ | (5.38 | ) | $ | (6.87 | ) | ||||
|
|
|
|
|
|
|
|
Potential common shares of 318,010, for the three and nine month period ended September 30, 2019 (which includes stock options and restricted shares), have an anti-dilutive effect (i.e., those that increase earnings per share or decrease loss per share) and are therefore excluded from the calculation of diluted earnings per share.
Potential common shares of 730,061 for the three and nine month periods ended September 30, 2018 (which includes stock options and restricted shares), have an anti-dilutive effect (i.e., those that increase earnings per share or decrease loss per share) and are therefore excluded from the calculation of diluted earnings per share.
NOTE 17: 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 vessels flag state, these are deducted from the amount of the duty to be paid in Greece.
The amount included in Navios Acquisitions statements of operations related to the Greek Tonnage tax for the nine months ended September 30, 2019, and 2018 was $639 and $855, respectively, and for the three months ended September 30, 2019 and 2018, it was $240 and $83, respectively.
F-28
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)
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 Acquisitions 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 Companys shares, but no assurance can be given that this will remain so in the future.
NOTE 18: SUBSEQUENT EVENTS
On November 5, 2019, the Board of Directors declared a quarterly cash dividend in respect of the third quarter of 2019 of $0.30 per share of common stock which will be paid on January 9, 2020, to stockholders of record as of December 17, 2019. 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 Acquisitions 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.
On October 8, 2019, the Company finalized the sale of the Nave Electron delivering the vessel to her new owners. (Please refer to Note 5)
In October 2019, Navios Acquisition entered into sale and lease back agreements with unrelated third parties for $90,811 in order to finance six product tankers. (Please refer to Note 10)
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. (Please refer to Note 10)
In October 2019, Navios Acquisition fully prepaid its Term Loan B facility due in June 2020.
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 estimated offering costs $320, amounted to $14,005.
In October and November 2019, Navios Acquisition repurchased $12,000 of its 2021 Notes from unaffiliated third parties in open market transactions for a cash consideration of $9,950.
On November 22, 2019, an agreement was reached to liquidate Navios Europe I. As of September 30, 2019, Navios Acquisition had a receivable of $32,299 from Navios Europe I. It is expected that Navios Acquisition will acquire the five tankers owned by Navios Europe I. This receivable along with debt financing will be used to finance the acquisition. The agreement is subject to definitive documentation which is expected to be completed by the end of 2019.
F-29
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: November 29, 2019 |
EXHIBIT 4.1
Dated 8 October 2019
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 up to US$31,800,000
to provide finance secured on one 2011-built very large crude carrier
Index | ||||||
Clause | Page | |||||
1 |
Interpretation | 1 | ||||
2 |
Facility | 19 | ||||
3 |
Position of the Lenders | 19 | ||||
4 |
Drawdown | 20 | ||||
5 |
Interest | 21 | ||||
6 |
Interest Periods | 23 | ||||
7 |
Default Interest | 24 | ||||
8 |
Repayment and Prepayment | 25 | ||||
9 |
Conditions Precedent | 27 | ||||
10 |
Representations and Warranties | 28 | ||||
11 |
General Undertakings | 32 | ||||
12 |
Corporate Undertakings | 36 | ||||
13 |
Insurance | 38 | ||||
14 |
Ship Covenants | 44 | ||||
15 |
Security Cover | 50 | ||||
16 |
Payments and Calculations | 52 | ||||
17 |
Application of Receipts | 54 | ||||
18 |
Application of Earnings | 55 | ||||
19 |
Events of Default | 57 | ||||
20 |
Fees and Expenses | 63 | ||||
21 |
Indemnities | 64 | ||||
22 |
No Set-Off or Tax Deduction | 67 | ||||
23 |
Illegality, etc. | 70 | ||||
24 |
Increased Costs | 70 | ||||
25 |
Set-Off | 72 | ||||
26 |
Transfers and Changes in Lending Offices | 73 | ||||
27 |
Variations and Waivers | 78 | ||||
28 |
Notices | 81 | ||||
29 |
Supplemental | 83 | ||||
30 |
Law and Jurisdiction | 84 |
Schedules
Schedule 1 Lenders and Commitments |
||||
Schedule 2 Drawdown Notice |
||||
Schedule 3 Condition Precedent Documents |
||||
Part A |
||||
Part B |
||||
Schedule 4 Mandatory Cost Formula |
||||
Schedule 5 Transfer Certificate |
||||
Schedule 6 Power of Attorney |
||||
Schedule 7 Form of Compliance Certificate |
||||
Schedule 8 Ship |
Execution |
||||
Execution Pages |
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THIS AGREEMENT is made on 8 October 2019
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
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 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.
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;
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;
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 and SSY Valuations Services Ltd. 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 Managers Undertaking means, in relation to the Ship, a letter of undertaking including (inter alia) an assignment of the Approved Managers 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;
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;
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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 requirementRules 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;
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 (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;
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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;
Correction Rate means, at any relevant time in relation to an Applicable Lender, the amount (expressed as a rate per annum) by which that Lenders 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 Lenders 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 Lenders cost of funding deposits in Dollars for that Interest Period, such determination being conclusive and binding in the absence of manifest error;
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);
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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 |
(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;
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 |
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(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;
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 the date falling on the earlier of (i) the date falling twelve (12) months from the Drawdown Date and (ii) 30 October 2020;
Finance Documents means together:
(a) | this Agreement; |
(b) | the Agency and Trust Agreement; |
(c) | the Account Pledges; |
(d) | the Mortgage; |
(e) | the Deed of Covenant; |
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(f) | the General Assignment; |
(g) | any Charterparty Assignment; |
(h) | the Approved Managers Undertaking; and |
(i) | any other document (whether creating a Security Interest or not) which is executed at any time by the Borrower, 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 each period of one year commencing on 1 January in respect of which the consolidated financial statements of Navios Acquisition 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 Borrower and all subsidiaries directly or indirectly owned by the Borrower and member of the Group shall be construed accordingly;
IACS means the International Association of Classification Societies;
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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;
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;
8
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 Banks 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;
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;
Margin means 2.80 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;
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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 Clause 11.19;
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;
Navios Acquisition 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, the Marshall Islands MH96960;
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:
(a) | Security Interests created by the Finance Documents; |
(b) | liens for unpaid masters and crews wages in accordance with usual maritime practice; |
(c) | liens for salvage; |
(d) | liens arising by operation of law for not more than one months prepaid hire under any charter in relation to the Ship not prohibited by this Agreement; |
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(e) | liens for masters 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 14.13; |
(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 companys 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 |
(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); |
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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 |
(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;
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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 CorporationRetention 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 |
(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; |
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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 and (ii) the net realisable value of any additional security provided at that time under Clause 15, 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 any 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 |
(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;
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Shareholder means Navios Maritime Midstream Operating L.L.C., a limited liability company formed in the Republic of the Marshall Islands, having its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, the Marshall Islands MH96960;
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; |
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 Ships insurers in which the insurers agree to treat the Ship as a total loss; and |
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(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;
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;
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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;
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 persons 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
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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.
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.
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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.
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.
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.
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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 Lenders participation in the Loan; and |
(c) | the duration of the first Interest Period in respect of the Loan. |
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. |
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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 Lenders 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 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 Lenders 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 |
(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.
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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 |
If the Agents notice under Clause 5.8 is served before the Loan is borrowed:
(a) | In a case falling within paragraph (a) of Clause 5.7, the Lenders obligation to make the Loan available; and |
(b) | In a case falling within paragraph (b) of Clause 5.7, the Affected Lenders obligation to participate in the Loan, |
shall be suspended while the circumstances referred to in the Agents notice continue.
5.10 | Negotiation of alternative rate of interest |
(a) | If the Agents notice under Clause 5.8 is served after the Loan is borrowed, the Borrower, the Agent, the Lenders (subject to Clause 27.5) or (as the case may be) the Affected Lender shall use reasonable endeavours to agree, within 30 days after the date on which the Agent serves its notice under Clause 5.8 (the Negotiation Period), an alternative interest rate or (as the case may be) an alternative basis for the Lenders or (as the case may be) the Affected Lender to fund or continue to fund their or its Contribution during the Interest Period concerned. |
(b) | During the Negotiation Period the Agent shall, with the agreement of each Lender or (as the case may be) the Affected Lender, set an interest period and interest rate representing the Cost of Funding of the Lenders or (as the case may be) the Affected Lender in Dollars, in each case as determined by the relevant Lender, or in any available currency of their or its Contribution plus the Margin and the Mandatory Cost (if any). |
5.11 | Application of agreed alternative rate of interest |
Any alternative interest rate or an alternative basis which is agreed during the Negotiation Period shall take effect in accordance with the terms agreed.
5.12 | Alternative rate of interest in absence of agreement |
If an alternative interest rate or alternative basis is not agreed within the Negotiation Period, and the relevant circumstances are continuing at the end of the Negotiation Period, then the procedure provided for in paragraph (b) of Clause 5.10 shall be repeated at the end of the interest period set by the Agent pursuant to that Clause.
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5.13 | Notice of prepayment |
If the Borrower does not agree with an interest rate set by the Agent under Clause 5.12, the Borrower may give the Agent not less than 5 Business Days notice of their intention to prepay the Loan at the end of the interest period set by the Agent.
5.14 | Prepayment; termination of Commitments |
A notice under Clause 5.13 shall be irrevocable; the Agent shall promptly notify the Lenders or (as the case may require) the Affected Lender of the Borrowers notice of intended prepayment; and:
(a) | on the date on which the Agent serves that notice, the Total Commitments or (as the case may require) the Commitment of the Affected Lender shall be cancelled; and |
(b) | on the last Business Day of the interest period set by the Agent, the Borrower shall prepay (without premium or penalty) the Loan or, as the case may be, the Affected Lenders Contribution, together with accrued interest thereon at the applicable rate plus the Margin and the Mandatory Cost (if any). |
5.15 | Application of prepayment |
The provisions of Clause 8 shall apply in relation to the prepayment.
6 | INTEREST PERIODS |
6.1 | Commencement of Interest Periods |
The first Interest Period shall commence on the Drawdown Date and each subsequent Interest Period shall commence on the expiry of the preceding Interest Period.
6.2 | Duration of normal Interest Periods |
Subject to Clauses 6.3 and 6.4, each Interest Period shall be:
(a) | 3 or 6 months; or |
(b) | such other period (as proposed by the Borrower to the Agent not later than 11:00 a.m. (Hamburg time) 5 Business Days before the commencement of the Interest Period) as the Agent may, with the authorisation of the Majority Lenders, agree with the Borrower (failing which the Interest Period shall be three months). |
6.3 | Duration of Interest Periods for Instalments |
In respect of an amount due to be repaid under Clause 8 on a particular Repayment Date, an Interest Period to which that Repayment Date relates shall end on that Repayment Date.
6.4 | Non-availability of matching deposits for Interest Period selected |
If, after the Borrower has proposed and the Lenders have agreed an Interest Period longer than three months, any Lender notifies the Agent by 11.00 a.m. (Hamburg time) on the third Business Day before the commencement of the Interest Period that it is not satisfied that deposits in Dollars for a period equal to the Interest Period will be available to it in the Relevant Interbank Market when the Interest Period commences, the Interest Period shall be of three months.
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7 | DEFAULT INTEREST |
7.1 | Payment of default interest on overdue amounts |
The Borrower shall pay interest in accordance with the following provisions of this Clause 7 on any amount payable by the Borrower under any Finance Document which the Agent, the Security Trustee or the other designated payee does not receive on or before the relevant date, that is:
(a) | the date on which the Finance Documents provide that such amount is due for payment; or |
(b) | if a Finance Document provides that such amount is payable on demand, the date on which the demand is served; or |
(c) | if such amount has become immediately due and payable under Clause 19.4, the date on which it became immediately due and payable. |
7.2 | Default rate of interest |
Interest shall accrue on an overdue amount from (and including) the relevant date until the date of actual payment (as well after as before judgment) at the rate per annum determined by the Agent to be 4 per cent. above:
(a) | in the case of an overdue amount of principal, the higher of the rates set out at paragraph (a) and (b) of Clause 7.3; or |
(b) | in the case of any other overdue amount, the rate set out at paragraph (b) of Clause 7.3. |
7.3 | Calculation of default rate of interest |
The rates referred to in Clause 7.2 are:
(a) | the rate applicable to the overdue principal amount immediately prior to the relevant date (but only for any unexpired part of any then current Interest Period applicable to it); |
(b) | the aggregate of the Margin, any Correction Rate and the Mandatory Cost (if any) plus, in respect of successive periods of any duration (including at call) up to three months which the Agent may select from time to time: |
(i) | LIBOR; or |
(ii) | if the Agent (after consultation with the Reference Banks) determines that Dollar deposits for any such period are not being made available to any Reference Bank by leading banks in the Relevant Interbank Market in the ordinary course of business, a rate from time to time determined by the Agent by reference to the cost of funds to the Reference Banks from such other sources as the Agent (after consultation with the Reference Banks) may from time to time determine. |
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7.4 | Notification of interest periods and default rates |
The Agent shall promptly notify the Lenders and the Borrower of each interest rate determined by the Agent under Clause 7.3 and of each period selected by the Agent for the purposes of paragraph (b) of Clause 7.3; but this shall not be taken to imply that the Borrower is liable to pay such interest only with effect from the date of the Agents notification.
7.5 | Payment of accrued default interest |
Subject to the other provisions of this Agreement, any interest due under this Clause shall be paid on the last day of the period by reference to which it was determined; and the payment shall be made to the Agent for the account of the Creditor Party to which the overdue amount is due.
7.6 | Compounding of default interest |
Any such interest which is not paid at the end of the period by reference to which it was determined shall be compounded every 6 months and shall be payable on demand.
8 | REPAYMENT AND PREPAYMENT |
8.1 | Amount of Instalments |
The Borrower shall repay the Loan by:
(a) | 4 equal consecutive quarterly instalments, each in the amount of $846,000 (each an Instalment and, together, the Instalments); and |
(b) | a balloon instalment in the amount of $28,416,000 (the Balloon Instalment), |
Provided that, if the amount of the Loan advanced is less than $31,800,000, the aggregate amount of the Instalments and the Balloon Instalment shall be reduced by an amount equal to the undrawn amount on a pro rata basis.
8.2 | Repayment Dates |
The first Instalment shall be repaid on the date falling three months after the Drawdown Date, each subsequent Instalment shall be repaid at three-monthly intervals thereafter and the last Instalment, shall be repaid together with the Balloon Instalment, on the Final Repayment Date.
8.3 | Final Repayment Date |
On the Final Repayment Date, the Borrower shall additionally pay to the Agent for the account of the Creditor Parties all other sums then accrued or owing under any Finance Document.
8.4 | Voluntary prepayment |
Subject to the following conditions, the Borrower may prepay the whole or any part of the Loan on the last day of an Interest Period or on such other date agreed between the Borrower and the Agent.
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8.5 | Conditions for voluntary prepayment |
The conditions referred to in Clause 8.4 are that:
(a) | a partial prepayment shall be $500,000 or a higher integral multiple thereof (or such other amount acceptable to the Agent in its sole discretion); |
(b) | the Agent has received from the Borrower at least 3 Business Days prior irrevocable written notice (each, a Prepayment Notice) specifying the amount to be prepaid and the date on which the prepayment is to be made; |
(c) | the Borrower has provided evidence satisfactory to the Agent that any consent required by the Borrower or any Security Party in connection with the prepayment has been obtained and remains in force, and that any regulation relevant to this Agreement which affects the Borrower or any Security Party has been complied with; and |
(d) | the Borrower is in compliance with Clause 8.10 on or prior to the date of prepayment. |
8.6 | Optional facility cancellation |
The Borrower shall be entitled, upon giving to the Agent not less than 5 Business Days prior written notice, to cancel, in whole or in part, and, if in part, by an aggregate amount not less than $500,000 or a higher multiple thereof (or such other amount acceptable to the Agent in its sole discretion), the undrawn balance of the Total Commitments (the Cancellation Notice) which notice shall be irrevocable. Upon such cancellation taking effect on expiry of a Cancellation Notice the several obligations of the Lenders to make their respective Commitments available in relation to the portion of the Total Commitments to which such Cancellation Notice relates shall terminate.
8.7 | Cancellation Notice or Prepayment Notice |
The Agent shall notify the Lenders promptly upon receiving a Cancellation Notice or Prepayment Notice, and shall provide, in the case of a Prepayment Notice, any Lender which so requests with a copy of any document delivered by the Borrower under paragraph (c) of Clause 8.5.
8.8 | Mandatory prepayment |
The Borrower shall be obliged to prepay the Loan if the Ship:
(a) | is sold, on or before the date on which the sale is completed by delivery of the Ship to the buyer; or |
(b) | becomes a Total Loss, on the earlier of the date falling 90 days after the Total Loss Date and the date of receipt by the Security Trustee of the proceeds of insurance relating to such Total Loss. |
8.9 | Effect of Prepayment Notice and Cancellation Notice |
Neither a Prepayment Notice nor a Cancellation Notice may be withdrawn or amended without the consent of the Agent, given with the authorisation of the Majority Lenders, and:
(a) | in the case of a Prepayment Notice, the amount specified in that Prepayment Notice shall become due and payable by the Borrower on the date for prepayment specified in that Prepayment Notice; and |
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(b) | in the case of a Cancellation Notice, the amount cancelled shall be permanently cancelled and may not be borrowed. |
8.10 | Amounts payable on prepayment |
A prepayment shall be made together with accrued interest (and any other amount payable under Clause 21 or otherwise) in respect of the amount prepaid and, if the prepayment is not made on the last day of an Interest Period, together with any sums payable under Clause 21.2 but without premium or penalty.
8.11 | Application of partial prepayment or cancellation |
Each partial prepayment:
(a) | if made pursuant to Clauses 8.4, shall be applied in order of maturity against the Instalments and the Balloon Instalment; and |
(b) | if made pursuant to Clauses 5.13, 15.2, 19.2, 23.3 or 24.6, shall be applied pro rata against the Instalments and the Balloon Instalment. |
8.12 | No reborrowing |
No amount prepaid or cancelled may be (re)borrowed.
9 | CONDITIONS PRECEDENT |
9.1 | Documents, fees and no default |
Each Lenders obligation to contribute to the Loan is subject to the following conditions precedent:
(a) | that, on or before the date of this Agreement, the Agent receives the documents described in Part A of Schedule 3 in form and substance satisfactory to the Agent and its lawyers; |
(b) | that, on or before the Drawdown Date but prior to the borrowing of the Loan, the Agent receives; |
(i) | the documents and conditions described in Part B of Schedule 3 in form and substance satisfactory to the Agent and its lawyers; |
(ii) | payment in full of the structuring fee payable pursuant to paragraph (a) of Clause 20.1 and of any commitment fee payable pursuant to paragraph (b) of Clause 20.1; and |
(iii) | payment of any expenses payable pursuant to Clause 20.2 which are due and payable on the Drawdown Date, |
(iv) | save for any documents and conditions that the Agent agrees, in its absolute sole discretion, at the Borrowers request to receive after any prepositioning of funds but before the release of the Loan; |
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(c) | that both at the date of the Drawdown Notice and at the Drawdown Date: |
(i) | no Event of Default or Potential Event of Default has occurred or would result from the borrowing of the Loan; |
(ii) | the representations and warranties in Clause 10 and those of the Borrower, the Approved Manager or any Security Party which are set out in the other Finance Documents would be true and not misleading if repeated on each of those dates with reference to the circumstances then existing; |
(iii) | none of the circumstances contemplated by Clause 5.7 has occurred and is continuing; and |
(iv) | there has been no Material Adverse Change; and |
(d) | that, if the Security Cover Ratio were applied immediately following the borrowing of the Loan, the Borrower would not be obliged to provide additional security or prepay part of the Loan under that Clause; and |
(e) | that the Agent has received, and found to be acceptable to it, any further opinions, consents, agreements and documents in connection with the Finance Documents which the Agent may, with the authorisation of the Majority Lenders, request by notice to the Borrower prior to the Drawdown Date. |
9.2 | Waiver of conditions precedent |
If the Majority Lenders, at their discretion, permit the Loan to be borrowed before certain of the conditions referred to in Clause 9.1 are satisfied, the Borrower shall ensure that those conditions are satisfied within 5 Business Days after the Drawdown Date (or such longer period as the Agent may, with the authorisation of the Majority Lenders, specify).
10 | REPRESENTATIONS AND WARRANTIES |
10.1 | General |
The Borrower represents and warrants to each Creditor Party as follows.
10.2 | Status |
The Borrower is duly incorporated, validly existing and in good standing under the laws of the Republic of the Marshall Islands.
10.3 | Share capital and ownership |
The Borrower has an authorised share capital of 500 registered shares with par value of $1 each, all of which shares have been issued and fully paid, and the legal title and beneficial ownership of all those shares is held, free of any Security Interest or other claim, by the Shareholder.
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10.4 | Corporate power |
The Borrower has the corporate capacity, and has taken all corporate action and obtained all consents necessary for it:
(a) | to execute the Underlying Documents to which it is a party and to maintain the Ship in its ownership under the applicable Approved Flag; |
(b) | to execute the Finance Documents to which the Borrower is a party; and |
(c) | to borrow under this Agreement and to make all the payments contemplated by, and to comply with, those Finance Documents to which the Borrower is a party. |
10.5 | Consents in force |
All the consents referred to in Clause 10.4 remain in force and nothing has occurred which makes any of them liable to revocation.
10.6 | Legal validity; effective Security Interests |
The Finance Documents to which the Borrower is a party, does now or, as the case may be, will, upon execution and delivery (and, where applicable, registration as provided for in the Finance Documents):
(a) | constitute the Borrowers legal, valid and binding obligations enforceable against the Borrower in accordance with their respective terms (having the requisite corporate benefit which is legally and economically sufficient); and |
(b) | create legal, valid and binding Security Interests (having the priority specified in the relevant Finance Document) enforceable in accordance with their respective terms over all the assets to which they, by their terms, relate, |
subject to any relevant insolvency laws affecting creditors rights generally.
10.7 | No third party Security Interests |
Without limiting the generality of Clause 10.6, at the time of the execution and delivery of each Finance Document to which the Borrower is a party:
(a) | the Borrower will have the right to create all the Security Interests which that Finance Document purports to create; and |
(b) | no third party will have any Security Interest (except for Permitted Security Interests) or any other interest, right or claim over, in or in relation to any asset to which any such Security Interest, by its terms, relates. |
10.8 | No conflicts |
The execution by the Borrower, the Approved Manager and each other Security Party of each Finance Document and each Underlying Document to which it is a party, and the borrowing by the Borrower of the Loan (or any part thereof), and its compliance with each Finance Document and each Underlying Document to which it is a party:
(a) | will not involve or lead to a contravention of: |
(i) | any law or regulation; or |
(ii) | the constitutional documents of the Borrower, the Approved Manager or other Security Party; or |
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(iii) | any contractual or other obligation or restriction which is binding on the Borrower, the Approved Manager or other Security Party or any of its assets, and |
(b) | will not have a Material Adverse Effect; and |
(c) | is for the corporate benefit of the Borrower or each other Security Party. |
10.9 | No withholding taxes |
All payments which the Borrower is liable to make under the Finance Documents to which it is a party may be made without deduction or withholding for or on account of any tax payable under any law of any Pertinent Jurisdiction.
10.10 | No default |
No Event of Default or Potential Event of Default has occurred.
10.11 | Information |
All information which has been provided in writing by or on behalf of the Borrower, the Approved Manager or any Security Party to any Creditor Party in connection with any Finance Document satisfied the requirements of Clause 11.5; all audited and unaudited accounts and financial statements which have been so provided satisfied the requirements of Clause 11.7 and are true, correct and not misleading and present fairly and accurately the financial position of the Borrower, Navios Acquisition or the Group (as the case may be); and there has been no change in the financial position or state of affairs of the Borrower, Navios Acquisition or the Group (or any member thereof) from that disclosed in the latest of those accounts which is likely to have a Material Adverse Effect.
10.12 | No litigation |
No legal or administrative action involving the Borrower, the Approved Manager or any Security Party (including action relating to any alleged or actual breach of the ISM Code or the ISPS Code) has been commenced or taken or, to the Borrowers knowledge, is likely to be commenced or taken which would, in either case, be likely to have a Material Adverse Effect.
10.13 | Validity and completeness of Underlying Documents |
Each Underlying Document constitutes valid, binding and enforceable obligations of the parties thereto in accordance with its terms and:
(a) | each of the copies of that Underlying Document delivered to the Agent before the date of this Agreement is a true and complete copy; and |
(b) | no amendments or additions to that Underlying Document have been agreed nor has any party which is the party to that Underlying Document, waived any of their respective rights thereunder. |
10.14 | Compliance with certain undertakings |
At the date of this Agreement, the Borrower is in compliance with Clauses 11.2, 11.4, 11.9, 11.13, 13, 14.3 and 14.10 and none of the events listed in paragraph (g) of Clause 19.1 has occurred in respect of either the Borrower or any Security Party.
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10.15 | Taxes paid |
The Borrower has paid all taxes applicable to, or imposed on or in relation to the Borrower, its business or the Ship.
10.16 | ISM Code and ISPS Code compliance |
All requirements of the ISM Code and the ISPS Code as they relate to the Borrower, the Approved Manager and the Ship have been complied with.
10.17 | No Money laundering |
The Borrower:
(a) | will not, and will procure that neither the Approved Manager nor any Security Party, to the extent applicable, will, in connection with this Agreement or any of the other Finance Documents, contravene or permit any subsidiary to contravene, any law, official requirement or other regulatory measure or procedure implemented to combat money laundering (as defined in Article 1 of the Directive 2015/849/EC of the European Parliament and of the Council of the European Communities) and comparable United States Federal and state laws. The Borrower shall further submit any documents and declarations on request, if such documents or declarations are required by any Creditor Party to comply with its domestic money laundering and/or legal identification requirements; and |
(b) | confirms that it is the beneficiary within the meaning of the German Anti Money Laundering Act (Gesetz über das Aufspüren von Gewinnen aus schweren Straftaten (Geldwäschegesetz)), acting for its own account and not for or on behalf of any other person for each part of the Loan made or to be made available to it under this Agreement. That is to say, it acts for its own account and not for or on behalf of anyone else. |
The Borrower will promptly inform the Agent by written notice, if it is not or ceases to be the beneficiary and will provide in writing the name and address of the beneficiary.
The Agent shall promptly notify the Lenders of any written notice it receives under this Clause 10.17.
10.18 | No immunity |
Neither the Borrower nor any of its assets is entitled to immunity on grounds of sovereignty or otherwise from any legal action or proceeding (including, without limitation, suit, attachment prior to judgement, execution or other enforcement).
10.19 | Choice of law |
The choice of the laws of England to govern this Agreement and those other Finance Documents which are expressed to be governed by the laws of England, the laws of Germany to govern the Account Pledges and the laws of the applicable Approved Flag State to govern the Mortgage, constitutes a valid choice of law and the submission by the Borrower or, as the case may be, the relevant Security Parties thereunder to the non-exclusive jurisdiction of the Courts of England and, in the case of the Account Pledges, Germany or, in the case of the Mortgage, the applicable Approved Flag State is a valid submission and does not contravene the laws of England or, in the case of the Account Pledges, Germany or, in the case of the Mortgage, the applicable Approved Flag State or the laws of any other Pertinent Jurisdiction,
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will be applied by the courts of any Pertinent Jurisdiction if this Agreement or those other Finance Documents or any claim thereunder comes under their jurisdiction upon proof of the relevant provisions of the laws of England or, in the case of the Account Pledges, Germany or, in the case of the Mortgage, the applicable Approved Flag State.
10.20 | Pari passu ranking |
The obligations of the Borrower and each Security Party under the Finance Documents to which it is a party are direct, general and unconditional obligations and rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except for obligations mandatorily preferred by law applying to companies generally.
10.21 | Repetition |
The representations and warranties in this Clause 10 shall be deemed to be repeated by the Borrower:
(a) | on the date of service of the Drawdown Notice; |
(b) | on the Drawdown Date; and |
(c) | with the exception of Clauses 10.9 and 10.14, on the first day of each Interest Period and on the date of any Compliance Certificate issued pursuant to Clause 11.20, |
as if made with reference to the facts and circumstances existing on each such day.
11 | GENERAL UNDERTAKINGS |
11.1 | General |
The Borrower undertakes with each Creditor Party to comply with the following provisions of this Clause 11 at all times during the Security Period except as the Agent, acting with the authorisation of the Majority Lenders, may otherwise permit in writing.
11.2 | Title and negative pledge |
The Borrower will:
(a) | hold the legal title to, and own the entire beneficial interest in its Ship, her Insurances and Earnings, free from all Security Interests and other interests and rights of every kind, except for those created by the Finance Documents and the effect of assignments contained in the Finance Documents and except for Permitted Security Interests; and |
(b) | not create or permit to arise any Security Interest (except for Permitted Security Interests) over any other asset, present or future. |
11.3 | No disposal of assets |
Subject to Clause 8.8, the Borrower will not transfer, lease or otherwise dispose of:
(a) | all or a substantial part of its assets, whether by one transaction or a number of transactions, whether related or not; or |
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(b) | any debt payable to it or any other right (present, future or contingent right) to receive a payment, including any right to damages or compensation, |
but paragraph (a) does not apply to any charter of the Ship.
11.4 | No other liabilities or obligations to be incurred |
The Borrower will not enter into any other investments, any sale and leaseback agreements, or any off-balance sheet transaction not incur any other liability or obligation (including, without limitation, any Financial Indebtedness or any obligations under a guarantee) except:
(a) | liabilities and obligations under the Finance Documents and the Underlying Documents to which it is or, as the case may be, will be a party; and |
(b) | liabilities or obligations reasonably incurred in the normal course of its business of trading, operating and chartering, maintaining and repairing the Ship. |
11.5 | Information provided to be accurate |
All financial and other information, including but not limited to factual information, exhibits and reports, which is provided in writing by or on behalf of the Borrower under or in connection with any Finance Document will be true, correct and not misleading and will not omit any material fact or consideration.