Thursday, February 19, 2009

Navios (NM) revisited: Setbacks in latest quarterly earnings from non-transparent transactions

There is more than meets the eye at Navios (NM). Investors needs to keep a careful watch on management decisions and balance sheet results. Management performance in the near future is critical.

In a previous analysis, I have commented on the complexity of the Navios (NM) balance sheet. My views have been cautious on this company. I feel justified in the latest NM earnings announcement.

Soaring expenses and large exceptional costs saw annual profit dive. Losses on warrants, swaps, doubtful accounts and newbuilding cancellation fees eroded a much-improved sales figure to leave the bottom line 56% down year-on-year.

The company continues to take on debt. NM revealed a total of $353.5 mio in debt financing “with favorable terms in difficult credit conditions”. The new deal includes a 10-year term deal for $120m secured at 60% of original vessel values to be used to partly fund the purchase of two Capesize newbuildings. There is also a three-year $33.5 mio convertible loan to partly fund another ship purchase and a $200 mio two-year revolving credit facility “for general corporate purposes”. This has to been seen in context of off-balance sheet items.

DnB NOR Bank shows NM with significant financing needs in 2009 and a shortfall of US$ 270 mio yet to be covered.

The rewards in NM are not without some risks.

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