Navios Maritime Holdings: Short-term debt maturities likely won’t be an issue (NYSE: NM)

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At the end of 2021, the dry bulk carrier Navios Maritime Holdings (NYSE: NM) or “Navios Holdings” announced the highly anticipated terms of its highly anticipated bailout by CEO and President Angeliki Frangou:

Bailout conditions

Company’s SEC filing

The two loans between related parties have term of four years and will not require cash interest or amortization payments for an initial period of 18 months (the “PIK Period”).

Instead, interest payments will be required to be made in the form of new unsecured convertible debentures (the “Convertible Debentures”).

The terms of the loan also provide for prepayment premiums ranging from 5% to 10% during the first 36 months, which would also be payable in the form of convertible debentures.

The Lender has the option to convert any portion of the outstanding balance of the Convertible Debentures into common stock of Navios Holdings at any time at a conversion price of $3.93. The convertible debentures have a term of five years and bear interest at the rate of 4% PIK payable at maturity, if not converted earlier.

The holder of the Convertible Debentures will be entitled to vote on an “as converted” basis with the common shareholders of the Company.

In addition, lender Navios Shipmanagement Holdings Corporation or “NSM” received an initial structuring fee of $24.0 million and an undisclosed amount of accrued interest and prepayment charges also in the form of convertible debentures.

During the PIK period, I would estimate that the amount of convertible debentures held by NSM should grow to nearly $100 million, which is enough for Angeliki Frangou to regain full control of the company.

Last month, Mrs. Frangou deposit an amended Form 13-D with the SEC disclosing a 40.8% ownership interest in the company on an as-converted basis.

Please note that the maximum number of shares issuable to NSM in connection with the convertible debentures is 51.5 million. If Navios Holdings issues the maximum number of shares, Ms. Frangou will own approximately 74.4% of the company’s common stock.

The company used proceeds from the new financing agreements along with available cash to repurchase $455.5 million of maturing 7.375% First Priority Mortgage Notes (the “Ship Mortgage Notes”) in January.

In March, Navios Holdings redeemed an additional $25 million of its 11.25% Senior Secured Notes (“the Senior Secured Notes”) due August, reducing the principal amount outstanding to $130 million. of dollars. According to Presentation Q4the company plans to repurchase an additional $50 million through the end of the second quarter and the remaining $80 million at maturity:

Senior Notes Refund

Company presentation

Despite the current insufficient cash available to redeem the remaining senior secured notes, I do not expect this to be a major issue as the company is expected to generate additional cash from its operations and could easily sell more ships to the former subsidiary Navios Maritime Partners (NMM) or “Navios Partners” as it has done in the past.

As of February 21, Navios Holdings had pegged approximately one-third of its available days for 2022 at an average TCE rate of $25,646 per day:

Operating cash flow forecast

Company presentation

According to statements made in the company Annual Report on Form 20-F, Angeliki Frangou recently indicated his intention to purchase up to $20 million of common stock in the company, subject to market conditions.

As of April 4, she had purchased common stock for about $10 million.

Conclusion

With dry bulk charter rates holding up reasonably well in the seasonally weak first quarter and the ability to raise additional cash by selling vessels to related party Navios Partners, the remaining short-term debt maturities are not expected to be a major problem for Navios Holdings.

That said, CEO and President Angeliki Frangou continues to have a stranglehold on the company due to the terms of the recent bailout. With interest on the loans being paid in additional convertible debentures, Ms. Frangou will soon regain full control of her shipping empire.

For my part, I still expect Ms. Frangou to bring together Navios Holdings and Navios Partners at the appropriate time in order to take a very substantial stake in Navios Partners as detailed in a previous article.

The holders of preferred shares of the company (NYSE:NM.PG) and (NYSE: NM.PH) will also have to hope for a Navios Holdings / Navios Partners merger because otherwise there is no reasonable chance that these stocks will recover.

Investors should stay on the sidelines and be wary of a possible future merger with Navios Partners to the detriment of common unitholders outside the partnership.