Executives: Angeliki Frangou – Chairman of the Board and Chief Executive Officer Efstratios Desypris – Chief Financial Officer George Achniotis – Executive Vice President-Business

Development
Analysts: Michael Webber – Wells Fargo Securities Noah Parquette – JPMorgan Amit Mehrotra – Deutsche Bank Prashant Nair – Citi

Research
Operator: Thank you for joining us for Navios Maritime Partners First Quarter 2016 Earnings Conference Call. With us today from the Company are Chairman and CEO, Ms. Angeliki Frangou; Chief Financial Officer, Mr. Efstratios Desypris; and Executive Vice President of Business Development, Mr. George Achniotis.

As a reminder, this conference call is being webcast. To access the webcast, please go to the Investor section of Navios Maritime Partners website at www.navios-mlp.com. You'll see the webcasting link in the middle of the page and a copy of the presentation referenced in today's earnings conference call will also be found there. Now, I'll read the Safe Harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners.

Forward-looking statements are statements that are not historical fact. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners management and are subject to numerous material risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements. Such risks are more fully discussed in Navios Partners' filings with the Securities and Exchange Commission including the Company's most recent 20-F. The information discussed in this conference call should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this conference call.

The agenda for today's call is as follows. First, Ms. Frangou will offer opening remarks; next Mr. Desypris will give his overview of Navios Partners' financial results; then Mr. Achniotis will provide an operational update and an industry overview; lastly, we'll open the call to take questions.

Now, I'll turn the call over to Navios Partners Chairman and CEO, Ms. Angeliki Frangou. Angeliki?

Angeliki Frangou: Thank you, Laura, and good morning to all of you joining us on today's call. For the first quarter of 2016, we earned $28.1 million of EBITDA and positive net income. While the MLP space experienced significant volatility during the first quarter of 2016, it appears to have brought on improved investor sentiment.

Recessionary fears appear to have eased while commodity prices have fallen often substantially. Slide 4 provides a 30-year view of the BDI. We have experienced the most difficult market that has ever existed in shipping highlighted by the low in the first quarter of 290 points on the BDI. This BDI was 43% lower than the all-time low established only a year ago. While the extended period of weakness in the drybulk industry is unprecedented, the BDI has recovered by 105% and is currently at 594 points subjecting that the nuclear [indiscernible].

This rate is coming into balance. Scrapping forecast reached 54.6 million deadweight tons or 7% of the drybulk fleet easily surpassing the prior record of 6.4% set in 1986. Moreover, there were new orders for only 18 million deadweight tons in 2015 and 12.3 million deadweight tons in 2016 here today. Cancelations or slippage on new building deliveries averaged around 40% over the past four years and this year it is almost 55%. As an example this particular combination of scrapping and slippage in new building orders, industry sources anticipate flat to negative net fleet growth in the drybulk industry in 2016 and 2017.

Slide 5 outlines additional developments. Since the beginning of 2016 we delevered our balance sheet to strengthen the Term Loan B metrics by approximately $73.5 million. That included $25 million cash payments and approximately $48.5 million contribution to the collateral by transferring the Yang Ming Unity, a 2006 built 8,204 TEU Container vessel. We would like to provide an update regarding our counterparties. HMM is currently engaged in a restructuring process and is seeking concession from charter owners in an effort to reduce cost.

NMM has five container vessels contracted out to HMM and are expected to generate $55 million in contracted annual revenue and $40 million in annual EBITDA. Hanjin Shipping has also declared that they are restructuring their debt. NMM has two Capesize vessels contracted out to Hanjin that are expected to generate $21 million in contracted annual revenue and $17 million in annual EBITDA. There has been a great deal of speculation as to the range of potential outcomes in respect of these two restructurings. We do not think it will be prudent for us to comment as to the probability of any outcome, but you can take comfort in our extensive experience in facing these kind of issues and the knowledge that we will work diligently to create the best results possible for our stakeholders.

Slide 6 highlights the $13.8 million annual savings enjoyed by harnessing the economies of scale created by Navios Holdings under the intercompany agreements approved by the shareholders. NM provides technical and commercial management services for a fixed fee and administrative services at cost. Importantly, NM does not charge any transactional fees whether for regulating loans or sales and purchase or otherwise creating value. To the extent that our fees are paid, these fees are paid to third-parties based on then market prices as compared to some of our peers that pay internal commissions ranging from 0.75% to 1.25% of the charters. The premise of the overall relationship is that there is a fair allocation of costs for the pricing of the share based on terms and conditions that third-parties generally would agree.

As a result of prices fixed through December 2017 at rates that are 17% below industry averages, our G&A expenses are $718 per day, one of the lowest among public shipping companies. Slide 7 demonstrates NMM's positioning as a unique platform for growth in the drybulk sector. Our balance sheet is strong and our credit ratios are healthy with net debt to book capitalization of 41.3% and interest coverage of 4.1 times as of the end of the first quarter. And our enterprise is valued relatively inexpensively as NMM trades with [indiscernible] EV to EBITDA of about 4.3 times. We also have the ability to generate significant free cash flow.

The table on slide 7 sets forth for a potential cash generation for the remaining of 2016. As you can see even in the low charter rate environment of today, we should be able to generate about $74 million assuming steady operating cost in current market rate for our open days. Slide 8 shows our liquidity. At March 31, 2016 we had a total cash of $35.8 million and a total debt of $577.1 million. We have a low net debt to book capitalization of 41.3% and no significant debt maturities until 2018.

At this point, I would like turn the call over to Mr. Efstratios Desypris, Navios Partners CFO, who will take over the results for the first quarter of 2016. Efstratios?

Efstratios Desypris: Thank you, Angeliki, and good morning all. I will briefly review Navios' financial results for the quarter ended March 31, 2016. The financial information is included in the press release and summarized in the slide presentation on the Company's website.

Moving to the financial results as shown on slide 9. Revenue for Q1 2016 decreased by 19.6% to $45.6 million compared to $56.8 million for Q1 of 2015. As Angeliki discussed earlier, in Q1 of 2016 the drybulk industry experienced the lowest level in history bottoming at 45% below the previous 30-year low. Time charter rates during the quarter reflected the depressed market as it decreased by 22% to $15,524 per day compared to $19,854 per day for Q1 2015. EBITDA for the quarter decreased by 26% to $28.1 million primarily because of the decrease in revenues discussed as well as $1.3 million increase in management fees mainly due to our larger own fleet.

This was mitigated by the decrease in time charter and voyage expenses by $1.6 million due to the delivery of the two charter vessels last year. Net income for the quarter amounted $0.2 million. Operating surplus for the quarter amounted $18.3 million. And the replacement and maintenance CapEx reserve was $3 million. Fleet utilization for the quarter was almost 100%.

Turning to slide 10, I will briefly discuss some key balance sheet data as of March 31, 2016. Cash and cash equivalents was $35.8 million. We do not have any immediate maturities or committed growth CapEx. Long-term debt including the current portion decreased by $20.9 million. Net debt to book capitalization decreased to 41.3% at the end of the quarter.

As Angeliki mentioned earlier, in 2016 we delevered our balance sheet and strengthened the Term Loan B metrics by approx. $73.5 million, of which $25 million represents cash payments of outstanding principal and the balance of approximately $48.5 million represents the market value of an additional collateral vessel the YM Unity. In this respect, Navios Partners prepaid in full $28.4 million of commercial bank debt. Slide 11 shows the details of our fleet. We have a large modern diverse fleet with a total capacity of 3.3 million deadweight tons.

Our fleet is young with an average age of 8.9 years. Our fleet consists of 31 vessels; 8 Capesizes, 12 Panamaxes, 3 Ultra-Handymax, and 8 container vessels. Slide 12 demonstrates our strong relationship with key participants in our industry. Our charters have an average remaining contract duration of 2.9 years. About 86% of our contracted revenue is from charters longer than three years.

Our charters are spread among a diverse group of counterparties. In slide 13 you can see the list of our fleet with the contracted rates and the respective expiration dates for the vessels. Currently we have fixed almost 90% of our available days for 2016 and we are 56% fixed for 2017. We do not have charter rate exposure to the container sector as our vessels are fixed for an average remaining period of approximately seven years. The expiration dates are staggered and the charter durations extend to 2027.

As shown in slide 14, we're an efficient low cost operator. We are benefiting from the economies of scale of our sponsor and we have removed the fixed operational cost for a 3% increase over two years until December 31, 2017. Our fixed costs are almost 17% below the industry average representing a benefit of $13.8 million based on the days of our fleet. I'll now pass the call to George Achniotis, our Executive Vice President of Business Development, to discuss the industry section. George?

George Achniotis: Thank you, Efstratios.

Please turn to slide 16 and the drybulk market fundamentals. Growth in world GDP generally coincides with growing raw material demand for steel and energy production, particularly as emerging markets urbanize and industrialize. According to the IMF, the rate of world GDP growth declined from 3.4% in 2014 to 3.1% in 2015. GDP growth is expected to increase to 3.2% in 2016 and 3.5% in 2017. Emerging and developing markets are expected to grow by 4.1% in 2016 and 4.6% in 2017.

Between 2014 and 2015, drybulk trade remained flat with 2016 forecast to show a small increase in trade of about 1% to 2%. Turning to slide 17, Chinese iron ore imports have increased by 12% CAGR between 2007 and 2015. Low cost Australian and Brazilian iron ore continues to displace more expensive lower quality domestic Chinese ore. In 2015 Chinese domestic iron ore production declined by over 8%. Steel production was slightly negative, but seaborne iron ore imports increased by 3%.

The year-to-date imports into China are up about 7% while domestic iron ore production continues to decline by about 7%. Steel production in China dipped in January and February, but rebounded in March as demand picked up for the peak domestic construction season. Steel exports from China continued at the high level seen in 2015 and they are up about 8% year-to-date. Please turn to slide 18. Additional efficient coal-fired power stations continue to be built in emerging markets as coal is needed for baseload power generation in many developing countries.

Environmental concerns, structurally cheap natural gas and domestic coal mining industries have created headwinds for the demand for additional seaborne thermal coal. As a result, global coal imports are forecast to slow by 1% in 2016. Chinese imports reduced in 2015 and continued to decline in Q1 of 2016. The Chinese domestic coal industry is coming to terms with a new world low price and is shutting down expensive and unsafe excess capacity. This should cause imports to start to rise again into China.

Moving to slide 19. As of January 1, the 2016 orderbook stood at 92.7 million deadweight tons. By April, 20.9 million deadweight tons delivered versus 45 million deadweight tons expected, a 54% non-delivery rate. This is the highest non-delivery rate in the last few years. If we assume 40% non-deliveries, then we estimate 2016 will see about 55 million deadweight tons actually delivered.

With the current 2016 scrapping rate annualized, net fleet growth should be very low this year. The orderbook as of January 1 for 2017 and 2018 as shown on the slide is not increasing substantially. In today's market with low charter rates, low vessel values, and lack of bank financing; the fleet could contract further going forward as they are delivering incentives to add orders for new ships. Turning to slide 20. The scrapping pace since the start of 2016 has been dramatic being the highest ever recorded as charter rates reached an all-time low.

Scrapping on an annualized pace is about 54 million deadweight tons for 2016. The Capesize and Panamax fleet are showing negative fleet growth so far in 2016. The Capesize fleet has contracted by nine vessels as 58 vessels have scrapped vessels 49 delivered. The Panamax fleet has seen 74 vessels scrapped versus 54 vessels delivered. That trend of negative fleet growth becomes more compelling based on the existing and projected orderbook in 2017 and 2018.

If the current low rate environment persists, we expect non-deliveries and scrapping to continue. Moving to slide 21. In the full-year 2015, 30.6 million deadweight tons were scrapped. So far in 2016, we have seen 18.9 million deadweight tons scrapped giving an annual pace of over 54 million deadweight tons or about 7% of the total fleet. This includes 58 Capesize vessels compared to 93 Capes in the whole of 2015 and 74 Panamax vessels compared to 92 Panamaxes in the whole of 2015.

If the current rate continues for the remainder of 2016, record high scrapping both in terms of deadweight and percentage of the fleet could be reached. Net fleet growth for 2016 is projected to be flat given historic non-deliveries and current rates of scrapping coupled with all-time low market levels. As discussed in the previous slide, the Capesize and Panamax vessels are showing negative fleet growth so far in 2016. This could be their first year of negative fleet growth since 1999 when their fleet contracted by 0.3%. The table on the bottom right shows that there is an increasing pool of scrap candidates as the average age of scrapping reduces.

Capesize average age of scrapping has reduced from 30 years five years ago to 23 years today. We regularly see vessels under 20 years of age being scrapped. Looking at the total drybulk fleet, there's 61 million deadweight tons 20 years or older and 126 million deadweight tons 15 years or older giving plenty of potential scrap candidates going forward. Moving to slide 22. Over the past 19 years container trade has expanded at 7.2% CAGR.

As world GDP growth declined between 2014 and 2015, there was also a reduction in the rate of container trade growth to 2.3% in 2015, the lowest since 2009. However, it is expected to increase by 3.8% in 2016. As demand growth is projected to be close to net fleet growth, charter rate should improve during the latter part of the year. NMM's container vessels are fixed on long-term charters so they are not affected by the sluggishness in 2015 and 2016. Turning to slide 23.

At the beginning of 2016, the container fleet consisted of 5,224 vessels of almost 20 million TEU capacity. Vessels carrying 300,000 TEU have delivered during 2016 versus a projection of vessels carrying 600,000 TEU giving a non-delivery rate of 50% versus a non-delivery rate of 11% in 2015. As non-deliveries have increased so has the rate of scrapping. So far in 2016, 51 vessels over 156,000 TEU have scrapped giving an annualized pace of over 460,000 TEU or about 2.4% of the total container fleet. Estimates are that TEU growth will be about 4% in 2016, about the same as the 3.8% estimated increase in container demand.

This concludes my presentation. I would now like to turn the call over to Angeliki for her final comments. Angeliki?

Angeliki Frangou: Thank you, George. This completes our formal presentation and we'll open the call to questions.

Operator: [Operator Instructions] Your first question comes from the line of Michael Webber of Wells Fargo.

Michael Webber: Hey, good morning. How are you?

Angeliki Frangou: Good morning.

Michael Webber: Just a couple of questions quickly around the Term Loan B and some of the credits that you went through and then a couple of questions on charters. But first around the collateral that's been added to the Term Loan B. Just in general maybe within just broader compliance, how much wiggle room do you guys have right now within the updated covenant around the term loan and how often is that math revisited from a compliance perspective?

Angeliki Frangou: Every quarter we test it as it is required.

We added $73.5 million on collateral and cash prepayments and that brings the total in compliance maintenance as it is required. You have to also realize that Q1 was beyond even the 30-year low. So I think from that point on, we believe that values will be expanding the same way as earnings have doubled. I'm not saying that you see that that was the low point of the cycle.

Michael Webber: So, there's no grades associated with it.

So let's say if it's tight enough, I guess would there be another cash payment next quarter and/or more collateral push if any to bump it up? If I can get a sense of whether this is going to be something you have to revisit in the next couple quarters as well?

Angeliki Frangou: I think asset values are going to be expanding. I think the low part of the cycle was Q1 and basically February which followed also the earnings. I think from that point on, you can see also from transactions there is a strong recovery in values.

Michael Webber: Okay. Just around the Hanjin and the HMM charters, there's a 30% figure that's tossed around in the media.

And without getting into too much detail around it, I'm just curious when you guys are looking at kind of internal budgeting or when you kind of lay out the credit metrics you laid out a figure 7%. What are you guys looking at in terms of are you guys going to model in kind of ongoing cash flows from those assets when you guys model out your compliance on a long-term basis?

Angeliki Frangou: Listen, we have particularly put on page 5 the contracted revenue. On HMM is $55 million contracted annual revenue, at 10% is about $5.5 million circa, and on Hanjin is about $2 million. So, that gives you an indication of the margins. You're going to be talking an annualized basis of about $7 million on a 10% plus rate.

But one thing I'd like to say is that in essence Korean Development Bank and Korean state has taken a decision to take through a period of court restructuring in both companies. HMM is ahead and Hanjin is following after that. You always have to realize whatever you read in the press is what is asked is obviously some additional views and there's also ways that may receive [indiscernible]. The actual cash asset we believe that is not going to be material. The other reason that I'd like to remind you is that the Company has on an annualized basis with all our contracted revenue for nine months we have about $74 million.

On a full year you should think that is about $100 million free cash generation.

Michael Webber: Okay. And you're right we see the [indiscernible] on associated debt in terms of what that haircut could look like. Maybe if we try to model this in today forms some kind of some sort of expectation around it. We've seen scenarios in the past where we've seen tribal projects get renegotiated, there are a couple that stick out my mind.

I think there were some COSCO assets a few years ago and then there's some smaller traders that have had to renegotiate. Is there anything different around this process relative to those in terms of using that kind of outcome as a comp for what you guys are negotiating here with HMM and Hanjin? Anything else that you need to…

Angeliki Frangou: You touch a very interesting point and what I think is really worth noticing. There are pure drybulk companies that we have seen them going actually to Chapter 11 in this kind of situations and there is the kind of COSCO which has a container arm within HMM and Hanjin, which makes a difference. You have seen that container companies have usually done volunteered court restructurings. We've seen it with ZIM, we have seen it in part with Friends entities, we have seen it along the way.

On a purely drybulk company, the most usual thing is to go to a court restructuring, which is totally different than out of court which means is a voluntary.

Michael Webber: Just one more and this is more housekeeping. I noticed on slide 14 that you have the fixed pricing for the management agreement through December 31 of 2017. Is that a new agreement or is that the old agreement? I think it was [indiscernible] the dollars that switched to kind of a passthrough?

Angeliki Frangou: We extended the renewed fixed two-year period at the 3% increase and now it is actually fixed for the next two years. One of the things we clarified on page 6, you can see that on the fixed and I think that is something that we like to have it very transparent.

The fixed fee, which is a lot of times compared to OpEx, includes also commercial management. And we have no additional technical management fees or commercial charges because we fix the vessel the usual 1%, 1.25% or any other fee. And then on the administrative services you can do a lot of G&A and in that aspect again, the G&A is one of the lowest in the public shipping companies. There is no sales and purchase fee, there is no loan financing transaction, or any fee whatsoever enhancing the value. So, we wanted to become very transparent so that people do understand that what sometimes they thought as OpEx in the case of Navios includes everything.

Michael Webber: There's a lot of color on page 6, but just to be clear. The fixed through December 2017, was that date in place as of Q4 or was that extended this quarter?

Angeliki Frangou: This got extended in January.

Michael Webber: Okay, perfect. All right. Thank you very much for the time, guys.

I appreciate it.

Angeliki Frangou: Thank you.

Operator: Your next question comes from the line of Noah Parquette of JPMorgan.

Noah Parquette: Thanks. I just had a follow-up question on the Term Loan B and what you did there.

Like you mentioned, I think we're all comfortable that asset values seem to have sort of bottomed, but you value the charters in terms of the collateral. Is what you did this quarter in anticipation of any sort of restructuring on the charters that you're discussing or would that be kind of an additional event that we're doing?

Angeliki Frangou: This is purely LTV maintenance and everything is charter free. So, in essence the Term Loan B lenders get the benefit of the charters. In essence everything is charter free. The entire balance sheet of the Company and all our loan-to-value compliance in all our loans is without the charters.

There is over $0.5 million on charter arrangements that exist on the different [indiscernible]. That is not part of the LTV, that is on top.

Noah Parquette: Okay. That's all I have. Thanks.

Operator: Your next question comes from the line of Chris Wetherbee of Citi.

Prashant Nair: Good morning. This is Prashant in for Chris.

Angeliki Frangou: Good morning.

Prashant Nair: Good morning.

My first question just following up on Michael's question about the HMM and Hanjin. In the restructuring process I understand that it's still in process right now, but just sort of seeing what's been restructured so far maybe with other companies, how should we be thinking about the duration being contracted versus the cash upfront component? Is there any sort of color we can think of in terms of structuring, in terms of modeling out cash flows or is it too early to tell?

Angeliki Frangou: I think it's too early. At the worst case scenario what you hear in the Bloomberg and et cetera is at 30%. That will have a 10% effect is $7 million. But I think this is too premature to actually model something.

Prashant Nair: Okay. And then turning to the drybulk side, rates have come up as you noted from 1Q and the scrapping level is sustaining. So, I guess sort of a two-part question. One, as you look to fix the remaining days for the year, are you seeing rates that are climbing above the 6,000 maybe towards 7,000 mark on the Capes and the Panamaxes? And then two, last year we saw high scrapping levels and then they went away in the summer time. What gives you confidence that you will have greater sort of sustained elevated scrapping level this year?

Angeliki Frangou: Actually 600 or slightly below 600 is a very low level on the BDI.

We are looking at rates that cover the OpEx, but they hardly cover financing costs and et cetera so this is not sustainable long-term level. We have seen that we have negative fleet growth on Capes from the full 2015 accumulative till this year. And in Panamaxes we are going to be turning negative not only for the year, but cumulative for the two years on Panamaxes this quarter. So with this in the background and knowing that we are not going be in a huge recessionary situation where the world has stabilized in a low level, we see that there is going to be this level or better. So, we don't see a deterioration from here.

Prashant Nair: Okay. Thanks very much. I'll turn it over.

Operator: Your next question comes from the line of Amit Mehrotra of Deutsche Bank.

Amit Mehrotra: Thank you very much.

Good afternoon everybody. Sorry I hopped on very late as I was on another earnings call, but couple of quick questions. On the $75 million of operating cash flow that you guys expect to generate this year, you mentioned acquiring assets. I apologize if this is asked already, but just any more color on. Did you have actually deals in the pipeline, timing because that's obviously a significant amount of cash, but given the weakness in the industry I wasn't really sure how that's going to be deployed from a timing standpoint?

Angeliki Frangou: Actually we are watching the market, I think we wanted to see stabilization and we will be viewing the market in the second half how it develops.

Amit Mehrotra: And then one other one on the containership assets vis-a-vis HMM. Have you spoken to the other owners to maybe have somewhat of a consolidated front in negotiations? I realize rates are different by owners, but not sure if you had any discussions there. And then also can you update us on your exposure to Yang Ming which I think has a slightly better balance sheet than the other two, but obviously still has some potential concerns given what's going on over there, if you could just update us there? Thanks.

Angeliki Frangou: Yang Ming is an investment that is owned by the Japanese government and in essence there is no question, there is not even any consideration that the Company has any problem. We have not heard, we have not seen, there is not any consideration.

It is owned by the Japanese government. And as for the Hyundai and Hanjin, I think we gave a lot of color and the rest is really we are part of a negotiating process that you have to wait to see the outcome. We feel comfortable on the situation.

Amit Mehrotra: Okay. Alright, that's all I had.

Thanks very much, guys.

Angeliki Frangou: Thank you.

Operator: Ladies and gentlemen, we have reached the allotted time for questions and answers. I'll now return the call to Ms. Angeliki Frangou for any additional or closing remarks.

Angeliki Frangou: Thank you. This completes our first quarter results.

Operator: Thank you for participating in today's conference call. You may now disconnect.