Executives: Angeliki Frangou – Chairman and Chief Executive Officer Stratos Desypris – Chief Financial Officer George Achniotis – Executive Vice President-Business

Development
Analysts: Noah Parquette – JPMorgan Prashant Rao –

Citigroup
Operator: Thank you for joining us for Navios Maritime Partners Fourth Quarter and Full Year 2016 Earnings Conference Call. With us today from the company are Chairman and CEO, Ms. Angeliki Frangou; Chief Financial Officer, Mr. Stratos 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 Partners’ website at www.navio-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 can also be found there. Now, I’ll review 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 conference call is as follows. First, Ms. Frangou will offer opening remarks. Next, Mr. Desypris will give an overview of Navios Partners financial results.

Then Mr. Achniotis will provide an operational update and an industry overview. And 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. Good morning to all of you joining us on today’s call. For the full year of 2016, Navios Partners reported revenue of $190.5 million and EBITDA of $76.9 million. For the fourth quarter of 2016, Navios Partners reported revenue of $49.7 million and EBITDA of $23.6 million. You’ll likely know that 2016 was the worst year in recorded history for the dry bulk market with EBITDA reaching a historical low for the first quarter of 2016.

In addition, the container sector suffered a difficult 2016, which included handing an expected bankruptcy filing and expanded Panama Canal making certain vessel size obsolete and a continuing investment on 20,000 TEU vessels, which is having a ripple effect on the usage of other container vessel sizes. We are only now beginning to see a return to normalcy through industry consolidation and record scrapping. Slide 5 details the management of our balance sheet. Since the beginning of 2016, we received about $151 million from the sale of vessels and HMM securities. During this period, we also reduced long-term debt by almost $178 million and increased the collateral value of the Term Loan B by about $100 million.

Also, by actively managing our maturities, only $32 million is due in November 2017 on the loan that is secured by two Capesize and one Panamax vessel. Our credit metrics have strengthened considerably because of these balance sheet initiatives. NMM 2016 net debt to book capitalization is 35.6% pro forma for the sale of the MSC Cristina and repayment of associated loans. Further, NMM’s adjusted interest coverage is at 4.7 times and net debt to adjusted EBITDA is at 4 times as of the end of 2016. Please turn to Slide 6.

As mentioned earlier, through the year, we reduced our debt by almost $178 million. To do that, we prepaid $25 million of principal on our Term Loan B and $181.8 million under the bank credit facility. The $178 million reduction in net debt includes the interest and retirement of $29 million of working capital facility. We also sold the Navios Apollon, a 2000-built Ultra-Handymax vessel, for a net price of $4.8 million. The vessel will be delivered to its new owners in Q2 of 2017.

We also completed the sale of the MSC Cristina for a net sale price of $125 million. As I have mentioned previously, we received profits of $106.25 million upon delivery of the vessel and then $18.75 million balance is guaranteed as seller’s credit accruing interest of 6% per annum. Slide 7 demonstrates NMM’s position as a unique platform for growth in the dry bulk sector. Our contracted revenue covers all our costs for 2017. As you can see on the table on Slide 7, we also have the ability to generate significant free cash flow through our open days.

Even in the low charter rate environment of today, we should be able to generate about $80 million in free cash flow in 2017. For 2019, we have about 7,900 open days and a low breakeven rate of about $1,350 per open day. Assuming identically rate for 2018 as for 2017, we will generate about $70 million in free cash flow. Slide 8 shows our liquidity. As of December 31, 2016, pro forma for the sale of the MSC Cristina, we had a total cash of $31.4 million and a total debt of $423.8 million.

We have a low net debt to book capitalization ratio of 36.5% and no significant debt maturities until 2018. At this point, I would like to turn the call over to Mr. Stratos Desypris, Navios Partners CFO, who will take you over the results of the fourth quarter and the full-year of 2016. Stratos?

Stratos Desypris: Thank you, Angeliki and good morning, all. I will briefly review Navios financial results for the fourth quarter and year-ended December 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 in Slide 9, our revenue for the fourth quarter of 2016 amounted to $49.7 million compared to $53.3 million for Q4 of 2015. The decrease was mainly due to the lower time charter equivalent rate in the quarter of $16,954 per day compared to $18,223 per day for the same quarter of 2015. EBITDA net income for the fourth quarter of 2016 were negatively affected by the $10 million impairment loss on one of our vessels. Excluding this item, adjusted EBITDA for the fourth quarter of 2016 amounted to $33.6, 5.8% lower than the same quarter last year primarily due to the decrease in the revenue.

Net income excluding the impairment loss amounted $7.9 million. Operating surplus for the fourth quarter of 2016 amounted to $24.1 million a replacement and maintenance CapEx reserve plus $3 million. Fleet utilization for the fourth quarter of 2016 was almost 100%. Moving to the full-year operations, time charter revenue for the year amounted to $190.5 million compared to $223.7 million in 2015. The decrease was mainly due to the decrease in time charter rate equivalent achieved.

In 2016 of $16,364 per day compared to $19,739 per day in 2015. EBITDA net income for 2016 were negatively affected by the $19.4 million loss on the sale of HMM shares and a $27.2 million impairment loss recognized on two vessels. Excluding these one-off items, adjusted EBITDA for 2016 amounted to a $123.5 million. Net income, excluding the one-off items that affected EBITDA, as well as the $20.5 million accelerated amortization of intangible assets, amounted to $14.6 million. Operating surplus for the year was $85 million.

Turning to Slide 10, I will briefly discuss some key balance sheet data as of December 31, 2016. Cash and cash equivalents was $25.1 million. As Angeliki mentioned earlier in 2017 we repaid $100 million of debt from the profit of the sale of MSC Cristina. Pro forma for January repayment net debt to book capitalization was 36.5%. 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 with an average age of 10 years. Our fleet consists of 31 vessels, nine Capsizes, 12 Panamaxes, three Ultra-Handymax and seven container vessels. In Slide 12, you can see the list of our fleet with the contracted rates and the respective expiration dates per vessel. Our charterers have an average remaining quarter duration of 2.8 years. 75% of our contracted revenue is from charterers longer than three years.

Currently, we have fixed approximately 73% of our available days for 2017, and we’re approximately 40% fixed for 2018. The expiration dates are staggered and the chartered durations extend to 2023. As from Slide 13, we are an efficient, low cost operator. We are benefitting from the economies of scale of our sponsor, and we have fixed our operational cost at low levels until December 2017. Our fixed costs are almost 15% below the industry average.

I now pass the call to George Achniotis, our Executive Vice President of Business Development, to discuss the Industry section. George?

George Achniotis: Thank you, Stratos. Please turn to Slide 15 and the dry bulk market fundamentals. Growth in the 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, GDP growth will be 3.4% in 2017 and 3.6% in 2018, accelerating from the 3.1% growth in 2016.

Advanced economies will increase from 1.6% in 2016 to 1.9% in 2017 and 2% in 2018. Emerging market growth will increase from 4.1% in 2016 to 4.5% in 2017 and 4.8 in 2018. Between 2014 and 2015, dry bulk rates remained flat with 2016 showing an increase of about 1.2%. Dry bulk trade growth is said to accelerate in 2017 and is forecast to grow by 2.1%. Since the all-time low 290 BDI in February 2016, the travel market has increased with BDI reaching as high as 1,257 in November.

We are currently experiencing the normal Q1 seasonal downturn, however, less severe than the last two years. Turn to Slide 16, imports of iron ore into China in 2016 have exceeded 1 billion tons for the first time in history. Chinese high-cost low-quality iron ore continues to be displaced by low-cost high-quality imported iron ore. The imports for 2016 went up by 7% to just over 1 billion tons. Chinese domestic iron ore production continues to decline with a 6% reduction in 2016.

Forecasters expect another increase in Chinese in 2017 by about 5% or 55 million tons. Preliminary January 2017 figure show imports, up by 12% year-on-year. Still production in China has surged particularly in December 2016 and ended the year up about 1%. High Chinese domestic demand for steel has been stimulated by large infrastructure projects and carrying the Chinese housing market. As Chinese steel exports reduce to CAGR for increased domestic demand, so steel production in the rest of the world has to increase to CAGR for a shortfall.

Further aiding seaborne iron ore shipments. With demand for iron ore, the delivered price to China has recovered. This has seen exporters outside of Brazil and Australia increase their shipments over 2016, a reversal in the declines seen over the last few years. With the new value super mine S11D Project coming online in 2017, high-grade Brazilian exports should gain market share further helping ton miles. Please turn to Slide 17.

2016 saw the Chinese coal markets – restructuring. Domestic coal production reduced by about 9% or approximately 300 million tons and imports of coal, surged by 21% or about 40 million tons. The Chinese government continues to rationalize domestic coal production closing down small inefficient mines and encouraging consolidation of large mining groups. Coal derived electricity production in China has grown by 7.3% during 2016 as economic activity picked up and – reduced by 5.6%. It is expected that the restructuring of the Chinese coal industry will continue to encourage imports as an efficient polluting mines are closed.

January 2017 coal imports are up by approximately 10 million tons or about 63% year-on-year. Indian coal imports started 2016 declining by 5.3% in Q1. Since May, imports have increased as electricity production has grown causing reduction of domestic wholesale price. By year-end 2016, Indian imports are projected to be similar to 2015 total. Combined Indian and Chinese imports are now expected to increase by about 7% annualized, a major improvement from forecast at the start of 2016.

Moving to Slide 18, 2016 ended with 47.2 million tons delivered versus an expected delivery of 92 million tons giving a 49% non-delivery rate. This is the highest non-delivery rate in the last few years. In January 2017 the pace of non-delivers remain at 50%. As of January 1, 2017 orderbook to 68.1 million deadweight tons. Preliminary non-deliveries for January up 50% with only $8.8 million deadweight tons delivery.

Using a 40% non-delivery rate for 2017, it is estimated about 35 million tons will actually deliver. Applying the five-year average scrub level for 2017, fleet growth will continue to be lower. With no incentive towards new buildings over the last couple of years, the order book going forward is very low, improving dry bulk fundamentals going forward. Turn to Slide 19, 2016 ended with almost 30 million tons scrap. Combined with actual delivers of 47.2 million tons, the dry bulk fleet grew by 2.2%, the lowest net fleet growth for many years.

Looking more at the details of net fleet growth, the Capesize and Panamax fleets have shown minimal fleet growth over the last two years. Through February 13, 2017, 2.5 million tons was scrapped. Over 2016, the average age of vessels scrapped continued to decline, expanding the pool of potential scrap candidates. With new regulations regarding balanced water treatment systems and sulfur emission restrictions coming into force, all the vessels will continue to scrap. Moving to Slide 20, over the last 20 years, container trade has expanded at 7% CAGR.

In 2016, container growth increase by 3.2%, is expected to grow by 4.2% in 2017 and a further 4.6% in 2018. Maersk Lines, the largest container liner operator, recently stated that there were signs that markets such as China, Brazil and West Africa have bottomed in recent months. Since April 2016, a Shanghai Shipping Exchange Container Freight Index has shown a change to an upward trend in container freight rates. I want to remind you that NMM’s container vessels are fixed on long-term charters, so they were not affected by the sluggishness in 2016. Turning to Slide 21, at the beginning of January, the container fleet consisted of about 5,100 vessels of about 20 million TEU capacity.

Vessels carrying mentioned 1,000 TEU have delivered during 2016 versus vessels carrying 1.3 million TEU projected, giving a non-delivery rate of 33% versus a non-delivery rate of just 11% in 2016. With an extended period of low charter rates, container scrapping has increased dramatically. In 2016, 194 vessels or about 700,000 TEU have been scrapped or about 3.3% of the total container fleet. With record scrapping in 2016, the container fleet experienced 1.2% net fleet growth, the smallest growth in the last several years. So far in 2017, the pace of demolition has increased with 138,000 TEU scrapped through February 13, giving negative fleet growth so far this year.

With no incentive to order new buildings in the current environment, the balance between demand and supply continues to improve. And this concludes my presentation. I would now like to turn the call over to Angeliki for her final comments. Angeliki?

Angeliki Frangou: Thank you. This completes our formal presentation.

We open the call to questions.

Operator: Ladies and gentlemen, the floor is now opened for your question. [Operator Instructions] Our first question comes from the line of Noah Parquette with JPMorgan.

Noah Parquette: Thanks. Yes, you guys have done a really good job of staying in front of the Term Loan B with the prepayments and adding collateral.

And it’s already a still bit out, but its next year, how are you guys thinking about replacing that piece of your capital structure going forward?

Angeliki Frangou: Good morning. I think that if you see all our – what we did, I guess, the last year, which was in a very difficult year concentrating our balance sheet, we reduced debt by 20% percentage points or $178 million prepayment, yet some was obligatory and some was opportunistic, taking care of banks that are leaving shipping and buying the debt at a discount – significant discount and naturally taking care of our maturity in Q4 of 2017. On the other side, we also strengthened the collateral of the Term Loan by $100 million, of which $52 million we did in Q4 with opportunistically acquiring vessels in Capesize, Japanese-built vessels, second hand, putting it in the Term Loan forecast. Why? Because that will give you a value expansion. So, today, we are sitting at the recovering dry bulk market.

I mean – guess maybe – spot can be seasonally down, but you can see the time charter rates, you can see the activity in the sectors is much strengthened. And you’re sitting on a recovering rate with a balance sheet that is actually today’s values. We have – I mean, we – if you see the entire portfolio, there is a 70% loan to value on charter adjusted on valuation.

Noah Parquette: Okay. And I guess it’s still tied into it.

I mean, regarding the dividend and essentially the resumption of the dividend, you guys feel like you have to get over that Term Loan B hurdle before, you’re comfortable putting in place one, or what you think in terms of timing of bringing back some sort of dividend.

Angeliki Frangou: I think this is – first of all you’d take care of your balance sheet, second of all, this is how start 2017. You start 2017, with $25 million free cash in 5,500 open days, which in today’s market one year [than charter] you are generating over $80 million combined CAGR. You are able to acquire vessels, today you are in the right point of the market to a growth strategy, not necessarily high dividend model, but you are able to really take care and grow that company being the best platform for growth in the dry.

Noah Parquette: Okay, sure growth, okay.

That’s all here thanks.

Angeliki Frangou: Thank you.

Operator: Our final question will come from the line of Chris Wetherbee with Citigroup.

Prashant Rao: Good morning. This is Prashant filling for Chris.

I wanted to follow-up just on those questions on the – you guys have done a great job, like you said, keeping in front of that Term Loan. I just wanted to get a sense, the market seems to be possibly turning a corner here, scrapping remains elevated. Do you anticipate that there would be any more collateral that would need to be put forward to that – towards the Term Loan? It doesn’t seem like it. And, I guess, the second part of the question is your $80 million free cash flow generation this year. Possibly, you’ll get a little bit more in the coming year.

Are vessel sales going to be – I mean, how do vessel sales factored in terms of cash generation as you look to clearing that hurdle in 2018?

Angeliki Frangou: We don’t pursue any collateral to be – put additional on the term loan. You have to realize that also some of the moves last year was also opportunistic, positioning the company, clearing our bank debt. So we have an easy $30 million repayment on 2017 with sufficient collateral on today’s market to really refinance it. So, some of the moves were really opportunistic on taking care also of the maturities. So the growth now and the ability to grow cash is really to be dedicated to our stakeholders – shareholders and stakeholders in general.

Prashant Rao: Okay, that makes sense. And then, in terms of scrapping, scrapping remains elevated and seems a bit more promising than we’ve seen over the past couple of years as to how sustained it’s been as we carry on end of 2016 into 2017. Looking at your fleet there, there’s still a few – I think it’s a Gemini, the Libra, the Felicity or a bit older Panamaxes, would you expect to take advantage of this market as you’re deleveraging also to maybe rejuvenate the fleet a little bit and include some scrapping there. What would you need to see to maybe retire those vessels or return opportunistic sale?

Angeliki Frangou: Listen, we’re looking on our entire protocol and if you see, we have already started doing that. Let’s say, we took the Navios Apollon, one of the small Supramaxes, good quality, Japanese, but small Supramax 17-year-old, and we sold that two times scrap much more higher values than other vessels can achieve.

This give you $5 million, which you can put back to work on a younger vessel and replenish into the better younger vessel. That is a kind of opportunity. On a vessel that is already 20 years old, you will take it to the end of its maturity with a significant – you will only get scrap value, so your incentive is on the older vessel bracket to replace immediately.

Prashant Rao: Okay. And then just one last question on the container fleet side.

The Yang Ming charted vessels that roll off in 2018, are those – are we past the point of having discussions or terms on the container side now that Hanjin is somewhat behind us and the Hyundai restructuring is behind us through their firm or are there continued talks with Yang Ming?

Angeliki Frangou: Yang Ming is owned 10% by the Taiwanese government, so it’s a wholly owned. I mean, the whole sector of container suffered from the Hanjin debacle, but I think we are past through that and I don’t think you have this kind of questions. Especially, Yang Ming is not considered of a risk.

Prashant Rao: Okay. I have figured, I just wanted to ask and make sure.

Thank you for the time, appreciate it.

Angeliki Frangou: Thank you.

Operator: Ladies and gentlemen, this concludes today’s conference call. You may now disconnect your lines.

Angeliki Frangou: Thank you.

This completes our Q4 results.