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Navios Maritime Holdings Inc. (NYSE:NM)

Q3 2011 Earnings Conference Call

November 17, 2011 08:30 ET

Executives

Angeliki Frangou – Chairman and Chief Executive Officer

Ted Petrone – President

Ioannis Karyotis – Senior Vice President, Strategic Planning

George Achniotis – Chief Financial Officer

Analysts

Natasha Boyden – Cantor Fitzgerald

Seth Lowry – Citi

Operator

Thank you for joining us for this morning’s Navios Maritime Holdings Third Quarter and Nine Months 2011 Earnings Conference Call. With us today from the company are Chairman and CEO, Ms. Angeliki Frangou; President, Mr. Ted Petrone; SVP of Strategic Planning, Mr. Ioannis Karyotis; and Chief Financial Officer, Mr. George Achniotis. As a reminder, this conference call is also being webcast. To access the webcast, please go to the Investors section of Navios Holdings’ website, www.navios.com.

Before I review the structure of this morning’s call, I’d like to 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. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Holdings management and are subject to risks and uncertainties, which could cause actual results to differ from forward-looking statements.

Such risks are more fully discussed in Navios Holdings’ filings with the Securities and Exchange Commission. The information set forth in this conference call should be understood in light of such risks. Navios Holdings does not assume any obligation to update the information contained in the call. Thank you.

The agenda for today’s call is as follows. First, Ms. Frangou will offer opening remarks. Next, Mr. Petrone will provide an operational update and an industry overview. Following Mr. Petrone’s remarks, Mr. Karyotis will go through an overview, including recent financials for Navios South American Logistics. Then Mr. Achniotis will review Navios Holdings’ financial results. Lastly, we will open the call to take your questions.

I would now like to turn the call over to Navios Holdings’ Chairman and CEO, Ms. Angeliki Frangou. Angeliki?

Angeliki Frangou – Chairman and Chief Executive Officer

Thank you, (Laura). Good morning to all of you joining us on today’s call. We are pleased to report our results for the third quarter of 2011. We had a solid quarter. Revenue and EBITDA were up 7% and 6% respectively. This was not an easy task given the difficult market we have been experiencing in the past couple of years and it reflects a hard work of the Navios team in managing our relationships, counterparties, and physical fleet during a great turbulent period. We have once again declared a $0.06 dividend for the quarter representing a yield of about 6%.

Slide 2 shows our guidance structure. The value of Navios Holdings primarily derives from four areas; the drybulk fleet within Navios Holdings and three principal operating subsidiaries. The growth continues to be valid at less than the sum of its parts. As you can see from a quick mark, the value of Navios Holdings interest in the two publicly released subsidiaries is $2.99 per share. The market does think that the other two businesses are only worth $0.72.

Navios Holdings core fleet, a drybulk fleet consists of 43 vessels in the water. This fleet has long-term charters with creditworthy counterparties that are all insured by AA+ European governmental entity. Our insurance coverage is unique. This insurance should provide comfort to all our stakeholders that we can continue to manage during difficult periods. The value of Navios Logistics is also growing. We have a superb management team, which is addressing the market opportunity and together we have transformed Navios Logistics into a key provider of service in the Hidrovia region of South America. Ioannis Karyotis will address Navios Logistics results in further detail later.

Slide 3 shows our competitive positioning. It reflects our strategy and the hard work we have dedicated to maintain cost in a very difficult market. Looking forward, we have already covered almost 70% of our fleet for 2012. We are also working on our book for 2013. We have covered almost 42% of our fleet days for this period. This forward visibility provides us with a margin of safety.

I wanted to share with you our assessment of our positioning. 2011 is literally over. All of our days have contracted and you can see that revenues will exceed expenses. We also feel very good for 2012. As we stand at this moment, we have 4,778 open vessel base. But let’s focus on the revenue based on the number of vessels contacted at this moment. As you can see from the chart, our contacted revenue is about $13 million less than our all-in cost. Now, if you divide this $13 million deficit by 4,778 open vessel base, you can see that we only need $2,740 per day per vessel for a breakeven. We think this is insignificant.

Just to provide a little bit of context for our low breakeven rate, we have provided the 2011 year-to-date BDI time charter averages for all type of vessels. This rate, in a difficult year, range from $13,800 per day to $14,500 per day for the different types, well above our breakeven rate. Further comfort is gained from reviewing the list of vessels that we have opened. We have only one Capesize vessel open, two Panamaxes and the balance are Handymax vessels. Handymax have proved to be particularly resilient in the current environment. They actually had the best yearly average for 2011, even though it is a smallest vessel class.

Finally, we know that the vessels are coming open proportionally throughout the year. So, we think that we will do significantly better. As you know, we have been reasonably conservative. As a result, our CapEx program only requires equity payments totaling $8 million for 2011 and ‘12, and not beyond that. These payments result from the recent deal we did to acquire Kamsarmax from a South Korean Shipyard for delivery in the first quarter of next year. We have already chartered out this vessel for two years and we expect annual EBITDA of $3 million and total EBITDA of $6 million.

Our focus today is on balancing a strong balance sheet and rewarding shareholders with a return of capital. We'll continue to pay dividends, and as mentioned earlier, declared a dividend for the third quarter of 2011. We have also recommend purchase and sales in the open market as we view the recent weakness in the market as an opportunity for our shareholders. We may from time to time make further purchases.

Let’s now turn to slide four, which shows our liquidity of $264 million, of which $212.5 million is cash and our net debt-to-book capitalization is relatively modest to 49.6%, and we have no significant capital repayment or CapEx until 2017. I also wanted to remind you about the structure of our balance sheet.

Our debt is long-term and stable. Bonds represent more than 60% of our debt outstanding with no amortization until maturity. These bonds have a favorable covenant allowing us operating and financial flexibility in this kind of a market. In a market featuring declining asset values, perhaps the most important is the absence of any loan-to-value maintenance obligation, and we have continued access to the debt market as the commercial lending market tightens.

Slide five sets for Navios substantial fixed revenue and low breakeven cost. As you can see almost 100% of the Navios revenue is fixed for 2011 at about $25,000 per day. In addition, approximately 70% is fixed for 2012 for $25,586 per day per vessel. We have already discussed our low breakeven rate for 2012. One thing that I like to emphasize is that costs include all operating, financial and financial expense, include maintenance CapEx, drydocking, charter-in expenses for all our charter-in fleet, G&A including credit default insurance, as well as interest cost and capital repayments.

With that, I would like to turn the call over to Mr. Ted Petrone, Navios’ President, who will take you through Navios’ operations and our industry perspective. Ted?

Ted Petrone – President

Thank you, Angeliki, and good morning, all. Please turn to slide six. Our long-term core fleet consists of 56 vessels, totaling 5.8 million deadweight. We have 43 vessels in the water with an average age of five years. This is considerably younger than the industry average of less than 13 years.

Please turn to slide seven. Navios’ average charter-out rate for its core fleet is $25,050 a day for 2011, which increases through 2013. 99.7% of the Navios’ fleet is chartered out for 2011, 68.4% for 2012, which is a 12% increase from Q2, where we also fixed out 41.5% for 2013. In total, we have contracted revenue of about $735 million through the end of 2013 and have ensured this contracted revenue to an EU-backed AA+ entity.

Please turn to slide 8. We enjoy vessel operating expenses significantly below the industry average in all asset classes. Navios’ current daily OpEx is $4,351, 31% below the industry average. This $1,976 daily savings per vessel amounts to a $20 million annual savings for the current owned fleet in the water, which goes directly to our bottom line. We expect to continue to leverage our economies of scale advantage.

Please turn to slide 9. 2011 trade estimates were revised down due to lower than anticipated shipments in the first half of 2011 as shipments were negatively affected by natural disasters. Steady recovery on the raw material production side since the middle of the year increased vessel demand and by mid October, the BDI reached its highest point for the year at 2,073 driven by rapidly increasing cargo volume and port congestion.

The biggest increases have been from iron ore and coal exports from Australia and Brazil raising total Q3 exports of these commodities to 462 million metric tons. This represented a 16% increase above the restricted Q1 levels. Despite the recent fluctuations, iron ore and coal prices remain historically high levels suggesting continued solid demand and increased trade as cargo availability continues to rise. While demand for drybulk commodities remains strong, the European sovereign debt crisis is proving more severe than originally feared. This raises concerns regarding global economic growth, which in turn could threaten demand for raw materials.

Please turn to slide 10. Drivers for world GDP growth continue to evolve as developing economies contribute a higher percentage of total world growth than the developed economies and the IMF expects that trend to continue for foreseeable future. The IMF’s September forecast shows that emerging economies will continue to grow at 6.4% in 2011 and 6.1% in 2012.

The primary engines of trade growth continue to be China, India, and Brazil with other emerging countries adding strong growth. China’s economy grew at 9.1% in Q3. For 2012, the IMF expects the Chinese economy to grow at 9%. India’s economic growth is expected to reach 7.5% in 2012. More importantly, world global growth is expected to reach 4% this year and 4% next year.

Turning to slide 11, in order to continue their urbanization and industrialization, China and India continue to invest heavily in infrastructure throughout Latin America, Africa, and the Middle East, both countries are securing supply lines of natural resources with these infrastructure investments to ensure continued growth. As a larger portion of world trade is occurring between emerging and developing economies, trade patterns are shifting eastward and southward.

Moving to slide 12, in 2010, seaborne iron ore trade set a new record as imports increased for the ninth consecutive year. This increase has been the result of high demand for most steelmaking countries. Going forward, the growth in worldwide iron ore imports will be constrained until new iron ore mines and expansion projects become operational. Over the medium to long-term, miners are investing heavily in additional production.

The chart on the upper right depicts potential new iron ore mining capacities of about 600 million tons per annum on a cumulative basis through 2014. These expansions will increase the tons carried and the ton miles. Development and urbanization of the Western and Central parts of China will continue to contribute significantly the steel consumption in 2011 and onwards. Crude steel production for China for the first 10 months of 2011 was 582 million tons, up 11% year-on-year.

China import is 49.9 million metric tons of iron ore in October. Iron ore imports have increased by 11% year-on-year to 559 million tons for the first 10 months and domestic iron ore production was estimated to be up 23% to about 1.7 billion tons. In addition to iron ore imports, China continues its imports of coal for use in steelmaking and power generation.

Turning to slide 13, India has taken initial step to industrialize and urbanize. As you can see in the lower right hand chart, India is expected to increase its urban population to 590 million people by 2030. That means India will have to build about 1.5 new cities per year during that time. To meet this demand, India has become the world’s fourth largest steel producer and has planned to expand production further.

To keep pace with expanding steel and electricity production, India coal imports shown on the left hand chart have increased dramatically at a 25% compound annual growth rate since 2006. According to the Central Electricity Authority of India, substantial demand will continue as most plant power generators will be coal-fired. India now imports more coal per annum than the UK, Italy, France and Germany combined. Indian companies are buying coal assets globally to assure future supplies meet projected growth.

Please turn to slide 14. The confluence of low freight rates, expensive fuel and high ship scrap prices have led to a surge in scrapping of vessels. In the first half of 2011 more Capesize vessels are scrapped than in the five year period of 2006 to 2010. The high steel prices indicate that a Capesize owner can earn approximately $12 million on scrapping the vessel or approximately 30% of the value on a five-year vessel. Through November 11, 324 vessels, including 66 capes, totaling 20.7 million deadweight tons have been sold for demolition. This deadweight total already surpasses the record 12.3 million deadweight scrapped in all of 1986, and represents an annualized scrapping rate of about 24 million deadweight tons or about 4.5% of the fleet.

The current environment should lead to high scrapping levels as about 11% of the fleet is older than 25 years of age and 17.4% of the fleet is over 20 years, providing about 104 million deadweight of scrapping potential. This is potential to get higher demolition in 2012 as scrap prices remain high and the major new Chinese recycling facility in Dalian is due to enter service.

Moving to slide 15, 2010, newbuilding deliveries were 77.9 million deadweight against an expected 125.6 million deadweight, a slippage of approximately 40%. The order book for 2011 ballooned from 120 million deadweight to 137 million deadweight, as statisticians reclassified many ships that were not delivered in 2010 to 2011 deliveries. Through October, non-deliveries continued to add about 31% as newbuilding deliveries were 78.2 million deadweight against an expected 113.1 million deadweight. This demonstrates that non-deliveries continue to be a substantial part of the drybulk order book. Additions to the fleet this year are on pace to be somewhat higher than 2010, but net growth in deadweight should be lower after expected scrapping is taken into account. The order book declines in 2012 and again in 2013.

Please turn to slide 16. We currently own 27.1% of Navios Partners, including a 2% GP interest. Navios Partners operates a fleet of 18 vessels equaling 1.9 million deadweight, with an average age of five years.

Turning to slide 17, Navios Partners provide a significant cash flow to Navios Holdings. Through Q3 2011 we received about $70 million in total distributions from Partners. This year we received $25.6 million in distributions. This is more than 100% of Navios Holdings expected annual dividend. Including Navios Acquisitions dividend, Navios Holdings receives a 130% of its expected annual dividend from its ownership in these two companies.

Please turn to slide 18. We have an approximately 54% economic interest in Navios Maritime Acquisition. Navios Acquisition’s current fleet consists of 26 tanker vessels totally 3.2 million deadweight. Navios Acquisition currently has 14 vessels in the water with an average age of 6 years. We anticipate that our newbuilding program for product tankers positions us to take advantage of favorable long-term industry dynamics.

Please turn to slide 19. The company is summarized on slide 19. Navios Acquisition has a large modern and diversified tanker fleet worth more than $1.2 billion. We have long-term contracted revenue that is well above our company’s low operating breakeven and we have profit-sharing arrangements in many contracts. These agreements limit our downside risk to the base rate and allows Navios Acquisition to enjoy the upside volatility. The related cash flow also sustains us for long period in distressed market conditions.

That concludes my presentation. I would now like to turn the call over to Ioannis Karyotis, Senior VP of Strategic Planning. Ioannis?

Ioannis Karyotis – Senior Vice President, Strategic Planning

Thanks Ted. Please turn to slide 20. Navios South American Logistics has three segments, each of which enjoys significant growth prospects. In port terminals, we expect the constructions of the new 100,000 tons capacity silo in Uruguay to be completed in March 2012.

In barge business, we took the liberty of three convoys consisting of 3 pushboats and 66 barges. These convoys serve a new long-term agreement for iron ore transportation. In Q3, however, only one of these three new convoys was in service for about one month. We anticipate that all three convoys will be operational for the entire period in the first quarter of 2012. In cabotage, we vote out our previous minority partner for $8.5 million cash and now have 100% ownership of four product tankers and two self-propelled barges.

Please turn to slide 21. Navios South American Logistics seeks long-term revenue from a diverse portfolio of high-quality clients. Our strategic relationships, investments, and the overall favorable export market fundamentals position us well.

Please turn to slide 22. For Q3, 2011, revenues increased 24% to $68.8 million compared to the same period last year. All three segments saw the increased revenues over the comparable quarter in the prior year. EBITDA for the same period was $8.9 million, 6% higher compared to the third quarter of 2010. Port Terminals achieved 35% increase in revenues while EBITDA declined 21% to $4.2 million mainly due to a temporary decline in the activity in our liquid port for this quarter. Barge business achieved 8% increase in revenues driven by higher iron ore volumes transported. EBITDA declined by $0.5 million to $0.6 million due to some unexpected pushboat repairs and increased port and voyage expenses.

Cabotage business achieved 24% increase in revenues, while EBITDA grew 112% compared to the same period in 2010 to $4.1 million mainly because we had two additional vessels operating for the period.

Interest expenses net in the third quarter increased to $5.1 million from $1.1 million for the same period in 2010 due to the interest expense associated with the senior notes issued in the second quarter of 2011. This resulted in a decline in the third quarter net income.

Turning to the nine months period ended September 30, 2011 which better reflects this year’s operations improvement, revenues increased by 17% compared to the nine months of 2010 $167.9 million. EBITDA grew 27% to $29 million. Net income affected by higher interest expenses was $1 million for the nine month period.

Please turn to slide 23. Slide 23 provides selected balance sheet data as of September 30, 2011. Navios Logistics had a strong balance sheet. The third quarter cash and cash equivalents amounted to $57.8 million as compared to $39.2 million on December 31, 2010. As we have already announced, during the third quarter, we acquired minority interest in five vessel owned subsidiaries and we paid their debt with part of the proceeds from the senior notes. We also concluded the acquisition and transportation in South America of 3 pushboats, 66 barges and a floating drydock for a total cost of approximately $56 million. Net debt-to-book capitalization at the end of the third quarter was a conservative 27.3%.

Now, I would like to turn the call over to George Achniotis, Navios Holdings’ Chief Financial Officer, who will take you through third quarter and nine months 2011 financial results. George?

George Achniotis – Chief Financial Officer

Thank you, Ioannis and good morning all. Please turn to slide 24 for a review of the third quarter financial highlights. I would like to draw your attention to the fact that for comparability purposes, we are presenting the consolidated results on a pro forma basis, excluding the effects of Navios Acquisition. Despite a material reduction in the time charter equivalent rate, EBITDA for the quarter increased by 6% compared to the same period last year from $63.3 million to $67.3 million. The increase is mainly attributable to the delivery of newbuilding vessels to our own fleet and the increase in the available days of the owned fleet from 2,118 in the third quarter of 2010 to 2,489 days in the same period of 2011.

During the same period, the available days attributed to the charter-in fleet decreased by 307 days. As you know, there is a higher operating profit margin on the owned vessels versus the charter-in ones, because owned vessels operating expenses are less than the charter-in cost for charter-in vessels.

Another factor that contributed to the increase in EBITDA was a slightly high contribution from Navios South American Logistics in the quarter. Despite the increase in EBITDA, net income for the period reduced from $18.7 million in 2010 to $16.3 million in 2011. The reduction is mainly attributable to the higher interest expense following the issuance of the $200 million bond at Navios Logistics in the second quarter of 2011. Net interest expense in the third quarter of 2011 increased by $3 million compared to the same period of 2010. Depreciation and amortization also increased between the two periods by $3 million, reflecting the increase in the owned fleet.

Turning to the highlights of the results for the nine month periods ending on September 30, EBITDA in both years was affected by certain one-off items. In 2011 EBITDA was affected by $38.8 million gain from the sale of Navios Luz and Navios Orbiter to Navios Partners, a $21.2 million of expense relating to the bond extinguishment of January 2011; and a $35.3 million non-cash accounting loss on the deconsolidation of Navios Acquisition.

In 2010 EBITDA included a gain of $26.1 million from the sale of Navios Aurora II, Navios Hyperion, and Navios Pollux to Navios Partners, a $17.7 million gain from the initial consolidation of Navios Acquisition and a $4 million write-off of an unfavorable short-term charter. Excluding these adjustments for the nine-month period ending September 30, 2011, adjusted EBITDA increased by 4% to $200 million from a $193 million in 2010.

The main reason for the increase was a contribution of Navios Logistics whose EBITDA increased from $23 million in 2010 to $29 million in 2011. Another reason for the increase was a delivery of the newbuilding vessels to the owned fleet. The available days of the owned fleet increased from 6,330 in the nine months of 2010 to 7,649 days in the same period in 2011. The increase was mitigated by a reduction in the available days of the charter-in fleet, which decreased by 1,252 days and a reduction in the TC rate achieved in 2011 compared to 2010, which reduced from $25,298 per day to $23,727 per day.

Net income for the nine months of 2011 and 2010 was also affected by the one-off items discussed earlier. Excluding the effect of these items, adjusted net income for the nine months to September 2011 decreased to $48 million compared to $57 million in 2010. The decrease is mainly attributable to the increase in interest expense due to the new bond issued by Navios Logistics and they had depreciation due to the increase in the number of owned vessels. Net interest expense increased from $63.6 million in the first nine months of 2010 to $70.5 million in 2011 and depreciation and amortization was up from $68.8 million to $74.3 million in the same periods.

Please turn now to slide 25, where the balance sheet highlights are presented. The cash balance as of September 30, 2011 increased by $46.7 million to $212.5 million compared to $165.8 million at the end of December 2010. The 28% increase reflects our intention to maintain a strong cash position in order to be able to take advantage of distressed transactions that may become available in 2012.

Other current assets increased temporarily at the end of the quarter, subsequent to the quarter end a significant amount was settled and the balance reduced. Other current liabilities also increased at the end of September 2011 compared to the end of December 2010. The main movement came from Navios Logistics from the capital lease of two of its vessels and accrued interest from the bond issued in Q2. Despite the prolonged period of depressed rates and vessel values in the drybulk market, our net debt-to-book capitalization ratio remained below 50% and our debt covenants were made at the end of the quarter.

Turning to slide 26, a dividend for the third quarter of 2011 of $0.06 per share was declared to common shareholders as of December 19 to be paid on January 4. The total annualized cash dividend inflows from our ownership in Navios Partners and Navios Acquisition is approximately $32 million. This exceeds the annual dividend paid out by Navios Holdings by $8 million.

As Angeliki mentioned earlier, we recently used the share buyback scheme we have in place to repurchase approximately 74,000 shares. The Board has previously approved a repurchase program of up to $25 million. This concludes my review of the financials.

At this point, I will turn the call back over to Angeliki for closing remarks. Angeliki?

Angeliki Frangou – Chairman and Chief Executive Officer

Thank you George and this concludes our formal presentation. We open the call to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Natasha Boyden with Cantor Fitzgerald.

Natasha Boyden – Cantor Fitzgerald

Thank you very much operator. Good morning everybody.

Angeliki Frangou

Good morning.

Unidentified Company Speaker

Good morning.

Natasha Boyden – Cantor Fitzgerald

Angeliki, the Capesize market has performance very well over the past couple of months. And I am just really wondering what you see is the main drivers of that phenomenon and how permanent do you believe that uptick is?

Angeliki Frangou

I think the main thing is coal and iron ore. I mean, we have seen the fluctuation in the iron ore price, get the possibility of additional trade. We have seen the recent days, there have been another push up in the rates and this is good for the market. Actually, we can say that from the last quarter, the last four months we have seen that the shipping market, the drybulk shipping market, the demand is very good.

Natasha Boyden – Cantor Fitzgerald

Okay, great. And just moving over to the S&P market, what are you seeing in terms of liquidity there, I mean, are you seeing more vessels moving at these lower prices or sellers are still hesitant to sell believing that there might be an upturn around the corner? And what do you believe the asset values could do at this point, you think they could come down further?

Angeliki Frangou

I think the issue today, even though demand as we said, I said a moment earlier is good. I mean better than people had expected in the beginning of 2011. There is no optimism in the market. So, you can see that in the sales price is really affected by the optimism and we can see that prices are low, I don’t see, there is no further pushing down. We haven’t seen deterioration right now, but don’t forget that if you compare to the first half of 2011 we have moved about 15% down.

Natasha Boyden – Cantor Fitzgerald

Okay. And then lastly, if I turn it over, given today’s events with one of your competitors, I am just wondering how you see the banks acting giving that they are healthier than a few years ago and a lot of companies are in violation of that covenants, do you think the banks are going to be more aggressive in terms of foreclosing?

Angeliki Frangou

I think there is three reasons, where you can see that the banks will be further asking in 2012. Number one, majority of the banks are European, dollar funding in European banks is very difficult today because U.S. does not provide the fund into the European banks. Second, under the Basel III unit, 9% Tier 1 capital from 2012, which means that the banks will have to either raise equity into this market or shrink their balance sheet or this company will be shrinking their balance sheet in Europe. And the third item is that you have – you had covenant relief in 2008. Under the rule they have three years. If the companies ask for relief again, this will be considered and they will have to be categorized in a different way. So, because of these three reasons, I think 2012 will provide opportunities and banks will have to move to different directions.

And we have seen in the second half of 2011, we have seen in the capital markets at least two bankruptcies. This will be further accelerated in 2012. This is one of the things – the analysis we internally look in Navios is not only how strong our balance sheet is, but is also the burn-out rate and the cash flow generation. The majority of the shipping companies have burn-out rate, very high burn-out rate. In the Navios case we have cash flow generation because of our very low breakeven.

Natasha Boyden – Cantor Fitzgerald

Okay great. Thank you very much. I’ll turn it over.

Operator

(Operator Instructions) Your next question comes from the line of Christian Wetherbee with Citi.

Seth Lowry – Citi

Good morning. This is actually Seth Lowry in for Chris today. If I can just touch on your previous two acquisitions at the South Korean shipyards, is that from the same yard? Are there potential future acquisitions at the same yard that you might view as attractive? Could you just give us some more color on that point?

Angeliki Frangou

This was from same the shipyards. I mean if we have an opportunity this was really a newbuilding vessel that we got it only one quarter away from the delivery. The vessel is delivering in March. We could very quickly fix the vessel for two years, so generating $6 million EBITDA, so to us was a very small transaction that made sense with zero risk really in our balance sheet. And that’s why we moved quickly. The reality is that Navios usually does larger deals, but this is a deal that makes sense and we can move because of the quality of the vessel which we already know very well.

Seth Lowry – Citi

Okay. And it looked like only a small portion of the acquisition cost is paid for by cash and to sort of piggybacking on the previous question, was the financing with your existing lenders – was there any pushback for financing a vessel for acquisition given the current market? I guess, my real question is, is acquisition financing still available to you?

Angeliki Frangou

Well, I guess. I mean it’s obvious. I mean we did one previously and we now did this one on similar terms, so I guess financing is here for us, it’s not available for everyone.

Seth Lowry – Citi

Okay. And then just lastly, if I could just switch gears to Logistics, I know you said its temporary factors in your port and barging business. Is it reasonable to assume that the pushboat repairs and some of the other temporary factors subside as we move into the fourth quarter, or could you just give us a sense of timing on when some of those issues may resolve themselves?

Angeliki Frangou

Yes. Moving into Q4, this is subsiding. The one issue you have to also remember is that there is a seasonal on the boat, meaning that Q1 and Q4 is low season for the grain business. So, this is one of the factors you should remember in Q4. Also one other issue is that the new convoys that came from value will have the full gear – a full quarter from Q1, 2012.

Seth Lowry – Citi

Okay great. Thank you very much.

Angeliki Frangou

Thank you.

Operator

At this time, we have no further questions. Now, I’d like to turn the floor back over to Ms. Frangou for any closing remarks.

Angeliki Frangou – Chairman and Chief Executive Officer

Thank you. This concludes our Q3 results. Thank you.

Operator

Thank you. This concludes today’s conference call. You may now disconnect.

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