Navios Maritime Holdings: Near-Term Debt Maturities Unlikely To Be An Issue

Summary

• Debt-laden dry bulk shipper is facing another debt maturity in August.
• With decent cash generated from operations and the option to sell additional vessels to related party Navios Maritime Partners, redemption of the remaining Senior Secured Notes shouldn't be an issue.
• CEO and Chairwoman Angeliki Frangou recently disclosed a 40.8% ownership stake on an as-converted basis and indicated her intention to purchase additional common shares for up to $20 million.
• Ms. Frangou still likely to reunite Navios Maritime Holdings and Navios Maritime Partners at an opportune time to grab a very substantial stake in Navios Maritime Partners.
• Investors should continue to remain on the sidelines and be wary of a potential future merger with Navios Partners to the detriment of the partnership's outside common unitholders.

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In late 2021, debt-laden dry bulk shipper Navios Maritime Holdings (NYSE:NM) or "Navios Holdings" announced the eagerly-awaited terms of its widely-anticipated bailout by CEO and Chairwoman Angeliki Frangou:

Company SEC-Filing

Both related-party loans have a term of four years and won't require cash interest or amortization payments for an initial 18-month period (the "PIK Period").

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

The loan terms also provide for prepayment premiums ranging from 5%-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 under the Convertible Debentures into shares of common stock of Navios Holdings at a conversion price of $3.93 at any time. The Convertible Debentures have a term of five years and bear interest of 4% PIK payable at maturity, if not earlier converted.

The holder of the Convertible Debentures will be entitled to vote on an "as converted" basis along with the company's common shareholders.

In addition, lender Navios Shipmanagement Holdings Corporation or "NSM" received an upfront structuring fee of $24.0 million and an undisclosed amount of accrued interest and prepayments fees also in the form of Convertible Debentures.

Over the PIK Period, I would estimate the amount of Convertible Debentures held by NSM to increase to almost $100 million, sufficient for Angeliki Frangou to regain full control of the company.

Last month, Ms. Frangou filed an amended Form 13-D with the SEC disclosing a 40.8% stake 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 beneficially own approximately 74.4% of the company's common stock.

The company used the proceeds from the new financing agreements together with available cash to redeem $455.5 million of maturing 7.375% First Priority Ship 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") maturing in August thus reducing the outstanding principal amount to $130 million. According to the Q4 presentation, the company is planning to redeem another $50 million until the end of Q2 and the remaining $80 million at maturity:

Company Presentation

Despite currently insufficient cash on hand to redeem the remaining Senior Secured Notes, I do not expect this to be a major issue as the company should generate additional cash from operations and could easily sell more vessels to former subsidiary Navios Maritime Partners (NMM) or "Navios Partners" like it has done in the past.

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

Company Presentation

According to statements made in the company's annual report on Form 20-F, Angeliki Frangou recently indicated her intention to purchase up to $20 million of the company's common stock, subject to market conditions.

As of April 4, she had purchased common shares for approximately $10 million.

Bottom Line

With dry bulk charter rates having held up reasonably well in the seasonally weak first quarter and the option to raise additional cash from selling vessels to related party Navios Partners, remaining near-term debt maturities should not be a major issue for Navios Holdings.

That said, CEO and Chairwoman Angeliki Frangou continues to have a stranglehold over the company due to the terms of the recent bail-out. 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 reunite Navios Holdings and Navios Partners at an opportune time in order to grab a very substantial stake in Navios Partners as laid out in detail in a previous article.

Holders of the company's preferred shares (NYSE:NM.PG) and (NYSE:NM.PH) will also have to hope for a Navios Holdings / Navios Partners merger as otherwise there's no reasonable chance for these securities to recover.

Investors should continue to remain on the sidelines and be wary of a potential future merger with Navios Partners to the detriment of the partnership's outside common unitholders.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.