APRIL 22, 2013 — Angeliki Frangou led Navios Maritime Holdings Inc. (NYSE: NM) and Navios Maritime Acquisition Corporation (NYSE: NNA) have executed a binding letter of intent to acquire ten vessels, composed of five product tankers and five container vessels with an average age of 5.5 years, from debtors of HSH Nordbank AG (“HSH”) through a new joint venture (“Navios JV”).
Angeliki Frangou, Chairman and Chief Executive Officer of Navios Holdings and Navios Acquisition stated, “Working closely with HSH over the past year, we devised a program whereby vessels can be removed from insolvency and placed into a stable situation. In so doing, we are leveraging Navios’ economies of scale and superior technical and commercial management to everyone’s betterment. HSH and Navios are committed to their excellent working relationship and look forward to doing similar deals in near future.”
Ms. Frangou continued, “Navios is acquiring a significant fleet at historically low values with favorable economics. Navios enjoys a 12.7% annual preferred return on its $10 million investment as well as a preferred return of this investment upon the sale of vessels. Thereafter, 20% of cash flow from operations or sales will be paid to Navios until the HSH’s subordinated loan is repaid. Once HSH’s loan has been satisfied, Navios will receive 100% of any excess.”
It is anticipated that the Navios JV will not be consolidated into Navios Holdings or Navios Acquisition. The transaction is subject to a number of conditions, and no assurance can be provided that the transaction will be concluded as contemplated, if at all. However, each party has agreed to reimburse a portion of the other’s expenses if the party does not conclude the transaction under certain circumstances.
Fleet Purchase Price
It is estimated that the purchase price to be paid to HSH will consist of $130 million in cash and the assumption of a subordinated HSH participating loan.
The cash payment will be equal to 60% of the current fair market value of the vessels, plus $10.0 million. It is anticipated that the cash payment will be funded as follows:
$10 million, from an investment by Navios JV funded by Navios Holdings and Navios Acquisition, and $120 million, from the proceeds of a senior bank financing (“senior bank financing”) to be secured with a first-priority mortgage on the vessels.
Subordinated HSH Participating Loan
Navios JV will assume subordinated participating loan provided by HSH (“HSH Loan”) in an amount of approximately $170.0 million. Interest will accrue annually at 8%. Principal and interest only will be repaid from net cash flow and net sale proceeds from the sale of vessels. The HSH Participating Loan will be subordinated to any senior bank financing and will be secured by a second priority vessel mortgage. If cash flow from operations and net proceeds from the sale of vessels are insufficient to repay amounts outstanding on the HSH Loan, such unpaid amount will not constitute a liability of Navios JV.
Navios Holdings will provide up to $5.0 million of working capital. The Navios Working Capital Loans will accrue interest at 12.7% and will be repaid out of Navios JV’s cash balances and proceeds of vessel sales.
Navios JV will receive a 12.7% annual preferred return on its $10 million investment and a preferred return of this $10 million investment upon the sale of vessels. Thereafter, 20% of cash flow from operations or sales will be paid to Navios JV and 80.0% will be paid to HSH until the amount outstanding on the HSH Participating Loan has been repaid. Once the HSH Participating Loan has been satisfied, Navios JV will receive 100% of any excess sale proceeds.
Vessels Sales – Final Exit
Beginning with year seven, vessels may be sold at the sole discretion of Navios JV. It is anticipated that the arrangement with HSH will be wound up by the tenth year.
HSH and Navios are committed to their excellent working relationship. After the completion of this transaction, HSH and Navios hope to work together toward similar transactions.
TEU Built Type of Vessel
3,091 2007 Panamax
2,741 2007 Sub Panamax
2,007 2008 Sub Panamax
2,824 2006 Sub Panamax
3,398 2006 Panamax
DWT Built Type of Vessel
37,500 2009 MR1
38,400 2008 MR1
37,000 2008 MR1
63,495 2008 MR1
63,599 2008 MR1