e424b5
The
information in this preliminary prospectus supplement is not
complete and may be changed. This preliminary prospectus
supplement and the accompanying prospectus are not an offer to
sell these securities and are not soliciting an offer to buy
these securities in any jurisdiction where the offer or sale is
not permitted.
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Filed Pursuant to Rule 424(b)(5)
Registration File No. 333-157000 and 333-173367
SUBJECT
TO COMPLETION, DATED APRIL 7, 2011
PRELIMINARY
PROSPECTUS SUPPLEMENT
(To Prospectus Dated February 6, 2009)
4,000,000
Common Units
Navios
Maritime Partners L.P.
Representing
Limited Partnership Interests
$
per common unit
We are selling 4,000,000 of our common units representing
limited partnership interests. We are a Marshall Islands limited
partnership formed by Navios Maritime Holdings Inc., or Navios
Holdings. Although we are a partnership, we have elected to be
taxed as a corporation solely for U.S. federal income tax
purposes.
We have granted the underwriters an option for 30 days to
purchase up to 600,000 additional common units to cover
over-allotments.
Our common units are listed on the New York Stock Exchange under
the symbol NMM. The last reported sale price of our
common units on the New York Stock Exchange on April 6,
2011 was $20.60 per common unit.
Investing in our common units
involves risks. See Risk Factors
beginning on
page S-7
of this prospectus supplement and page 4 of the
accompanying prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus supplement or the
accompanying prospectus are truthful or complete. Any
representation to the contrary is a criminal offense.
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Per Common Unit
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Total
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Public Offering Price
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$
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$
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Underwriting Discount
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$
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$
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Proceeds to Navios Maritime Partners L.P. (before expenses)
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$
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$
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The underwriters expect to deliver the common units to
purchasers on or
about ,
2011 through the book-entry facilities of The Depository
Trust Company.
Joint Book-Running Managers
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Citi |
J.P. Morgan |
Wells Fargo Securities |
Manager
,
2011
This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of this offering
of common units representing limited partnership interests. The
second part is the accompanying prospectus, which gives more
general information, some of which may not apply to this
offering of common units. Generally, when we refer to the
prospectus, we refer to both parts combined. If
information varies between this prospectus supplement and the
accompanying prospectus, you should rely on the information in
this prospectus supplement.
You should rely only on the information contained or
incorporated by reference in this prospectus or any free
writing prospectus we may authorize to be delivered to
you. We have not and the underwriters have not authorized anyone
to provide you with different information. If anyone provides
you with additional, different or inconsistent information, you
should not rely on it. You should not assume that the
information contained in this prospectus or any free
writing prospectus we may authorize to be delivered to
you, as well as the information we previously filed with the
Securities and Exchange Commission, or SEC, that is incorporated
by reference herein, is accurate as of any date other than its
respective date. Our business, financial condition, results of
operations and prospects may have changed since such dates.
We are offering to sell the common units, and are seeking offers
to buy the common units, only in jurisdictions where offers and
sales are permitted. The distribution of this prospectus and the
offering of the common units in certain jurisdictions may be
restricted by law. Persons outside the United States who come
into possession of this prospectus must inform themselves about
and observe any restrictions relating to the offering of the
common units and the distribution of this prospectus outside the
United States. This prospectus does not constitute, and may not
be used in connection with, an offer or solicitation by anyone
in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom
it is unlawful to make such offer or solicitation.
TABLE OF
CONTENTS
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Prospectus Supplement
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S-1
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S-1
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S-3
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S-5
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S-7
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S-11
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S-12
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S-13
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S-14
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S-19
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S-20
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S-25
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S-25
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S-25
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S-25
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Prospectus
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F-1
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i
WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the SEC a Registration Statement on
Form F-3
regarding the securities covered by this prospectus. This
prospectus does not contain all of the information found in the
Registration Statement. For further information regarding us and
the securities offered in this prospectus, you may wish to
review the full Registration Statement, including its exhibits.
In addition, we file annual, quarterly and other reports with
and furnish information to the SEC. You may inspect and copy any
document we file with or furnish to the SEC at the public
reference facilities maintained by the SEC at
100 F Street, NE, Washington, D.C. 20549, at
prescribed rates or from the SECs web site on the Internet
at www.sec.gov free of charge. Please call the SEC at
1-800-SEC-0330
for further information on public reference rooms. You can also
obtain information about us at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
We are subject to the information requirements of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, and, in
accordance therewith, are required to file with the SEC annual
reports on
Form 20-F
and provide to the SEC other material information on
Form 6-K.
These reports and other information may be inspected and copied
at the public reference facilities maintained by the SEC or
obtained from the SECs website as provided above. As a
foreign private issuer we are exempt under the Exchange Act
from, among other things, certain rules prescribing the
furnishing and content of proxy statements, and our directors
and principal unitholders and the executive officers of our
general partner are exempt from the reporting and short-swing
profit recovery provisions contained in Section 16 of the
Exchange Act. In addition, we are not required under the
Exchange Act to file periodic reports and financial statements
with the SEC as frequently or as promptly as U.S. companies
whose securities are registered under the Exchange Act,
including the filing of quarterly reports or current reports on
Form 8-K.
However, we furnish or make available to our unitholders annual
reports containing our audited consolidated financial statements
prepared in accordance with U.S. GAAP and make available to
our unitholders quarterly reports containing our unaudited
interim financial information for the first three fiscal
quarters of each fiscal year.
We make our periodic reports as well as other information filed
with or furnished to the SEC available, free of charge, through
our website, at www.navios-mlp.com, as soon as reasonably
practicable after those reports and other information are
electronically filed with or furnished to the SEC.
INCORPORATION
OF DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference into
this prospectus information that we file with the SEC. This
means that we can disclose important information to you without
actually including the specific information in this prospectus
by referring you to other documents filed separately with the
SEC. The information incorporated by reference is an important
part of this prospectus. Information that we later provide to
the SEC, and which is deemed to be filed with the
SEC, automatically will update information previously filed with
the SEC, and may replace information in this prospectus.
We incorporate by reference into this prospectus the documents
listed below:
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our Annual Report on
Form 20-F/A
for the fiscal year ended December 31, 2010 filed on
March 2, 2011;
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S-1
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all of our subsequent Reports on
Form 6-K
furnished to the SEC prior to the termination of this offering
only to the extent that we expressly state in such Reports that
they are being incorporated by reference into the Registration
Statement of which this prospectus is a part; and
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the description of our common units contained in our
Registration Statement on
Form 8-A
filed on November 7, 2007, including any subsequent
amendments or reports filed for the purpose of updating such
description.
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These reports contain important information about us, our
financial condition and our results of operations.
You may obtain any of the documents incorporated by reference in
this prospectus from the SEC through its public reference
facilities or its website at the addresses provided above. You
also may request a copy of any document incorporated by
reference in this prospectus (excluding any exhibits to those
documents, unless the exhibit is specifically incorporated by
reference in this document), at no cost by visiting our internet
website at www.navios-mlp.com or by writing or calling us
at the following address:
Navios Maritime Partners L.P.
85 Akti Miaouli Street, Piraeus, Greece 185 38
Attn: Corporate Secretary
(+30) 210 459 5000
You should rely only on the information incorporated by
reference or provided in this prospectus. We have not and the
underwriters have not authorized anyone else to provide you with
any information. You should not assume that the information
incorporated by reference or provided in this prospectus is
accurate as of any date other than the date on the front of each
document. The information contained in our website is not
incorporated by reference into this prospectus and should not be
considered as part of this prospectus.
S-2
FORWARD-LOOKING
STATEMENTS
Statements included in this prospectus which are not historical
facts (including any statements
concerning plans and objectives of management for future
operations or economic performance, or assumptions related
thereto) are forward-looking statements. In addition, we and our
representatives may from time to time make other oral or written
statements which are also forward-looking statements. Such
statements include, in particular, statements about our plans,
strategies, business prospects, changes and trends in our
business, and the markets in which we operate as described in
this prospectus. In some cases, you can identify the
forward-looking statements by the use of words such as
may, could, should,
would, expect, plan,
anticipate, intend,
forecast, believe, estimate,
predict, propose, potential,
continue or the negative of these terms or other
comparable terminology.
Forward-looking statements appear in a number of places and
include statements with respect to, among other things:
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forecasts of our ability to make cash distributions on the units;
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forecasts of our future financial condition or results of
operations and our future revenues and expenses;
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our anticipated growth strategies;
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future charter hire rates and vessel values;
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the repayment of debt;
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our ability to access debt and equity markets;
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planned capital expenditures and availability of capital
resources to fund capital expenditures;
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future supply of, and demand for, drybulk commodities;
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increases in interest rates;
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our ability to maintain long-term relationships with major
commodity traders;
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our ability to leverage to our advantage Navios Maritime
Holdings Inc.s relationships and reputation in the
shipping industry;
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our continued ability to enter into long-term, fixed-rate time
charters;
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our ability to maximize the use of our vessels, including the
re-deployment or disposition of vessels no longer under
long-term time charter;
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timely purchases and deliveries of newbuilding vessels;
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future purchase prices of newbuildings and secondhand vessels;
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our ability to compete successfully for future chartering and
newbuilding opportunities;
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the expected cost of, and our ability to comply with,
governmental regulations, maritime self-regulatory organization
standards, as well as standard regulations imposed by our
charterers applicable to our business;
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our anticipated incremental general and administrative expenses
and our expenses under
the management agreement and the administrative services
agreement with Navios ShipManagement Inc., or Navios
ShipManagement, and for reimbursements for fees and costs of our
general partner;
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the anticipated taxation of our partnership and distributions to
our unitholders;
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estimated future maintenance and replacement capital
expenditures;
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expected demand in the drybulk shipping sector in general and
the demand for our Panamax, Capesize and Ultra-Handymax vessels
in particular;
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S-3
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our ability to retain key executive officers;
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customers increasing emphasis on environmental and safety
concerns;
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future sales of our common units in the public market; and
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our business strategy and other plans and objectives for future
operations.
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These and other forward-looking statements are made based upon
managements current plans, expectations, estimates,
assumptions and beliefs concerning future events impacting us
and therefore involve a number of risks and uncertainties,
including those risks discussed in Risk Factors,
including those set forth below:
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a lack of sufficient cash to pay the minimum quarterly
distribution on our common units;
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the cyclical nature of the international drybulk shipping
industry;
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fluctuations in charter rates for drybulk carriers;
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the historically high numbers of new buildings currently under
construction in the drybulk industry;
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changes in the market values of our vessels and the vessels for
which we have purchase options;
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an inability to expand relationships with existing customers and
obtain new customers;
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the loss of any customer or charter or vessel;
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the aging of our fleet and resultant increases in operations
costs;
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damage to our vessels; and
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general domestic and international political conditions,
including wars, acts of piracy and terrorism.
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The risks, uncertainties and assumptions involve known and
unknown risks and are inherently subject to significant
uncertainties and contingencies, many of which are beyond our
control. We caution that forward-looking statements are not
guarantees and that actual results could differ materially from
those expressed or implied in the forward-looking statements.
We undertake no obligation to update any forward-looking
statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time
to time, and it is not possible for us to predict all of these
factors. Further, we cannot assess the impact of each such
factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to be
materially different from those contained in any forward-looking
statement.
S-4
PROSPECTUS
SUPPLEMENT SUMMARY
The following summary highlights selected information
contained elsewhere in this prospectus and the documents
incorporated by reference herein and does not contain all the
information you will need in making your investment decision.
You should carefully read this entire prospectus supplement, the
accompanying prospectus and the documents incorporated by
reference herein. Unless otherwise specifically stated, the
information presented in this prospectus supplement assumes that
the underwriters have not exercised their over-allotment
option.
You should read Risk Factors for more information
about important risks that you should consider carefully before
buying our common units. Unless otherwise indicated, all
references to dollars and $ in this
prospectus supplement are to, and amounts are presented in,
U.S. dollars. Unless otherwise indicated, all data
regarding our fleet and the terms of our charters is as of
December 31, 2010.
References in this prospectus supplement to Navios
Maritime Partners L.P., the Company,
we, our, us or similar terms
when used for periods prior to our initial public offering on
November 16, 2007 refer to the assets of Navios Maritime
Holdings Inc., or Navios Holdings, and its vessels and
vessel-owning subsidiaries that were sold or contributed to
Navios Maritime Partners L.P. and its subsidiaries in connection
with the initial public offering.
References in this prospectus supplement to Navios
Maritime Partners L.P., the Company,
we, our, us or similar terms
when used in a present tense or for historical periods since
November 16, 2007 refer to Navios Maritime Partners L.P.
and its subsidiaries. References in this prospectus to
Navios Holdings refer, depending on the context, to
Navios Holdings and its subsidiaries, including Navios
ShipManagement; provided, however, it shall not include Navios
Maritime Partners L.P. to the extent it may otherwise be deemed
a subsidiary. Navios ShipManagement (an affiliate of our general
partner) manages the commercial and technical operation of our
fleet pursuant to a management agreement and provides
administrative services to us pursuant to an administrative
services agreement. References in this prospectus supplement to
our IPO refer to our initial public offering, which
was consummated on November 16, 2007.
Overview
We are an international owner and operator of drybulk vessels,
formed in August 2007 by Navios Holdings, a vertically
integrated seaborne shipping and logistics company with over
55 years of operating history in the drybulk shipping
industry. We completed our IPO of 10,000,000 common units and
the concurrent sale of 500,000 common units to a corporation
owned by Angeliki Frangou, our chairman and chief executive
officer, on November 16, 2007. We used the proceeds of
these sales of approximately $193.3 million, plus
$165.0 million funded from our revolving credit facility,
to acquire our initial fleet of vessels. As of December 31, 2010 our fleet consisted of ten modern active Panamax vessels,
five Capesize vessels and one Ultra-Handymax vessel.
On each of January 26, 2010 and April 26, 2010, we
declared a cash distribution of $0.41 per unit for the
quarter ended December 31, 2009 and $0.415 per unit for the
quarter ended March 31, 2010, respectively. The cash
distributions were paid on February 11, 2010 and May 13,
2010 to all unitholders of record as of February 8, 2010
and May 10, 2010, respectively. On
July 22, 2010 and October 25, 2010, we declared a cash distribution of $0.42 per
unit for the quarters ended June 30, 2010 and September 30, 2010, respectively.
The cash distributions were paid on August 12, 2010 and November 12, 2010
to all unitholders of record as of August 9, 2010 and November 10, 2010, respectively.
In addition, on January 21, 2011, we declared a cash distribution of $0.43 per unit for the quarter ended December 31, 2010.
This most recent declaration represents $1.72 on an annualized basis. This cash distribution was paid on February 14, 2011
to all unitholders of record as of February 9, 2011.
Corporate
Information
We are incorporated under the laws of the Republic of the
Marshall Islands. We maintain our principal executive offices at
85 Akti Miaouli Street, Piraeus, Greece 185 38. Our telephone
number at that address is (011) +30 210 459 5000. Our
website address is www.navios-mlp.com. The information on
our website is not a part of this prospectus supplement or
accompanying prospectus.
S-5
The
Offering
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Issuer |
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Navios Maritime Partners L.P. |
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Common units offered by us |
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4,000,000 common units. |
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4,600,000 common units if the underwriters exercise in full
their option to purchase up to an additional 600,000 common
units to cover any over-allotments. |
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Units outstanding after this offering |
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45,779,404 common units, 7,621,843 subordinated units and
1,000,000 subordinated Series A units. |
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46,379,404 common units, 7,621,843 subordinated units and
1,000,000 subordinated Series A units, if the underwriters
exercise their over-allotment option in full. |
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Use of proceeds |
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We will use the net proceeds of approximately $78.4 million from this offering, and the proceeds of
$1.7 million from the sale of general partner units to our general partner to fund our
fleet expansion and/or for general partnership purposes. |
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Over-allotment option |
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We have granted the underwriters a
30-day
option to purchase up to 600,000 additional common units to
cover over-allotments, if any. |
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General Partner Units |
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At the closing of this offering, we will receive a
$1.7 million from our general partner for general partner units to
allow it to maintain its 2.0% general partner interest in us (or
$1.9 million if the underwriters exercise their
over-allotment option in full). The sale of general partner units is not
part of this offering. |
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Upon the closing of this offering, Navios Holdings will own a
26.7% interest in us (or 26.4% if the underwriters exercise
their over-allotment option in full), which includes the 2.0%
interest through our general partner which Navios Holdings owns
and controls. |
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New York Stock Exchange symbol |
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NMM. |
S-6
RISK
FACTORS
Before investing in our common units, you should carefully
consider all of the information included or incorporated by
reference into this prospectus. Although many of our business
risks are comparable to those of a corporation engaged in a
similar business, limited partner interests are inherently
different from the capital stock of a corporation. When
evaluating an investment in our common units, you should
carefully consider those risks discussed below and under the caption
Risk Factors beginning on page 4 of the
accompanying prospectus, as well as the discussion of risk
factors beginning on page 6 of our Annual Report on
Form 20-F/A
for the fiscal year ended December 31, 2010, and the risk
factors included in our Reports on
Form 6-K,
as applicable, that are specifically incorporated by reference
into this prospectus. If any of these risks were to occur, our
business, financial condition or operating results could be
materially adversely affected. In that case, our ability to pay
distributions on our common units may be reduced, the trading
price of our common units could decline, and you could lose all
or part of your investment.
We are subject to inherent operational risks that may not be adequately covered by our
insurance.
The operation of ocean-going vessels in international trade is inherently risky. Although we
carry insurance for our fleet against risks commonly insured against by vessel owners and
operators, including hull and machinery insurance, war risks insurance and protection and indemnity
insurance (which include environmental damage and pollution insurance), all risks may not be
adequately insured against, and any particular claim may not be paid. We do not currently maintain
off-hire insurance, which would cover the loss of revenue during extended vessel off-hire periods,
such as those that occur during an unscheduled drydocking due to damage to the vessel from
accidents. Accordingly, any extended vessel off-hire, due to an accident or otherwise, could have a
material adverse effect on our business and our ability to pay distributions to our unitholders.
Any claims covered by insurance would be subject to deductibles, and since it is possible that a
large number of claims may be brought, the aggregate amount of these deductibles could be material.
For example, in March 2011, Navios Apollon suffered an engine breakdown on her way to Tonda,
Japan for discharging operations. As a result, the vessel was off-hire during March 2011 and remains off-hire. The
extent of damage and rectification action is still under consideration in consultation with the
engine specialists, the Classification Society, the Hull and Machinery Underwriters who will cover
the costs of repairs and the P&I Club of the vessel (as discussed above, we do not maintain off-hire insurance). We do
not expect this incident to affect our
ability to pay distributions to our unitholders.
We may be unable to procure adequate insurance coverage at commercially reasonable rates in
the future. For example, more stringent environmental regulations have led in the past to increased
costs for, and in the future may result in the lack of availability of, insurance against risks of
environmental damage or pollution. A catastrophic oil spill or marine disaster could exceed our
insurance coverage, which could harm our business, financial condition and operating results.
Changes in the insurance markets attributable to terrorist attacks may also make certain types of
insurance more difficult for us to obtain. In addition, the insurance that may be available to us
may be significantly more expensive than our existing coverage.
Even if our insurance coverage is adequate to cover our losses, we may not be able to timely
obtain a replacement vessel in the event of a loss. Furthermore, in the future, we may not be able
to obtain adequate insurance coverage at reasonable rates for our fleet. Our insurance policies
also contain deductibles, limitations and exclusions which can result in significant increased
overall costs to us.
S-7
The loss of a customer or charter or vessel could result in a loss of revenues and cash flow in the
event we are unable to replace such customer, charter or vessel.
We have 12 charter counterparties. Some of our major charter counterparties are Mitsui O.S.K.
Lines, Ltd., Cargill International S.A., Cosco Bulk Carrier Co. Ltd., Samsun Logix and The Sanko
Steamship Co. Ltd., and these charter counterparties accounted for approximately
27.7%, 11.8%, 11.2%, 8.5% and 8.3%, respectively, of total revenues for the year ended
December 31, 2010. For the year ended December 31, 2009, Mitsui O.S.K. Lines, Ltd., Cargill
International S.A., The Sanko Steamship Co. Ltd., Daiichi Chuo Kisen Kaisha and Augustea Imprese
Maritime accounted for approximately 34.3%, 18.8%, 13.0%, 9.6% and 9.3%, respectively, of total
revenues. For the year ended December 31, 2008, Mitsui O.S.K. Lines, Ltd., Cargill International
S.A., The Sanko Steamship Co. Ltd., Daiichi Chuo Kisen Kaisha and Augustea Imprese Maritime
accounted for approximately 28.2%, 22.2%, 15.6%, 11.9% and 9.7%, respectively, of total revenues.
We could lose a customer or the benefits of a charter if:
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the customer fails to make charter payments because of its financial
inability, disagreements with us or otherwise; |
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the customer exercises certain rights to terminate the charter; |
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the customer terminates the charter because we fail to deliver the
vessel within a fixed period of time, the vessel is lost or damaged
beyond repair, there are serious deficiencies in the vessel or
prolonged periods of off-hire, or we default under the charter; or |
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a prolonged force majeure event affecting the customer, including
damage to or destruction of relevant production facilities, war or
political unrest prevents us from performing services for that
customer. |
If we lose a charter, we may be unable to re-deploy the related vessel on terms as favorable
to us due to the long-term nature of most charters and the cyclical nature of the industry or we
may be forced to charter the vessel on the spot market at then market rates which may be less
favorable that the charter that has been terminated. If we are unable to re-deploy a vessel for
which the charter has been terminated, we will not receive any revenues from that vessel, but we
may be required to pay expenses necessary to maintain the vessel in proper operating condition. In
addition, if a customer exercises any right to purchase a vessel to the extent we have granted any
such rights, we would not receive any further revenue from the vessel and may be unable to obtain a
substitute vessel and charter. This may cause us to receive decreased revenue and cash flows from
having fewer vessels operating in our fleet. Any replacement newbuilding would not generate
revenues during its construction, and we may be unable to charter any replacement vessel on terms
as favorable to us as those of the terminated charter. Any compensation under our charters for a
purchase of the vessels may not adequately compensate us for the loss of the vessel and related
time charter.
The permanent loss of a customer, time charter or vessel, or a decline in payments under our
charters, could have a material adverse effect on our business, results of operations and financial
condition and our ability to make cash distributions in the event we are unable to replace
such customer, time charter or vessel.
S-8
To mitigate the risk we have insured our charter-out contracts through a AA+ rated
governmental agency of a European Union member state, which provides that if the charterer goes
into payment default, the insurer will reimburse us for the charter payments under the terms of the
policy (subject to applicable deductibles and other customary limitations for such insurance) for
the remaining term of the charter-out contract.
In January 2011,
Korea Line Corporation (KLC) filed for receivership, which is a
reorganization under South Korean bankruptcy law. Navios Partners has reviewed the matter, as its
Capesize vessel Navios Melodia is charted out to KLC. We provided 30-day notice to KLC demanding
that the charter be affirmed or terminated. The charter was affirmed and will be performed by KLC on its
original terms, provided that during an interim suspension period the sub-charter will pay us directly.
As a result we do not expect KLCs receivership to have any material adverse effect on our business, results of operations and financial
condition or our ability to make cash distributions.
Our operations expose us to global political risks, such as wars and political instability that may
interfere with the operation of our vessels causing a decrease in revenues from such vessels.
We are an international company and conduct our operations primarily outside the United
States. Changing economic, political and governmental conditions in the countries where we are
engaged in business or where our vessels are registered will affect us. In the past, political
conflicts, particularly in the Persian Gulf, resulted in attacks on vessels, mining of waterways
and other efforts to disrupt shipping in the area. For example, in October 2002, the vessel
Limburg, which was not affiliated with us, was attacked by terrorists in Yemen. Acts of terrorism
and piracy have also affected vessels trading in regions such as the South China Sea. Following the
terrorist attack in New York City on September 11, 2001, and the military response of the United
States, the likelihood of future acts of terrorism may increase, and our vessels may face higher
risks of being attacked in the Middle East region and interruption of operations causing a decrease
in revenues. In addition, continuing conflicts and recent developments in North Africa and the
Middle East and future hostilities or other political instability in regions where our vessels
trade could affect our trade patterns and adversely affect our operations by causing delays in
shipping on certain routes or making shipping impossible on such routes, thereby causing a decrease
in revenues.
In addition, a government could requisition title or seize our vessels during a war or
national emergency. Requisition of title occurs when a government takes a vessel and becomes the
owner. A government could also requisition our vessels for hire, which would result in the
governments taking control of a vessel and effectively becoming the charterer at a dictated
charter rate. Requisition of one or more of our vessels would have a substantial negative effect on
us as we would potentially lose all revenues and earnings from the requisitioned vessels and
permanently lose the vessels. Such losses might be partially offset if the requisitioning
government compensated us for the requisition.
S-9
The economic slowdown in the Asia Pacific region has markedly reduced demand for shipping services
and has decreased shipping rates, which could adversely affect our results of operations and
financial condition.
Currently, China, India, Japan, other Pacific Asian economies and India are the main driving
force behind the development in seaborne drybulk trades and the demand for drybulk carriers.
Reduced demand from such economies has driven decreased rates and vessel values. A further negative
change in economic conditions in any Asian Pacific country, but particularly in China or Japan, as
well as India, may have a material adverse effect on our business, financial condition and results
of operations, as well as our future prospects, by reducing demand and the resultant charter rates.
In particular, in recent years, China has been one of the worlds fastest growing economies in
terms of gross domestic product. Furthermore, the economic uncertainty in the United States, the
European Union, and other countries may deepen the economic slowdown in China, among others.
The March 2011 natural disaster in Japan and its currently uncertain resultant effects may also
have a significant impact on the regional and world economies. With the third largest economy in
the world, an extended period of recovery for Japan and its economy could decrease oil and dry bulk
imports to that country, and a slowdown in the Japanese economy or an
interruption in Japanese production could have adverse effects on
other countries both within and outside the region. Our financial condition and results of operations, as well as our future
prospects, would likely be adversely affected by an economic downturn in any of these countries as
such downturn would likely translate into reduced demand for shipping services and lower shipping
rates industry-wide. As a result, our operating results would be further materially affected.
S-10
USE OF
PROCEEDS
We expect to receive net proceeds of approximately $80.1 million from the sale of common units we are
offering (which includes $1.7 million from our general
partners capital contribution to allow it to maintain its 2.0% general
partner interest in us), after deducting the underwriting
discount and estimated expenses payable by us. This amount
assumes a public offering price of $20.60 per common unit, the
last reported sales price of our common units on the New York
Stock Exchange on April 6, 2011. We expect to receive net
proceeds of approximately $92.1 million if the
underwriters option to acquire additional common units is
exercised in full, which includes $1.9 million from our
general partners related capital contribution.
We will use the net proceeds from our sale of common units
covered by this prospectus and the capital contribution by our
general partner to fund our fleet expansion
and/or for
general partnership purposes.
S-11
CAPITALIZATION
The following table sets forth our capitalization as of
December 31, 2010 on historical basis and on an as adjusted
basis to give effect to this offering, the capital contribution
by our general partner to maintain its 2.0% general partner
interest in us, and the application of the net proceeds
therefrom, assuming an offering price of $20.60, the last reported sales price of
our common units on April 6, 2011, and no exercise of the underwriters
over-allotment option.
The historical data in the table is derived from and should be
read in conjunction with our consolidated financial statements,
including accompanying notes, incorporated by reference in this
prospectus. You should also read this table in conjunction with
Use of Proceeds and the section entitled
Operating and Financial Review and Prospects and our
consolidated financial statements and the related notes thereto,
which are incorporated by reference herein from our Annual
Report on
Form 20-F
for the fiscal year ended December 31, 2010.
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Actual
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As Adjusted
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(In thousands of U.S. dollars)
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Long-term Debt:
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$
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321,500
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$
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321,500
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(1)
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Partners Capital:
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Common Unitholders (41,779,404 units issued and outstanding
December 31, 2010 and 45,779,404 as adjusted)
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651,965
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730,337
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Subordinated Unitholders (7,621,843 units issued and
outstanding December 31, 2010 and as adjusted)
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(168,229
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)
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(168,229
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General Partner (1,028,599 units issued and outstanding
December 31, 2010 and 1,110,232 as adjusted)
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1,685
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3,367
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Subordinated Series A Unitholders (1,000,000 units
issued and outstanding December 31, 2010 and as
adjusted)
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6,082
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6,082
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Total Partners Capital
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491,503
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571,557
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Total Capitalization
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$
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813,003
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$
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893,057
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(1) |
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As Adjusted Long-term Debt does not include repayment of
$7.3 million in February 2011 as per the repayment terms of our
credit facility. |
S-12
PRICE
RANGE OF COMMON UNITS AND DISTRIBUTIONS
Our common units were first offered on the New York Stock
Exchange on November 13, 2007, at an initial price of
$20.00 per unit. Our common units are listed for trading on the
New York Stock Exchange under the symbol NMM.
The following table sets forth, for the periods indicated, the
high and low closing prices for our common units, as reported on
the New York Stock Exchange, for the periods indicated. The last
reported sale price of our common units on the New York Stock
Exchange on April 6, 2011 was $20.60 per common unit.
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Price Range
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High
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Low
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Year Ended:
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December 31, 2010
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$
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20.03
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$
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14.50
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December 31, 2009
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$
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15.80
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$
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6.25
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December 31, 2008
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$
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18.85
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$
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3.36
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December 31, 2007*
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$
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19.45
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$
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17.40
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Quarter Ended:
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March 31, 2011
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$
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20.82 |
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$
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18.13
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December 31, 2010
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$
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19.58
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$
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17.93
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September 30, 2010
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$
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18.58
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$
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15.33
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June 30, 2010
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$
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20.03
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$
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14.81
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March 31, 2010
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$
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17.77
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$
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14.50
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December 31, 2009
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$
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15.90
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$
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11.80
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September 30, 2009
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$
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13.42
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$
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9.15
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June 30, 2009
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$
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11.94
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$
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7.90
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Month Ended:
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March 31, 2011
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$
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20.33
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$
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18.13
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February 28, 2011
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$
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19.87
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$
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18.75
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January 31, 2011
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$
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20.82
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$
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18.65
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December 31, 2010
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$
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19.58
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$
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18.73
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November 30, 2010
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$
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18.56
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$
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18.12
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October 31, 2010
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$
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18.88
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$
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17.93
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* |
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Period commenced on November 13, 2007. |
Quarterly
Distributions
The following table sets forth, for the periods indicated, the
approximate amounts of cash distributions that we have declared
and paid:
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Distributions for Quarter Ended
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Amount of Cash Distributions
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Cash Distributions per Unit
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December 31, 2010
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$21.9 million
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$0.43 per unit
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September 30, 2010
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$21.0 million
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$0.42 per unit
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June 30, 2010
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$18.3 million
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$0.42 per unit
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March 31, 2010
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$18.0 million
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$0.415 per unit
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December 31, 2009
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$15.1 million
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$0.41 per unit
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September 30, 2009
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$11.6 million
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$0.405 per unit
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June 30, 2009
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$10.1 million
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$0.40 per unit
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March 31, 2009
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$8.7 million
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$0.40 per unit
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December 31, 2008
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$8.7 million
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$0.40 per unit
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September 30, 2008
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$8.3 million
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$0.385 per unit
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June 30, 2008
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$6.5 million
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$0.35 per unit
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March 31, 2008
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$6.5 million
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$0.35 per unit
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December 31, 2007*
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$3.2 million
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$0.175 per unit
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* |
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Prorated for the period from November 16, 2007 to
December 31, 2007. |
S-13
MATERIAL
TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal
income tax considerations that may be relevant to prospective
unitholders and, unless otherwise noted in the following
discussion, is the opinion of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., our U.S. counsel, insofar as
it relates to matters of U.S. federal income tax law and
legal conclusions with respect to those matters. The opinion of
our counsel is dependent on the accuracy of representations made
by us to them, including descriptions of our operations
contained herein.
This discussion is based upon provisions of the Internal Revenue
Code, or the Code, U.S. Treasury Regulations, and current
administrative rulings and court decisions, all as in effect or
in existence on the date of this prospectus and all of which are
subject to change or differing interpretations by the Internal
Revenue Service or a court, possibly with retroactive effect.
Changes in these authorities may cause the tax consequences of
unit ownership to vary substantially from the consequences
described below. Unless the context otherwise requires,
references in this section to we, our or
us are references to Navios Maritime Partners L.P.
The following discussion applies only to beneficial owners of
common units that own the common units as capital
assets (generally, for investment purposes). The following
discussion does not comment on all aspects of U.S. federal
income taxation which may be important to particular unitholders
in light of their individual circumstances, such as unitholders
subject to special tax rules (e.g., banks or other
financial institutions, real estate investment trusts, regulated
investment companies, insurance companies, broker-dealers,
tax-exempt organizations and retirement plans, individual
retirement accounts and tax-deferred accounts, or former
citizens or long-term residents of the United States) or to
persons that will hold the units as part of a straddle, hedge,
conversion, constructive sale, or other integrated transaction
for U.S. federal income tax purposes, to partnerships or
other entities classified as partnerships for U.S. federal
income tax purposes or their partners or to persons that have a
functional currency other than the U.S. dollar, all of whom
may be subject to tax rules that differ significantly from those
summarized below. If a partnership or other entity classified as
a partnership for U.S. federal income tax purposes holds
our common units, the tax treatment of its partners generally
will depend upon the status of the partner and the activities of
the partnership. If you are a partner in a partnership holding
our common units, you should consult your own tax advisor
regarding the tax consequences to you of the partnerships
ownership of our common units.
No ruling has been obtained or will be requested from the Internal Revenue
Service, or the IRS, regarding any matter affecting us or
prospective unitholders. The opinions and statements made herein
may be challenged by the IRS and, if so challenged, may not be
sustained upon review in a court.
This discussion does not contain information regarding any
U.S. state or local, estate, gift or alternative minimum
tax considerations concerning the ownership or disposition of
common units, nor does it discuss any tax considerations under the newly enacted
Medicare tax on certain investment income. Each prospective unitholder is urged to consult
its own tax advisor regarding the U.S. federal, state,
local, and other tax consequences of the ownership or
disposition of common units.
Election
to be Treated as a Corporation
We have elected to be treated as a corporation for
U.S. federal income tax purposes. Consequently, among other
things, U.S. Holders (as defined below) will not directly
be subject to U.S. federal income tax on their shares of
our income, but rather will be subject to U.S. federal
income tax on distributions received from us and dispositions of
units as described below. For a further discussion of our
treatment for U.S. federal income tax purposes, please see
pages 48 to 50 of our Annual Report on
Form 20-F/A
for the fiscal year ended December 31, 2010, which is
incorporated by reference into this prospectus.
U.S.
Federal Income Taxation of U.S. Holders
As used herein, the term U.S. Holder means a
beneficial owner of our common units that owns less than 10.0%
of our common units and that:
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is an individual U.S. citizen or resident (as determined
for U.S. federal income tax purposes),
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S-14
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a corporation (or other entity that is classified as a
corporation for U.S. federal income tax purposes) organized
under the laws of the United States or any of its political
subdivisions,
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source, or
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a trust if (i) a court within the United States is able to
exercise primary jurisdiction over the administration of the
trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust or (ii) the
trust has a valid election in effect under current
U.S. Treasury Regulations to be treated as a
U.S. person.
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Distributions
Subject to the discussion below of the rules applicable to
passive foreign investment companies, or PFICs, any
distributions to a U.S. Holder made by us with respect to
our common units generally will constitute dividends, which will
be taxable as ordinary income or qualified dividend
income as described in more detail below, to the extent of
our current and accumulated earnings and profits, as determined
under U.S. federal income tax principles. Distributions in
excess of our earnings and profits will be treated first as a
non-taxable return of capital to the extent of the
U.S. Holders tax basis in its common units on a
dollar-for-dollar basis, and thereafter as capital gain, which
will be either long-term or short-term capital gain depending
upon whether the U.S. Holder held the common units for more
than one year. U.S. Holders that are corporations generally
will not be entitled to claim a dividend received deduction with
respect to distributions they receive from us. For
U.S. foreign tax credit purposes, dividends received with
respect to the common units will be treated as foreign source
income and generally will be treated as passive category
income.
Dividends received with respect to our common units by a
U.S. Holder who is an individual, trust or estate (a
U.S. Individual Holder) generally will be
treated as qualified dividend income that is taxable
to such U.S. Individual Holder at preferential capital gain
tax rates (through 2012), provided that: (i) our common
units are readily tradable on an established securities market
in the United States (such as the New York Stock Exchange where
our common units are traded); (ii) we are not a PFIC for
the taxable year during which the dividend is paid or the
immediately preceding taxable year (which we do not believe we
are, have been or will be, as discussed below); (iii) the
U.S. Individual Holder has owned the common units for more
than 60 days during the
121-day
period beginning 60 days before the date on which the
common units become ex-dividend (and has not entered into
certain risk limiting transactions with respect to such common
units); and (iv) the U.S. Individual Holder is not
under an obligation to make related payments with respect to
positions in substantially similar or related property. Any
dividends paid on our common units that are not eligible for
these preferential rates will be taxed as ordinary income to a
U.S. Individual Holder. In the absence of legislation
extending the term of the preferential tax rates for qualified
dividend income, all dividends received by a taxpayer in tax
years beginning on or after January 1, 2013, will be taxed
at rates applicable to ordinary income.
Special rules may apply to any amounts received in respect of
our common units that are treated as extraordinary
dividends. In general, an extraordinary dividend is a
dividend with respect to a common unit that is equal to or in
excess of 10.0% of a unitholders adjusted tax basis (or
fair market value upon the unitholders election) in such
common unit. In addition, extraordinary dividends include
dividends received within a one-year period that, in the
aggregate, equal or exceed 20.0% of a unitholders adjusted
tax basis (or fair market value). If we pay an
extraordinary dividend on our common units that is
treated as qualified dividend income, then any loss
recognized by a U.S. Individual Holder from the sale or
exchange of such common units will be treated as long-term
capital loss to the extent of the amount of such dividend.
Sale,
Exchange or Other Disposition of Common Units
Subject to the discussion of PFICs below, a U.S. Holder
generally will recognize capital gain or loss upon a sale,
exchange or other disposition of our units in an amount equal to
the difference between the amount realized by the
U.S. Holder from such sale, exchange or other disposition
and the U.S. Holders adjusted tax basis in such
units. The U.S. Holders initial tax basis in the
common units generally will be the U.S. Holders
purchase price for the common units and that tax basis will be
reduced (but not below zero) by the amount of any distributions
on the common units that are treated as non-taxable returns of
capital (Please read Material Tax
Considerations U.S. Federal Income Taxation of
U.S. Holders Distributions).
S-15
Such gain or loss will be treated as long-term capital gain or
loss if the U.S. Holders holding period is greater
than one year at the time of the sale, exchange or other
disposition. Certain U.S. Holders (including individuals)
may be eligible for preferential rates of U.S. federal
income tax in respect of long-term capital gains. A
U.S. Holders ability to deduct capital losses is
subject to limitations. Such capital gain or loss generally will
be treated as U.S. source income or loss, as applicable,
for U.S. foreign tax credit purposes.
PFIC
Status and Significant Tax Consequences
In general, we will be treated as a PFIC with respect to a
U.S. Holder if, for any taxable year in which the holder
held our common units, either:
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at least 75.0% of our gross income (including the gross income
of our vessel-owning subsidiaries) for such taxable year
consists of passive income (e.g., dividends, interest, capital
gains and rents derived other than in the active conduct of a
rental business), or
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at least 50.0% of the average value of the assets held by us
(including the assets of our vessel-owning subsidiaries) during
such taxable year produce, or are held for the production of,
passive income.
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Income earned, or deemed earned, by us in connection with the
performance of services will not constitute passive income. By
contrast, rental income generally will constitute passive
income unless we were treated as deriving our rental
income in the active conduct of a trade or business under the
applicable rules.
Based on our current and projected methods of operation, and an
opinion of counsel, we believe that we will not be a PFIC with
respect to any taxable year. Our U.S. counsel, Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., is of the
opinion that (1) the income we receive from time chartering
activities and assets engaged in generating such income should
not be treated as passive income or assets, respectively, and
(2) so long as our income from time charters exceeds 25.0%
of our gross income for each taxable year after our initial
taxable year and the value of our vessels contracted under time
charters exceeds 50.0% of the average value of our assets for
each taxable year after our initial taxable year, we should not
be a PFIC. This opinion is based on representations and
projections provided to our counsel by us regarding our assets,
income and charters, and its validity is conditioned on the
accuracy of such representations and projections.
Our counsels opinion is based principally on its
conclusion that, for purposes of determining whether we are a
PFIC, the gross income we derive or are deemed to derive from
the time chartering activities of our wholly-owned subsidiaries
should constitute services income, rather than rental income.
Correspondingly, such income should not constitute passive
income, and the assets that we or our subsidiaries own and
operate in connection with the production of such income, in
particular, the vessels we or our subsidiaries own that are
subject to time charters, should not constitute passive assets
for purposes of determining whether we are or have been a PFIC.
We expect that all of the vessels in our fleet will be engaged
in time chartering activities and intend to treat our income
from those activities as non-passive income, and the vessels
engaged in those activities as non-passive assets, for PFIC
purposes.
Our counsel believes that there is substantial analogous legal
authority supporting our position consisting of the Code,
legislative history, case law and IRS pronouncements concerning
the characterization of income derived from time charters as
services income for other tax purposes. However, there is no
legal authority directly on point, and we are not obtaining a
ruling from the IRS on this issue. The opinion of our counsel is
not binding on the IRS or any court. Thus, while we have
received an opinion of our counsel in support of our position,
there is a possibility that the IRS or a court could disagree
with this position and the opinion of our counsel. Although we
intend to conduct our affairs in a manner to avoid being
classified as a PFIC with respect to any taxable year, we cannot
assure you that the nature of our operations will not change in
the future.
As discussed more fully below, if we were to be treated as a
PFIC for any taxable year, a U.S. Holder would be subject
to different taxation rules depending on whether the
U.S. Holder makes a timely filed election to treat us as a
Qualified Electing Fund, which we refer to as a
QEF election. As an alternative to making a QEF
election, a U.S. Holder should be able to make a
mark-to-market election with respect to our common
units, as discussed below. In addition, if we are a PFIC, a U.S.
Holder would be subject to new annual reporting requirements
under section 1298(f) of the Code.
S-16
Taxation
of U.S. Holders Making a Timely QEF Election
If a U.S. Holder makes a timely QEF election (an
Electing Holder), he must report for
U.S. federal income tax purposes his pro rata share of our
ordinary earnings and net capital gain, if any, for our taxable
years that end with or within his taxable year, regardless of
whether or not the Electing Holder received distributions from
us in that year. The Electing Holders adjusted tax basis
in the common units will be increased to reflect taxed but
undistributed earnings and profits. Distributions of earnings
and profits that were previously taxed will result in a
corresponding reduction in the Electing Holders adjusted
tax basis in common units and will not be taxed again once
distributed. An Electing Holder generally will recognize capital
gain or loss on the sale, exchange or other disposition of our
common units. A U.S. Holder makes a QEF election with
respect to any year that we are a PFIC by filing IRS
Form 8621 with his U.S. federal income tax return. If
contrary to our expectations, we determine that we are treated
as a PFIC for any taxable year, we will provide each
U.S. Holder with the information necessary to make the QEF
election described above.
Taxation
of U.S. Holders Making a Mark-to-Market
Election
If we were to be treated as a PFIC for any taxable year and, as
we anticipate, our units were treated as marketable
stock, then, as an alternative to making a QEF election, a
U.S. Holder would be allowed to make a
mark-to-market election with respect to our common
units, provided the U.S. Holder completes and files IRS
Form 8621 in accordance with the relevant instructions and
related Treasury Regulations. If that election is made, the
U.S. Holder generally would include as ordinary income in
each taxable year the excess, if any, of the fair market value
of the U.S. Holders common units at the end of the
taxable year over the holders adjusted tax basis in the
common units. The U.S. Holder also would be permitted an
ordinary loss in respect of the excess, if any, of the
U.S. Holders adjusted tax basis in the common units
over the fair market value thereof at the end of the taxable
year, but only to the extent of the net amount previously
included in income as a result of the mark-to-market election. A
U.S. Holders tax basis in his common units would be
adjusted to reflect any such income or loss recognized. Gain
recognized on the sale, exchange or other disposition of our
common units would be treated as ordinary income, and any loss
recognized on the sale, exchange or other disposition of the
common units would be treated as ordinary loss to the extent
that such loss does not exceed the net mark-to-market gains
previously included in income by the U.S. Holder.
Taxation
of U.S. Holders Not Making a Timely QEF or Mark-to-Market
Election
If we were to be treated as a PFIC for any taxable year, a
U.S. Holder who does not make either a timely QEF election
or a mark-to-market election for that year (i.e.,
the taxable year in which the U.S. Holders holding period
commences), whom we refer to as a Non-Electing
Holder, would be subject to special rules resulting in
increased tax liability with respect to (1) any excess
distribution (i.e., the portion of any distributions
received by the Non-Electing Holder on our common units in a
taxable year in excess of 125.0% of the average annual
distributions received by the Non-Electing Holder in the three
preceding taxable years, or, if shorter, the Non-Electing
Holders holding period for the common units), and
(2) any gain realized on the sale, exchange or other
disposition of the units. Under these special rules:
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the excess distribution or gain would be allocated ratably over
the Non-Electing Holders aggregate holding period for the
common units;
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the amount allocated to the current taxable year and any year
prior to the year we were first treated as a PFIC with respect
to the Non-Electing Holder would be taxed as ordinary
income; and
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the amount allocated to each of the other taxable years would be
subject to tax at the highest rate of tax in effect for the
applicable class of taxpayer for that year, and an interest
charge for the deemed deferral benefit would be imposed with
respect to the resulting tax attributable to each such other
taxable year.
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These penalties would not apply to a qualified pension, profit
sharing or other retirement trust or other tax-exempt
organization that did not borrow money or otherwise utilize
leverage in connection with its acquisition of our common units.
If we were treated as a PFIC for any taxable year and a
Non-Electing Holder
S-17
who is an individual dies while owning our common units, such
holders successor generally would not receive a
step-up in
tax basis with respect to such units.
U.S.
Federal Income Taxation of
Non-U.S.
Holders
A beneficial owner of our common units (other than a partnership
or an entity or arrangement treated as a partnership for
U.S. federal income tax purposes) that is not a
U.S. Holder is a
Non-U.S. Holder.
If you are a partner in a partnership (or an entity or
arrangement treated as a partnership for U.S. federal
income tax purposes) holding our common units, you should
consult your own tax advisor regarding the tax consequences to
you of the partnerships ownership of our common units.
Distributions
Distributions we pay to a
Non-U.S. Holder
will not be subject to U.S. federal income tax or
withholding tax if the
Non-U.S. Holder
is not engaged in a U.S. trade or business. If the
Non-U.S. Holder
is engaged in a U.S. trade or business, our distributions
will be subject to U.S. federal income tax to the extent
they constitute income effectively connected with the
Non-U.S. Holders
U.S. trade or business. However, distributions paid to a
Non-U.S. Holder
who is engaged in a trade or business may be exempt from
taxation under an income tax treaty if the income arising from
the distribution is not attributable to a U.S. permanent
establishment maintained by the
Non-U.S. Holder.
Disposition
of Units
In general, a
Non-U.S. Holder
is not subject to U.S. federal income tax or withholding
tax on any gain resulting from the disposition of our common
units provided the
Non-U.S. Holder
is not engaged in a U.S. trade or business. A
Non-U.S. Holder
that is engaged in a U.S. trade or business will be subject
to U.S. federal income tax in the event the gain from the
disposition of units is effectively connected with the conduct
of such U.S. trade or business (provided, in the case of a
Non-U.S. Holder
entitled to the benefits of an income tax treaty with the United
States, such gain also is attributable to a U.S. permanent
establishment). However, even if not engaged in a
U.S. trade or business, individual
Non-U.S. Holders
may be subject to tax on gain resulting from the disposition of
our common units if they are present in the United States for
183 days or more during the taxable year in which those
units are disposed and meet certain other requirements.
Backup
Withholding and Information Reporting
In general, payments to a non-corporate U.S. Holder of
distributions or the proceeds of a disposition of common units
will be subject to information reporting. These payments to a
non-corporate U.S. Holder also may be subject to backup
withholding, if the non-corporate U.S. Holder:
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fails to provide an accurate taxpayer identification number;
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is notified by the IRS that he has failed to report all interest
or corporate distributions required to be reported on his
U.S. federal income tax returns; or
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in certain circumstances, fails to comply with applicable
certification requirements.
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Non-U.S. Holders
may be required to establish their exemption from information
reporting and backup withholding by certifying their status on
IRS
Form W-8BEN,
W-8ECI or
W-8IMY, as
applicable.
Backup withholding is not an additional tax. Rather, a
unitholder generally may obtain a credit for any amount withheld
against his liability for U.S. federal income tax (and
obtain a refund of any amounts withheld in excess of such
liability) by filing a U.S. federal income tax return with
the IRS.
Code section 6038D requires that individuals who are
U.S. Holders and who hold specified foreign financial
assets (as defined), including a foreign
corporations units whose aggregate value exceeds $50,000
during the tax year (and which assets are not held in an account
maintained by a U.S. financial institution, as
defined) must attach to their tax returns for the year certain
specified information. An individual who fails to timely furnish
the required information may be subject to a penalty.
U.S. Holders who are individuals should consult their own
tax advisors regarding their reporting obligations.
S-18
NON-UNITED
STATES TAX CONSIDERATIONS
Marshall
Islands Tax Consequences
The following discussion is based upon the opinion of
Reeder & Simpson P.C., our counsel as to matters of
the laws of the Republic of the Marshall Islands, and the
current laws of the Republic of the Marshall Islands applicable
to persons who do not reside in, maintain offices in or engage
in business in the Republic of the Marshall Islands.
Because we and our subsidiaries do not and do not expect to
conduct business or operations in the Republic of the Marshall
Islands, and because all documentation related to this offering
will be executed outside of the Republic of the Marshall
Islands, under current Marshall Islands law you will not be
subject to Marshall Islands taxation or withholding on
distributions, including upon distribution treated as a return
of capital, we make to you as a unitholder. In addition, you
will not be subject to Marshall Islands stamp, capital gains or
other taxes on the purchase, ownership or disposition of common
units, and you will not be required by the Republic of the
Marshall Islands to file a tax return relating to your ownership
of common units.
EACH PROSPECTIVE UNITHOLDER IS URGED TO CONSULT HIS OWN TAX,
LEGAL AND OTHER ADVISORS REGARDING THE CONSEQUENCES OF OWNERSHIP
OF COMMON UNITS UNDER THE UNITHOLDERS PARTICULAR
CIRCUMSTANCES.
S-19
UNDERWRITING
Citigroup Global Markets Inc., J.P. Morgan Securities LLC
and Wells Fargo Securities, LLC are
acting as joint book-running managers of the offering and as
representatives of the underwriters named below. Subject to the
terms and conditions stated in the underwriting agreement dated
the date of this prospectus supplement, each underwriter named
below has severally agreed to purchase, and we have agreed to
sell to that underwriter, the number of common units set forth
opposite the underwriters name.
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Number
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Underwriter
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of Common Units
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Citigroup Global Markets Inc.
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J.P. Morgan Securities LLC
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Wells Fargo Securities, LLC
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S. Goldman Capital LLC
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Total
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4,000,000
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The underwriting agreement provides that the obligations of the
underwriters to purchase the common units included in this
offering are subject to approval of legal matters by counsel and
to other conditions. The underwriters are obligated to purchase
all the common units (other than those covered by the
over-allotment option described below) if they purchase any of
the common units.
Common units sold by the underwriters to the public will
initially be offered at the public offering price set forth on
the cover of this prospectus supplement. Any common units sold
by the underwriters to securities dealers may be sold at a
discount from the initial public offering price not to exceed
$
per common unit. If all the common units are not sold at the
initial offering price, the underwriters may change the offering
price and the other selling terms.
If the underwriters sell more common units than the total number
set forth in the table above, we have granted to the
underwriters an option, exercisable for 30 days from the
date of this prospectus supplement, to purchase up to 600,000
additional common units at the public offering price less the
underwriting discount. The underwriters may exercise the option
solely for the purpose of covering over-allotments, if any, in
connection with this offering. To the extent the option is
exercised, each underwriter must purchase a number of additional
common units approximately proportionate to that
underwriters initial purchase commitment. Any common units
issued or sold under the option will be issued and sold on the
same terms and conditions as the other common units that are the
subject of this offering.
We, our officers and directors and Navios Holdings and its
affiliates have agreed that, for a period of 90 days from
the date of this prospectus supplement, we and they will not,
without the prior written consent of each of Citigroup Global Markets Inc., J.P. Morgan
Securities LLC and Wells Fargo Securities, LLC,
dispose of or hedge any common units or any securities
convertible into or exchangeable for our common units. The
securities subject to these
lock-up
arrangements may be released at any time without notice upon the
written consent of all the representatives. The foregoing will
not apply to the offer for sale, sale or other issuance of
common units or other securities to Navios Holdings or any of
its subsidiaries in connection with our acquisition of any
assets from Navios Holdings or any of its subsidiaries, provided
that any such recipient of common units or other securities
enters into a
lock-up
arrangement for the remainder of the
90-day
restricted period. Notwithstanding the foregoing, if
(i) during the last 17 days of the
90-day
restricted period, we issue an earnings release or material news
or a material event relating to our company occurs; or
(ii) prior to the expiration of the
90-day
restricted period, we announce that we will release earnings
results during the
16-day
period beginning on the last day of the
90-day
restricted period, the restrictions described above shall
continue to apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
occurrence of the material news or material event.
The common units are listed on the New York Stock Exchange under
the symbol NMM.
S-20
The following table shows the underwriting discounts and
commissions that we are to pay to the underwriters in connection
with this offering. These amounts are shown assuming both no
exercise and full exercise of the underwriters
over-allotment option.
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No Exercise
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Full Exercise
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Per common unit
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$
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$
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Total
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$
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$
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We estimate that our portion of the total expenses of this
offering will be $320,000.
In connection with the offering, the underwriters may purchase
and sell common units in the open market. Purchases and sales in
the open market may include short sales, purchases to cover
short positions, which may include purchases pursuant to the
over-allotment option, and stabilizing purchases.
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Short sales involve secondary market sales by the underwriters
of a greater number of common units than they are required to
purchase in the offering.
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Covered short sales are sales of common units in an
amount up to the number of common units represented by the
underwriters over-allotment option.
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Naked short sales are sales of common units in an
amount in excess of the number of common units represented by
the underwriters over-allotment option.
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Covering transactions involve purchases of common units either
pursuant to the over-allotment option or in the open market
after the distribution has been completed in order to cover
short positions.
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To close a naked short position, the underwriters must purchase
common units in the open market after the distribution has been
completed. A naked short position is more likely to be created
if the underwriters are concerned that there may be downward
pressure on the price of the common units in the open market
after pricing that could adversely affect investors who purchase
in the offering.
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To close a covered short position, the underwriters must
purchase common units in the open market after the distribution
has been completed or must exercise the over-allotment option.
In determining the source of common units to close the covered
short position, the underwriters will consider, among other
things, the price of common units available for purchase in the
open market as compared to the price at which they may purchase
common units through the over-allotment option.
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Stabilizing transactions involve bids to purchase common units
so long as the stabilizing bids do not exceed a specified
maximum.
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The underwriters also may impose a penalty bid. Penalty bids
permit the underwriters to reclaim a selling concession from a
syndicate member when the underwriters, in covering short
positions or making stabilizing purchases, repurchase common
units originally sold by that syndicate member.
Purchases to cover short positions and stabilizing purchases, as
well as other purchases by the underwriters for their own
accounts, may have the effect of preventing or retarding a
decline in the market price of the common units. They may also
cause the price of the common units to be higher than the price
that would otherwise exist in the open market in the absence of
these transactions. The underwriters may conduct these
transactions on the New York Stock Exchange, in the
over-the-counter market or otherwise. If the underwriters
commence any of these transactions, they may discontinue them at
any time.
Some of the underwriters or their affiliates have performed
commercial banking, investment banking and advisory services for
us and Navios Holdings and its subsidiaries from time to time
for which they have received customary fees and reimbursement of
expenses. The underwriters or their affiliates may, from time to
time, engage in transactions with and perform services for us
and Navios Holdings and its subsidiaries in the ordinary course
of their business for which they may receive customary fees and
reimbursement of expenses.
We, our general partner and Navios Maritime Operating L.L.C.
have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of
1933, as amended, or to contribute to payments the underwriters
may be required to make because of any of those liabilities.
S-21
Notice to
Prospective Investors in the European Economic Area
In relation to each member state of the European Economic Area
that has implemented the Prospectus Directive (each, a relevant
member state), with effect from and including the date on which
the Prospectus Directive is implemented in that relevant member
state (the relevant implementation date), an offer of common
units described in this prospectus supplement may not be made to
the public in that relevant member state prior to the
publication of a prospectus in relation to the common units that
has been approved by the competent authority in that relevant
member state or, where appropriate, approved in another relevant
member state and notified to the competent authority in that
relevant member state, all in accordance with the Prospectus
Directive, except that, with effect from and including the
relevant implementation date, an offer of securities may be
offered to the public in that relevant member state at any time:
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to any legal entity that is authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
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to any legal entity that has two or more of (1) an average
of at least 250 employees during the last financial year;
(2) a total balance sheet of more than 43,000,000 and
(3) an annual net turnover of more than 50,000,000,
as shown in its last annual or consolidated accounts;
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to fewer than 100 natural or legal persons (other than qualified
investors as defined below) subject to obtaining the prior
consent of the representatives for any such offer; or
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in any other circumstances that do not require the publication
of a prospectus pursuant to Article 3 of the Prospectus
Directive.
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Each purchaser of common units described in this prospectus
supplement located within a relevant member state will be deemed
to have represented, acknowledged and agreed that it is a
qualified investor within the meaning of
Article 2(1)(e) of the Prospectus Directive.
For purposes of this provision, the expression an offer to
the public in any relevant member state means the
communication in any form and by any means of sufficient
information on the terms of the offer and the securities to be
offered so as to enable an investor to decide to purchase or
subscribe the securities, as the expression may be varied in
that member state by any measure implementing the Prospectus
Directive in that member state, and the expression
Prospectus Directive means Directive 2003/71/EC and
includes any relevant implementing measure in each relevant
member state.
The sellers of the common units have not authorized and do not
authorize the making of any offer of common units through any
financial intermediary on their behalf, other than offers made
by the underwriters with a view to the final placement of the
common units as contemplated in this prospectus supplement.
Accordingly, no purchaser of the common units, other than the
underwriters, is authorized to make any further offer of the
common units on behalf of the sellers or the underwriters.
Notice to
Prospective Investors in the United Kingdom
This prospectus supplement and the accompanying prospectus are
only being distributed to, and is only directed at, persons in
the United Kingdom that are qualified investors within the
meaning of Article 2(1)(e) of the Prospectus Directive that are
also (i) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the Order) or
(ii) high net worth entities, and other persons to whom it
may lawfully be communicated, falling within
Article 49(2)(a) to (d) of the Order (each such person
being referred to as a relevant person). This
prospectus supplement and its contents are confidential and
should not be distributed, published or reproduced (in whole or
in part) or disclosed by recipients to any other persons in the
United Kingdom. Any person in the United Kingdom that is not a
relevant person should not act or rely on this document or any
of its contents.
Notice to
Prospective Investors in France
Neither this prospectus supplement nor any other offering
material relating to the common units described in this
prospectus supplement has been submitted to the clearance
procedures of the Autorité des Marchés
S-22
Financiers or of the competent authority of another
member state of the European Economic Area and notified to the
Autorité des Marchés Financiers. The common
units have not been offered or sold and will not be offered or
sold, directly or indirectly, to the public in France. Neither
this prospectus supplement nor any other offering material
relating to the common units has been or will be:
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released, issued, distributed or caused to be released, issued
or distributed to the public in France; or
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used in connection with any offer for subscription or sale of
the common units to the public in France.
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Such offers, sales and distributions will be made in France only:
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to qualified investors (investisseurs qualifiés)
and/or to a
restricted circle of investors (cercle restreint
dinvestisseurs), in each case investing for their own
account, all as defined in, and in accordance with
articles L.411-2,
D.411-1, D.411-2, D.734-1, D.744-1, D.754-1 and D.764-1 of the
French Code monétaire et financier;
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to investment services providers authorized to engage in
portfolio management on behalf of third parties; or
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in a transaction that, in accordance with
article L.411-2-II-1°-or-2°-or
3° of the French Code monétaire et financier
and
article 211-2
of the General Regulations (Règlement
Général) of the Autorité des Marchés
Financiers, does not constitute a public offer (appel
public à lépargne).
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The common units may be resold directly or indirectly, only in
compliance with
articles L.411-1,
L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French
Code monétaire et financier.
Notice to
Prospective Investors in Hong Kong
The common units may not be offered or sold in Hong Kong by
means of any document other than (i) in circumstances which
do not constitute an offer to the public within the meaning of
the Companies Ordinance (Cap. 32, Laws of Hong Kong), or
(ii) to professional investors within the
meaning of the Securities and Futures Ordinance (Cap. 571, Laws
of Hong Kong) and any rules made thereunder, or (iii) in
other circumstances which do not result in the document being a
prospectus within the meaning of the Companies
Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement,
invitation or document relating to the common units may be
issued or may be in the possession of any person for the purpose
of issue (in each case whether in Hong Kong or elsewhere), which
is directed at, or the contents of which are likely to be
accessed or read by, the public in Hong Kong (except if
permitted to do so under the laws of Hong Kong) other than with
respect to common units which are or are intended to be disposed
of only to persons outside Hong Kong or only to
professional investors within the meaning of the
Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong)
and any rules made thereunder.
Notice to
Prospective Investors in Japan
The common units offered in this prospectus supplement have not
been registered under the Securities and Exchange Law of Japan.
The common units have not been offered or sold and will not be
offered or sold, directly or indirectly, in Japan or to or for
the account of any resident of Japan, except (i) pursuant
to an exemption from the registration requirements of the
Securities and Exchange Law and (ii) in compliance with any
other applicable requirements of Japanese law.
Notice to
Prospective Investors in Singapore
This prospectus supplement has not been registered as a
prospectus with the Monetary Authority of Singapore.
Accordingly, this prospectus supplement and any other document
or material in connection with the offer or sale, or invitation
for subscription or purchase, of the common units may not be
circulated or distributed, nor may the common units be offered
or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to
persons in Singapore other than (i) to an institutional
investor under Section 274 of the Securities and Futures
Act, Chapter 289 of Singapore (the SFA),
(ii) to a relevant person pursuant to Section 275(1),
or any person pursuant to Section 275(1A), and in
S-23
accordance with the conditions specified in Section 275 of
the SFA or (iii) otherwise pursuant to, and in accordance
with the conditions of, any other applicable provision of the
SFA, in each case subject to compliance with conditions set
forth in the SFA.
Where the common units are subscribed or purchased under
Section 275 of the SFA by a relevant person which is:
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a corporation (which is not an accredited investor (as defined
in Section 4A of the SFA)) the sole business of which is to
hold investments and the entire share capital of which is owned
by one or more individuals, each of whom is an accredited
investor; or
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a trust (where the trustee is not an accredited investor) whose
sole purpose is to hold investments and each beneficiary of the
trust is an individual who is an accredited investor,
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common units, debentures and units of common units and
debentures of that corporation or the beneficiaries rights
and interest (howsoever described) in that trust shall not be
transferred within six months after that corporation or that
trust has acquired the common units pursuant to an offer made
under Section 275 of the SFA except:
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to an institutional investor (for corporations, under
Section 274 of the SFA) or to a relevant person defined in
Section 275(2) of the SFA, or to any person pursuant to an
offer that is made on terms that such common units, debentures
and units of common units and debentures of that corporation or
such rights and interest in that trust are acquired at a
consideration of not less than $200,000 (or its equivalent in a
foreign currency) for each transaction, whether such amount is
to be paid for in cash or by exchange of securities or other
assets, and further for corporations, in accordance with the
conditions specified in Section 275 of the SFA;
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where no consideration is or will be given for the
transfer; or
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where the transfer is by operation of law.
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Notice to Prospective Investors in Switzerland
This prospectus is being
communicated in Switzerland to a small number of selected investors
only. Each copy of this prospectus is addressed to a specifically named recipient and may not be
copied, reproduced, distributed or passed on to third parties. Our common units are not being
offered
to the public in Switzerland, and neither this prospectus, nor any other offering
materials relating to
our common units may be distributed in connection with any such public offering.
We have not been
registered with the Swiss Financial Market Supervisory Authority FINMA as
a foreign collective investment scheme pursuant to Article 120 of the Collective Investment Schemes
Act of June 23, 2006 (CISA). Accordingly, our common units may not be offered to
the public in or
from Switzerland, and neither this prospectus, nor any other offering materials relating to
our common
units may be made available through a public offering in or from Switzerland. Our common
units may
only be offered and this prospectus may only be distributed in or from Switzerland by way of private
placement exclusively to qualified investors (as this term is defined in the CISA and its implementing
ordinance).
S-24
SERVICE
OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
We are organized under the laws of the Marshall Islands as a
limited partnership. Our general partner is organized under the
laws of the Marshall Islands as a limited liability company. The
Marshall Islands has a less developed body of securities laws as
compared to the United States and provides protections for
investors to a significantly lesser extent.
Most of our directors and the directors and officers of our
general partner and those of our subsidiaries are residents of
countries other than the United States. Substantially all of our
and our subsidiaries assets and a substantial portion of
the assets of our directors and the directors and officers of
our general partner are located outside the United States. As a
result, it may be difficult or impossible for United States
investors to effect service of process within the United States
upon us, our directors, our general partner, our subsidiaries or
the directors and officers of our general partner or to realize
against us or them judgments obtained in United States courts,
including judgments predicated upon the civil liability
provisions of the securities laws of the United States or any
state in the United States. However, we have expressly submitted
to the jurisdiction of the U.S. federal and New York state
courts sitting in the City of New York for the purpose of any
suit, action or proceeding arising under the securities laws of
the United States or any state in the United States, and we have
appointed the Trust Company of the Marshall Islands, Inc.,
Trust Company Complex, Ajeltake Island,
P.O. Box 1405, Majuro, Marshall Islands MH96960, to
accept service of process on our behalf in any such action.
Reeder & Simpson P.C., our counsel as to Marshall
Islands law, has advised us that there is uncertainty as to
whether the courts of the Republic of the Marshall Islands would
(1) recognize or enforce against us, our general partner or
our general partners directors or officers judgments of
courts of the United States based on civil liability provisions
of applicable U.S. federal and state securities laws or
(2) impose liabilities against us, our directors, our
general partner or our general partners directors and
officers in original actions brought in the Marshall Islands,
based on these laws.
LEGAL
MATTERS
The validity of the common units offered hereby and certain
other legal matters with respect to the laws of the Republic of
the Marshall Islands will be passed upon for us by our counsel
as to Marshall Islands law, Reeder & Simpson P.C.
Certain other legal matters will be passed upon for us by Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., New York, New
York. Certain matters with respect to this offering will be
passed upon for the underwriters by Fried, Frank, Harris,
Shriver & Jacobson LLP, New York, New York. Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and Fried,
Frank, Harris, Shriver & Jacobson LLP may rely on the
opinion of Reeder & Simpson P.C. for all matters of
Marshall Islands law. Fried, Frank, Harris, Shriver &
Jacobson LLP has performed legal services for Navios Holdings
and its subsidiaries from time to time.
EXPERTS
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting (which is included in Managements
Report on Internal Control over Financial Reporting)
incorporated in this Prospectus by reference to the
Annual Report on Form 20-F for the year ended
December 31, 2010 have been so incorporated in reliance on
the report of PricewaterhouseCoopers S.A, an independent
registered public accounting firm, given on the authority of
said firm as experts in auditing and accounting.
You may contact PricewaterhouseCoopers S.A. at their address at
268 Kifissias Avenue, 152 32 Halandri, Greece.
EXPENSES
The following table sets forth costs and expenses, other than
any underwriting discounts and commissions, we expect to incur
in connection with the issuance and distribution of the common
units covered by this
S-25
prospectus. Other than the Securities and Exchange Commission
registration fee which is set forth in the base prospectus, all
amounts are estimated.
|
|
|
|
|
Legal fees and expenses
|
|
$
|
200,000
|
|
Accounting fees and expenses
|
|
$
|
60,000
|
|
Printing costs
|
|
$
|
50,000
|
|
Transfer agent fees
|
|
$
|
10,000
|
|
|
|
|
|
|
Total
|
|
$
|
320,000
|
|
|
|
|
|
|
S-26
PROSPECTUS
$500,000,000
Navios Maritime Partners
L.P.
Common Units
Representing Limited
Partnership Interests
Debt Securities
We may, from time to time, issue up to $500,000,000 aggregate
principal amount of common units
and/or debt
securities. We will specify in an accompanying prospectus
supplement the terms of the securities. We may sell these
securities to or through underwriters and also to other
purchasers or through agents. We will set forth the names of any
underwriters or agents in the accompanying prospectus
supplement. Our common units are listed on the New York Stock
Exchange under the symbol NMM. On February 5,
2009, the last reported sales price of our common units on the
NYSE was $8.00 per common unit.
Investing in our common units
involves risks that are described in the Risk
Factors section beginning on page 4 of this
prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
This prospectus may not be used to consummate sales of
securities unless it is accompanied by a prospectus
supplement.
The date of this prospectus is February 6, 2009.
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with different information. If
anyone provides you with different or inconsistent information,
you should not rely on it. We are not, and the underwriters are
not, making an offer to sell these securities in any
jurisdiction where an offer or sale is not permitted. You should
assume that the information appearing in this prospectus is
accurate only as of the date on the front cover of this
prospectus. Our business, financial condition, results of
operations and prospects may have changed since that date.
TABLE OF
CONTENTS
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Page
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1
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4
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F-1
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i
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission, or SEC,
utilizing a shelf registration process. Under this
shelf process, we may sell any combination of the securities
described in this prospectus in one or more offerings up to a
total dollar amount of U.S.$500,000,000. We have provided to you
in this prospectus a general description of the securities we
may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information
about the terms of that offering. In any applicable prospectus
supplements, we may add to, update or change any of the
information contained in this prospectus.
References in this prospectus to Navios Maritime Partners
L.P., Navios Partners, we,
our, us or similar terms when used in a
present tense or for historical periods since November 16,
2007 refer to Navios Maritime Partners L.P. and its
subsidiaries. References in this prospectus to Navios
Holdings refer, depending on the context, or for
historical periods prior to November 16, 2007 refer to
Navios Maritime Holdings Inc. and its subsidiaries, including
Navios ShipManagement Inc., or Navios ShipManagement. Navios
ShipManagement (an affiliate of our general partner) manages the
commercial and technical operation of our fleet pursuant to a
management agreement and provides administrative services to us
pursuant to an administrative services agreement. References in
this prospectus referring to existing credit
facility, credit facility or similar terms
refer to our revolving credit facility, as will be amended on
January 2009.
You should read carefully this prospectus, any prospectus
supplement, and the additional information described below under
the heading Where You Can Find More Information. You
should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with
different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not
making an offer to sell these securities in any jurisdiction
where an offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as
of the date on the front cover of this prospectus. Our business,
financial condition, results of operations and prospects may
have changed since that date.
INCORPORATION
OF DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference into
this prospectus information that we file with the SEC. This
means that we can disclose important information to you without
actually including the specific information in this prospectus
by referring you to other documents filed separately with the
SEC. The information incorporated by reference is an important
part of this prospectus. Information that we later provide to
the SEC, and which is deemed to be filed with the
SEC, automatically will update information previously filed with
the SEC, and may replace information in this prospectus.
We incorporate by reference into this prospectus the documents
listed below:
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our Annual Report on
Form 20-F
for the fiscal year ended December 31, 2007 (the
Annual Report);
|
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our Current Report on
Form 6-K/A
reporting results for the fiscal quarter ended
September 30, 2008 filed on January 28, 2009;
|
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our Current Report on
Form 6-K
dated July 10, 2008, filed on July 10, 2008;
|
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our Current Report on
Form 6-K
dated July 1, 2008, filed on July 2, 2008;
|
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|
all subsequent reports on
Form 20-F
shall be deemed to be incorporated by reference into this
prospectus and deemed to be a part hereof after the date of this
prospectus but before the termination of the offering by this
prospectus; and
|
|
|
|
our reports on
Form 6-K
furnished to the SEC after the date of this prospectus only to
the extent that the forms expressly state that we incorporate by
reference in this prospectus.
|
These reports contain important information about us, our
financial condition and our results of operations.
ii
You may obtain any of the documents incorporated by reference in
this prospectus from the SEC through its public reference
facilities or its website at the addresses provided above. You
also may request a copy of any document incorporated by
reference in this prospectus (excluding exhibits to those
documents, unless the exhibit is specifically incorporated by
reference in this document), at no cost by visiting our Internet
website at www.capitalpplp.com, or by writing or calling us at
the following address:
85 Akti Miaouli Street
Piraeus, Greece 185 38
(011) +30 210 459 5000
You should rely only on the information incorporated by
reference or provided in this prospectus or any prospectus
supplement. We have not authorized anyone else to provide you
with any information. You should not assume that the information
incorporated by reference or provided in this prospectus or any
prospectus supplement is accurate as of any date other than the
date on the front of each document.
iii
SUMMARY
The following is only a summary. We urge you to read the
entire prospectus, including the more detailed financial
statements, notes to the financial statements and other
information incorporated by reference from our other filings
with the SEC. An investment in our securities involves risks.
Therefore, carefully consider the information provided under the
heading Risk Factors beginning on page 4.
Navios
Maritime Partners L.P.
We are an international owner and operator of Capesize and
Panamax vessels, formed on August 7, 2007 under the laws of
Marshall Islands by Navios Maritime Holdings Inc. (Navios
Holdings), a vertically integrated seaborne shipping and
logistics company with over 50 years of operating history
in the drybulk shipping industry. Navios GP L.L.C. (the
General Partner), a wholly-owned subsidiary of
Navios Holdings, was also formed on that date to act as the
general partner of Navios Partners and received a 2% general
partner interest. Our vessels are employed under long-term time
charters with an average remaining term of approximately
4.4 years to a strong group of counterparties, consisting
of Mitsui O.S.K. Lines Ltd., Cargill International SA, Ltd., Rio
Tinto Shipping Pty Ltd., Augustea Atlantica SrL Charterers, The
Sanko Steamship Co., Ltd. and Daiichi Chuo Kisen Kaisha.
In connection with our IPO, on November 16, 2007, we
acquired interests in five wholly-owned subsidiaries of Navios
Holdings, each of which owned a Panamax drybulk carrier, as well
as interests in three wholly-owned subsidiaries of Navios
Holdings that operated and had options to purchase three
additional vessels in exchange for (a) all of the net
estimated proceeds of $193.3 million from the sale of
10,000,000 common units in the IPO and the sale of 500,000
common units in a concurrent private offering to a corporation
owned by Navios Partners Chairman and CEO,
(b) $160.0 million drawn under a credit facility
entered into in connection with our IPO, (c) 7,621,843
subordinated units issued to Navios Holdings and (d) the
issuance to the General Partner of the 2% general partner
interest and all incentive distribution rights in Navios
Partners. Initially, Navios Holdings had a 43.2% interest in
Navios Partners, including the 2% general partner interest.
After the issuance on July 1, 2008 of 3,131,415 common
units to Navios Holdings for the acquisition of Navios
Aurora I, and the issuance of additional general partner
units, there are currently outstanding: 13,631,415 common units,
7,621,843 subordinated units and 433,740 general partner units.
As of December 31, 2008, Navios Holdings owned a 51.6%
interest in Navios Partners, including the 2% general partner
interest.
Navios Partners is engaged in the seaborne transportation
services of a wide range of drybulk commodities including iron
ore, coal, grain and fertilizer, chartering its vessels under
medium to long-term charters.
Our fleet consists of eight modern, active Panamax vessels, one
modern Capesize vessel and one newbuild Capesize vessel, Navios
TBN I, which we have agreed to purchase from Navios
Holdings when it is delivered, which is expected to occur in
June 2009. Assuming delivery of Navios TBN I in June 2009, our
fleet of high-quality Panamax and Capesize vessels will have an
average age, weighted by dead weight ton, of approximately
5.5 years in June 2009, which is significantly younger than
the current industry average of about 16 years. Panamax
vessels are highly flexible vessels capable of carrying a wide
range of drybulk commodities, including iron ore, coal, grain
and fertilizer and of being accommodated in most major discharge
ports, while Capesize vessels are primarily dedicated to the
carriage of iron ore and coal. We may from time to time purchase
additional vessels, including vessels from Navios Holdings.
All of our current vessels operate under long-term time charters
of three or more years at inception with counterparties that we
believe are creditworthy. Under certain circumstances we may
operate vessels in the spot market until the vessels have been
fixed under appropriate long-term charters.
We use the expertise and reputation of Navios Holdings to pursue
additional growth opportunities in the Panamax and Capesize
markets and in other drybulk shipping markets. We seek to grow
our fleet through purchasing additional vessels from Navios
Holdings, selectively pursuing open market acquisition
opportunities and entering into long-term charter-in contracts.
Pursuant to the omnibus agreement we entered into with
1
Navios Holdings, we have the right to purchase additional
Panamax and Capesize vessels from Navios Holdings when those
vessels are fixed under charters of three or more years upon the
expiration of their current charters or upon completion of their
construction.
Navios Holdings manages the commercial and technical operation
of our fleet through its wholly-owned subsidiary, Navios
ShipManagement. Navios Holdings has an experienced management
team with a long track record, a reputation for technical
expertise in managing and operating vessels, and strong
relationships with leading charterers and shipyards. We believe
we will have stable and growing cash flows through the
combination of the long-term nature of our charters and our
commercial and technical management agreement with Navios
ShipManagement, which provides for a fixed management fee
through November 16, 2009.
The following table provides summary information about our fleet:
FLEET
PROFILE
Owned
Vessels
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Charter
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Rate per
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Vessels
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Type
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Built
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DWT
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|
Expiration Date(1)
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day(2)
|
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Navios Gemini S
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|
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Panamax
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1994
|
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|
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68,636
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February 2009
|
|
$
|
19,523
|
|
|
|
|
|
|
|
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|
|
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February 2014
|
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$
|
24,225
|
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Navios Libra II
|
|
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Panamax
|
|
|
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1995
|
|
|
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70,136
|
|
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December 2010
|
|
$
|
23,513
|
|
Navios Felicity
|
|
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Panamax
|
|
|
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1997
|
|
|
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73,867
|
|
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April 2013
|
|
$
|
26,169
|
|
Navios Galaxy I
|
|
|
Panamax
|
|
|
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2001
|
|
|
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74,195
|
|
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February 2018
|
|
$
|
21,937
|
|
Navios Alegria
|
|
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Panamax
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|
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2004
|
|
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76,466
|
|
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December 2010
|
|
$
|
23,750
|
|
Navios Fantastiks
|
|
|
Capesize
|
|
|
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2005
|
|
|
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180,265
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|
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March 2011
|
|
$
|
32,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 2014
|
|
$
|
36,290
|
|
Navios Aurora I(3)
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|
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Panamax
|
|
|
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2005
|
|
|
|
75,397
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|
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February 2009
|
|
|
33,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2009
|
|
|
3,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 2010
|
|
|
11,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 2013
|
|
|
17,000
|
|
Owned
Vessels to be delivered
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|
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Charter
|
Vessels
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Type
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|
Expected Delivery
|
|
DWT
|
|
Delivery date
|
|
Rate
|
|
Navios TBN I(4)
|
|
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Capesize
|
|
|
|
June 2009
|
|
|
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180,000
|
|
|
|
June 2014
|
|
|
$
|
47,400
|
|
Long-term
Chartered-in Vessels
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Charter
|
|
|
Purchase
|
|
Vessels
|
|
Type
|
|
|
Built
|
|
|
DWT
|
|
|
Expiration Date
|
|
Rate
|
|
|
option
|
|
|
Navios Prosperity
|
|
|
Panamax
|
|
|
|
2007
|
|
|
|
82,535
|
|
|
July 2012
|
|
$
|
24,000
|
|
|
|
Yes(5
|
)
|
Navios Aldebaran
|
|
|
Panamax
|
|
|
|
2008
|
|
|
|
76,500
|
|
|
March 2013
|
|
$
|
28,391
|
|
|
|
Yes(6
|
)
|
|
|
|
(1) |
|
Represents the initial expiration date of the time charter and,
if applicable, the new time charter expiration date for the
vessels with new time charters. |
|
(2) |
|
Net time charter-out rate per day (net of commissions).
Represents the charter-out rate during the time charter period,
prior to the time charter expiration date and, if applicable,
the charter-out rate under the new time charter. |
|
(3) |
|
In January 2009 Navios Partners and its counterparty to the
Navios Aurora I charter party mutually agreed for a lump sum
amount of approximately $30.5 million to be received in the
first quarter of 2009. Under a new charter agreement, the
balance of the aggregate value of the original contract will be
allocated to the period until its original expiration. |
2
|
|
|
(4) |
|
We have agreed to purchase Navios TBN I, when it is
delivered in June 2009, from Navios Holdings for
$130.0 million, which we expect to fund through borrowings
under our existing credit facility and the issuance of
additional common units at such time. |
|
(5) |
|
Navios Prosperity is chartered-in until June 2014 and we have
options to extend for two one-year periods. We have the option
to purchase the vessel after July 2012 at a purchase price that
is initially 3.8 billion Japanese Yen ($42.1 million
based upon the exchange rate at December 31, 2008),
declining pro rata by 145 million Japanese Yen
($1.60 million based upon the exchange rate at
December 31, 2008) per calendar year. |
|
(6) |
|
Navios Aldebaran was delivered on March 17, 2008. Navios
Aldebaran is chartered-in until March 2015 and we have options
to extend for two one-year periods. We have the option to
purchase the vessel after March 2013 at a purchase price that is
initially 3.6 billion Japanese Yen ($40.0 million
based upon the exchange rate at December 31,
2008) declining pro rata by 150 million Japanese Yen
($1.65 million based upon the exchange rate at
December 31, 2008) per calendar year. |
Additionally, we have the option to acquire a newbuild Capesize
vessel, Navios TBN II, from Navios Holdings upon delivery of
such vessel to Navios Holdings which is expected to occur in
October 2009.
3
RISK
FACTORS
Although many of our business risks are comparable to those a
corporation engaged in a similar business would face, limited
partner interests are inherently different from the capital
stock of a corporation. You should carefully consider the
following risk factors together with all of the other
information included in this prospectus when evaluating an
investment in our common units.
If any of the following risks actually occur, our business,
financial condition, cash flows or operating results could be
materially adversely affected. In that case, we might not be
able to pay distributions on our common units, the trading price
of our common units could decline, and you could lose all or
part of your investment.
Risks
Inherent in Our Business
We may
not have sufficient cash from operations to enable us to pay the
minimum quarterly distribution on our common units following the
establishment of cash reserves and payment of fees and expenses
or to maintain or increase distributions.
We may not have sufficient cash available each quarter to pay
the minimum quarterly distribution of $0.35 per common unit, or
any distribution following the establishment of cash reserves
and payment of fees and expenses. The amount of cash we can
distribute on our common units principally depends upon the
amount of cash we generate from our operations, which may
fluctuate based on numerous factors including, among other
things:
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the rates we obtain from our charters and the market for
long-term charters when we recharter our vessels;
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the level of our operating costs, such as the cost of crews and
insurance, following the expiration of the fixed term of our
management agreement pursuant to which we pay a fixed daily fee
until November 2009;
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the number of unscheduled off-hire days for our fleet and the
timing of, and number of days required for, scheduled
inspection, maintenance or repairs of submerged parts, or
drydocking, of our vessels;
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demand for drybulk commodities;
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supply of drybulk vessels;
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prevailing global and regional economic and political
conditions; and
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the effect of governmental regulations and maritime
self-regulatory organization standards on the conduct of our
business.
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The actual amount of cash we will have available for
distribution also will depend on other factors, some of which
are beyond our control, such as:
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the level of capital expenditures we make, including those
associated with maintaining vessels, building new vessels,
acquiring existing vessels and complying with regulations;
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our debt service requirements and restrictions on distributions
contained in our debt instruments;
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interest rate fluctuations;
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the cost of acquisitions, if any;
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fluctuations in our working capital needs;
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our ability to make working capital borrowings, including the
payment of distributions to unitholders; and
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the amount of any cash reserves, including reserves for future
maintenance and replacement capital expenditures, working
capital and other matters, established by our board of directors
in its discretion.
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4
The amount of cash we generate from our operations may differ
materially from our profit or loss for the period, which will be
affected by non-cash items. As a result of this and the other
factors mentioned above, we may make cash distributions during
periods when we record losses and may not make cash
distributions during periods when we record net income.
The
cyclical and volatile nature of the international drybulk
shipping industry may lead to decreases in long-term charter
rates and lower vessel values, resulting in decreased
distributions to our common unitholders.
The shipping business, including the dry cargo market, is
cyclical in varying degrees, experiencing severe fluctuations in
charter rates, profitability and, consequently, vessel values.
For example, during the period from October 30, 2007 to
December 31, 2008, the Baltic Exchanges Panamax time
charter average daily rates experienced a low of $3,537 and a
high of $94,977. Additionally during the period from
January 1, 2008 to December 31, 2008, the Baltic
Exchanges Capesize time charter average daily rates
experienced a low of $2,316 and a high of $233,988. We
anticipate that the future demand for our drybulk carriers and
drybulk charter rates will be dependent upon demand for imported
commodities, economic growth in the emerging markets, including
the Asia Pacific region, India, Brazil and Russia and the rest
of the world, seasonal and regional changes in demand and
changes to the capacity of the world fleet. Recent adverse
economic, political, social or other developments have decreased
demand and prospects for growth in the shipping industry and
thereby could reduce revenue significantly. A decline in demand
for commodities transported in drybulk carriers or an increase
in supply of drybulk vessels could cause a further decline in
charter rates, which could materially adversely affect our
results of operations and financial condition. The demand for
vessels, in general, has been influenced by, among other factors:
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global and regional economic conditions;
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developments in international trade;
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changes in seaborne and other transportation patterns, such as
port congestion and canal closures;
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weather and crop yields;
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armed conflicts and terrorist activities;
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political developments; and
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embargoes and strikes.
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In connection with the IPO, we entered into a share purchase
agreement with a subsidiary of Navios Holdings to purchase its
interests in the subsidiary that owns the newbuilding Capesize
Navios TBN I at the pre-determined purchase price of
$130.0 million. We will purchase from a subsidiary of
Navios Holdings its interests in the subsidiary that owns the
newbuilding upon delivery of the vessel to the subsidiary. Even
if the market value of the Capesize declines by the time the
newbuilding is actually delivered to the vessel-owning
subsidiary, we will still be required to purchase the interests
in that subsidiary at the price specified in the share purchase
agreement. As a result, we may pay substantially more for that
vessel than we would pay if we were to purchase that vessel from
an unaffiliated third party.
If we sell a vessel at a time when the market value of our
vessels has fallen, the sale may be at less than the
vessels carrying amount, resulting in a loss. A decline in
the market value of our vessels is a default under our existing
credit facility of $295.0 million, or any other prospective
credit facility to which we become a party, affect our ability
to refinance our existing credit facility
and/or limit
our ability to obtain additional financing.
Charter
rates in the drybulk shipping industry have decreased from their
historically high levels and may decrease further in the future,
which may adversely affect our earnings and ability to pay
dividends.
The industrys current charter rates have decreased from
their historic highs reached in the second quarter of 2008. If
the drybulk shipping industry, which has been highly cyclical,
is depressed in the future when our
5
charters expire or at a time when we may want to sell a vessel,
our earnings and available cash flow may be adversely affected.
We cannot assure you that we will be able to successfully
charter our vessels in the future or renew our existing charters
at rates sufficient to allow us to operate our business
profitably, meet our obligations including payment of debt
service to our lenders or to pay dividends to our unitholders.
Our ability to renew the charters on our vessels on the
expiration or termination of our current charters, or on vessels
that we may acquire in the future, the charter rates payable
under any replacement charters and vessel values will depend
upon, among other things, economic conditions in the sectors in
which our vessels operate at that time, changes in the supply
and demand for vessel capacity and changes in the supply and
demand for the transportation of commodities.
All of our time charters are scheduled to expire on dates
ranging from December 2010 to January 2018. If, upon expiration
or termination of these or other contracts, long-term recharter
rates are lower than existing rates, particularly considering
that we intend to enter into long-term charters, or if we are
unable to obtain replacement charters, our earnings, cash flow
and our ability to make cash distributions to our unitholders
under any new contracts could be materially adversely affected.
The
market values of our vessels, which have declined from
historically high levels, may fluctuate significantly, which
could cause us to breach covenants in our existing credit
facility and result in the foreclosure on our mortgaged
vessels.
Factors that influence vessel values include:
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number of newbuilding deliveries;
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changes in environmental and other regulations that may limit
the useful life of vessels;
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changes in global drybulk commodity supply;
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types and sizes of vessels;
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development of and increase in use of other modes of
transportation;
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cost of vessel acquisitions;
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governmental or other regulations;
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prevailing level of charter rates, which are at historical
highs; and
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general economic and market conditions affecting the shipping
industry.
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If the market values of our owned vessels decrease, we may
breach covenants contained in our existing credit facility. We
purchased our vessels from Navios Holdings based on market
prices which were at historically high levels. If we breach such
covenants and are unable to remedy any relevant breach, our
lenders could accelerate our debt and foreclose on the
collateral, including our vessels. Any loss of vessels would
significantly decrease our ability to generate positive cash
flow from operations and therefore service our debt. In
addition, if the book value of a vessel is impaired due to
unfavorable market conditions, or a vessel is sold at a price
below its book value, we would incur a loss.
We
must make substantial capital expenditures to maintain the
operating capacity of our fleet, which will reduce our cash
available for distribution. In addition, each quarter our board
of directors is required to deduct estimated maintenance and
replacement capital expenditures from operating surplus, which
may result in less cash available to unitholders than if actual
maintenance and replacement capital expenditures were
deducted.
We must make substantial capital expenditures to maintain, over
the long term, the operating capacity of our fleet. These
maintenance and replacement capital expenditures include capital
expenditures associated with drydocking a vessel, modifying an
existing vessel or acquiring a new vessel to the extent these
expenditures are incurred to maintain the operating capacity of
our fleet.
6
These expenditures could increase as a result of changes in:
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the cost of our labor and materials;
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the cost of suitable replacement vessels;
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customer/market requirements;
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increases in the size of our fleet; and
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governmental regulations and maritime self-regulatory
organization standards relating to safety, security or the
environment.
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Our significant maintenance and replacement capital expenditures
will reduce the amount of cash we have available for
distribution to our unitholders. Any costs associated with
scheduled drydocking until November 2009 are included in a daily
fee of $4,000 per owned Panamax vessel and $5,000 per owned
Capesize vessel that we pay Navios ShipManagement Inc., a
subsidiary of Navios Holdings, under a management agreement. The
initial term of the management agreement is until November 2012
and this fee is fixed until November 2009. From November 2009 to
November 2012, we expect that we will reimburse Navios
ShipManagement for all of the actual operating costs and
expenses it incurs in connection with the management of our
fleet, which may result in significantly higher fees for that
period. In the event our management agreement is not renewed, we
will separately deduct estimated capital expenditures associated
with drydocking from our operating surplus in addition to
estimated replacement capital expenditures.
Our partnership agreement requires our board of directors to
deduct estimated, rather than actual, maintenance and
replacement capital expenditures from operating surplus each
quarter in an effort to reduce fluctuations in operating
surplus. The amount of estimated capital expenditures deducted
from operating surplus is subject to review and change by the
conflicts committee of our board of directors at least once a
year. If our board of directors underestimates the appropriate
level of estimated maintenance and replacement capital
expenditures, we may have less cash available for distribution
in future periods when actual capital expenditures begin to
exceed previous estimates.
If we
expand the size of our fleet in the future, we generally will be
required to make significant installment payments for
acquisitions of vessels prior to their delivery and generation
of revenue. In addition, we intend to finance the purchase of
Navios TBN I, to be delivered in 2009, partly with debt and
partly by issuing additional equity securities. Depending on
whether we finance our expenditures through cash from operations
or by issuing debt or equity securities, our ability to make
cash distributions to unitholders may be diminished or our
financial leverage could increase or our unitholders could be
diluted.
The actual cost of a vessel varies significantly depending on
the market price, the size and specifications of the vessel,
governmental regulations and maritime self-regulatory
organization standards.
We have entered into an agreement to purchase the newbuilding
Navios TBN I and related time charter in June 2009 for
$130.0 million. We intend to finance the purchase of Navios
TBN I partially with borrowings under our existing credit
facility and partially by issuing additional common units or
other equity securities.
If we purchase additional vessels in the future, we generally
will be required to make installment payments prior to their
delivery. If we finance these acquisition costs by issuing debt
or equity securities, we will increase the aggregate amount of
interest payments or minimum quarterly distributions we must
make prior to generating cash from the operation of the vessel.
To fund the remaining portion of these and other capital
expenditures, we will be required to use cash from operations or
incur borrowings or raise capital through the sale of debt or
additional equity securities. Use of cash from operations will
reduce cash available for distributions to unitholders. After
borrowing under our existing credit facility to finance the
purchase of Navios TBN I in June 2009, we will have no borrowing
capacity under such credit facility unless we increase the size
of the facility. Our ability to obtain bank financing or to
access the capital markets for future offerings may be limited
by our financial condition at the time of any such financing or
offering as well as by adverse market conditions resulting from,
among other
7
things, general economic conditions and contingencies and
uncertainties that are beyond our control. Our failure to obtain
the funds for necessary future capital expenditures could have a
material adverse effect on our business, results of operations
and financial condition and on our ability to make cash
distributions. Even if we successfully obtain necessary funds,
the terms of such financings could limit our ability to pay cash
distributions to unitholders. In addition, incurring additional
debt may significantly increase our interest expense and
financial leverage, and issuing additional equity securities may
result in significant unitholder dilution and would increase the
aggregate amount of cash required to meet our minimum quarterly
distribution to unitholders, which could have a material adverse
effect on our ability to make cash distributions to unitholders.
Our
debt levels may limit our flexibility in obtaining additional
financing and in pursuing other business opportunities and our
interest rates under our existing credit facility may fluctuate
and may impact our operations.
Upon the closing of the IPO, we entered into our existing credit
facility which, as amended, provided us with the ability to
borrow up to $295.0 million, of which $235.0 million
was outstanding as of December 31, 2008. We intend to
borrow an additional $60.0 million to finance a portion of
the purchase price of Navios TBN I in June 2009. We do not have
the funds or availability under our existing credit facility to
purchase the Navios TBN I and will need to either raise the
funds through the issuance of additional equity or debt
securities to satisfy our obligation. There can be no assurance
we will be able to obtain such financing. We have the ability to
incur additional debt, subject to limitations in our existing
credit facility. Our level of debt could have important
consequences to us, including the following:
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our ability to obtain additional financing, if necessary, for
working capital, capital expenditures, acquisitions or other
purposes may be impaired or such financing may not be available
on favorable terms;
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we will need a substantial portion of our cash flow to make
principal and interest payments on our debt, reducing the funds
that would otherwise be available for operations, future
business opportunities and distributions to unitholders;
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our debt level will make us more vulnerable than our competitors
with less debt to competitive pressures or a downturn in our
business or the economy generally; and
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our debt level may limit our flexibility in responding to
changing business and economic conditions.
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Our ability to service our debt depends upon, among other
things, our future financial and operating performance, which
will be affected by prevailing economic conditions and
financial, business, regulatory and other factors, some of which
are beyond our control. Our ability to service debt under our
existing credit facility also will depend on market interest
rates, since the interest rates applicable to our borrowings
will fluctuate with the London Interbank Offered Rate, or LIBOR,
or the prime rate. We do not currently hedge against increases
in such rates and, accordingly, significant increases in such
rate would require increased debt levels and reduce
distributable cash. If our operating results are not sufficient
to service our current or future indebtedness, we will be forced
to take actions such as reducing distributions, reducing or
delaying our business activities, acquisitions, investments or
capital expenditures, selling assets, restructuring or
refinancing our debt, or seeking additional equity capital or
bankruptcy protection. We may not be able to effect any of these
remedies on satisfactory terms, or at all.
Our
existing credit facility contains restrictive covenants, which
may limit our business and financing activities.
The operating and financial restrictions and covenants in our
existing credit facility and any future credit facility could
adversely affect our ability to finance future operations or
capital needs or to engage, expand or pursue our business
activities. For example, our existing credit facility requires
the consent of our lenders or limits our ability to, among other
items:
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incur or guarantee indebtedness;
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8
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charge, pledge or encumber the vessels;
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merge or consolidate;
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change the flag, class or commercial and technical management of
our vessels;
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make cash distributions;
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make new investments (including the acquisition of TBN I); and
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sell or change the beneficial ownership or control of our
vessels.
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Our existing credit facility also requires us to comply with the
International Safety Management Code or ISM Code, and the
International Ship and Port Facilities Security Code, or ISPS
Code, and to maintain valid safety management certificates and
documents of compliance at all times.
In addition, our existing credit facility requires us to:
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maintain minimum free consolidated liquidity (which may be in
the form of undrawn commitments under the credit facility) of at
least $13.0 million per year (increasing by
$9.0 million per year on each of December 31, 2009,
December 31, 2010, and December 31, 2011 until it
reaches $40.0 million, at which level it is required to be
maintained thereafter) of which certain amounts are required to
be maintained in an account pledged to the bank.;
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maintain a ratio of EBITDA (as defined in our existing credit
facility) to interest expense of at least 2.00 to 1.00; and
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maintain a ratio of total liabilities to total assets of less
than 0.75 to 1.00.
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We are also required to maintain an aggregate market value
(charter inclusive adjusted) of our financed vessels equal to
143% of the aggregate amount outstanding under our existing
credit facility and a tangible net worth of at least
$100.0 million.
In January 2009 Navios Partners has agreed to amend the terms of
its existing credit facility. The amendment will be effective
until January 15, 2010 and will provide for
(a) repayment of $40.0 million in February 2009,
(b) cash reserves into a pledged account with the agent
bank as follows: $2.5 million on January 31, 2009;
$5.0 million on March 31, 2009; $7.5 million on
June 30, 2009, $10.0 million on September 30,
2009; $12.5 million on December 31, 2009 and
(c) margin at 2.25%. Further, the covenants will be amended
(a) by reducing the minimum net worth to
$100.0 million, (b) by reducing the VMC (Value
Maintenance Covenant) to be below 100% using charter free values
and (c) the minimum leverage covenant to be calculated
using charter inclusive adjusted values until December 31,
2009, while a new VMC is introduced based on charter attached
valuations that should be at 143%. The new revised covenants
will be applied for 2008 year-end compliance purposes.
However, if we were required to use the original loan covenants
on December 31, 2008 to test compliance, we may not have
been in compliance with certain covenants using charter free
valuations.
Our ability to comply with the covenants and restrictions that
are contained in our existing credit facility and any other debt
instruments we may enter into in the future may be affected by
events beyond our control, including prevailing economic,
financial and industry conditions. If market or other economic
conditions deteriorate, our ability to comply with these
covenants may be impaired. If we are in breach of any of the
restrictions, covenants, ratios or tests in our existing credit
facility, especially if we trigger a cross default currently
contained in certain of our loan agreements, a significant
portion of our obligations may become immediately due and
payable, and our lenders commitment to make further loans
to us may terminate. We may not have, or be able to obtain,
sufficient funds to make these accelerated payments. In
addition, our obligations under our existing credit facility
will be secured by certain of our vessels, and if we are unable
to repay borrowings under such credit facility, lenders could
seek to foreclose on those vessels.
9
Restrictions
in our debt agreements may prevent us from paying distributions
to unitholders.
Our payment of principal and interest on the debt will reduce
cash available for distribution on our units. In addition, our
existing credit facility prohibits the payment of distributions
if we are not in compliance with certain financial covenants or
upon the occurrence of an event of default.
Events of default under our existing credit facility include,
among other things, the following:
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failure to pay any principal, interest, fees, expenses or other
amounts when due;
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failure to observe any other agreement, security instrument,
obligation or covenant beyond specified cure periods in certain
cases;
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default under other indebtedness;
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an event of insolvency or bankruptcy;
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material adverse change in the financial position or prospects
of us or our general partner;
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failure of any representation or warranty to be materially
correct; and
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failure of Navios Holdings or its affiliates to own at least 30%
of us.
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We anticipate that any subsequent refinancing of our current
debt or any new debt will have similar restrictions.
We
depend on Navios Holdings and its affiliates to assist us in
operating and expanding our business.
Pursuant to a management agreement between us and a subsidiary
of Navios Holdings, Navios ShipManagement Inc., Navios
ShipManagement provides to us significant commercial and
technical management services (including the commercial and
technical management of our vessels, vessel maintenance and
crewing, purchasing and insurance and shipyard supervision). In
addition, pursuant to an administrative services agreement
between us and Navios ShipManagement, Navios ShipManagement
provides to us significant administrative, financial and other
support services. Our operational success and ability to execute
our growth strategy depends significantly upon Navios
ShipManagements satisfactory performance of these
services. Our business will be harmed if Navios ShipManagement
fails to perform these services satisfactorily, if Navios
ShipManagement cancels either of these agreements, or if Navios
ShipManagement stops providing these services to us. We may also
in the future contract with Navios Holdings for it to have
newbuildings constructed on our behalf and to incur the
construction-related financing. We would purchase the vessels on
or after delivery based on an
agreed-upon
price.
Our ability to enter into new charters and expand our customer
relationships will depend largely on our ability to leverage our
relationship with Navios Holdings and its reputation and
relationships in the shipping industry. If Navios Holdings
suffers material damage to its reputation or relationships, it
may harm our ability to:
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renew existing charters upon their expiration;
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obtain new charters;
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successfully interact with shipyards during periods of shipyard
construction constraints;
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obtain financing on commercially acceptable terms; or
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maintain satisfactory relationships with suppliers and other
third parties.
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If our ability to do any of the things described above is
impaired, it could have a material adverse effect on our
business, results of operations and financial condition and our
ability to make cash distributions.
10
As we
expand our business, we may have difficulty managing our growth,
which could increase expenses.
We intend to seek to grow our fleet, either through vessel
purchases, the increase of the number of chartered-in vessels or
through the acquisitions of businesses. The addition of vessels
to our fleet or the acquisition of new businesses will impose
significant additional responsibilities on our management and
staff. We will also have to increase our customer base to
provide continued employment for the new vessels. Our growth
will depend on:
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locating and acquiring suitable vessels;
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identifying and consummating acquisitions or joint ventures;
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integrating any acquired business successfully with our existing
operations;
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enhancing our customer base;
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managing our expansion; and
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obtaining required financing.
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Growing any business by acquisition presents numerous risks such
as undisclosed liabilities and obligations, difficulty in
obtaining additional qualified personnel and managing
relationships with customers and suppliers and integrating newly
acquired operations into existing infrastructures. We cannot
give any assurance that we will be successful in executing our
growth plans or that we will not incur significant expenses and
losses in connection therewith or that our acquisitions will
perform as expected, which could materially adversely affect our
results of operations and financial condition.
Our
growth depends on the growth in demand for drybulk commodities
and the shipping of drybulk cargoes.
Our growth strategy focuses on expansion in the drybulk shipping
sector. Accordingly, our growth depends on growth in world and
regional demand for drybulk commodities and the shipping of
drybulk cargoes, which could be negatively affected by a number
of factors, such as declines in prices for drybulk commodities,
or general political and economic conditions.
Reduced demand for drybulk commodities and the shipping of
drybulk cargoes would have a material adverse effect on our
future growth and could harm our business, results of operations
and financial condition. In particular, Asian Pacific economies
and India have been the main driving force behind the past
increase in seaborne drybulk trade and the demand for drybulk
carriers. The negative change in economic conditions in any
Asian Pacific country, but particularly in China or Japan, as
well as India, may have a material adverse effect on our
business, financial condition and results of operations, as well
as our future prospects, by further reducing demand and
resultant charter rates.
Our
growth depends on our ability to expand relationships with
existing customers and obtain new customers, for which we will
face substantial competition.
Long-term time charters have the potential to provide income at
pre-determined rates over more extended periods of time.
However, the process for obtaining longer term time charters is
highly competitive and generally involves a lengthy, intensive
and continuous screening and vetting process and the submission
of competitive bids that often extends for several months. In
addition to the quality, age and suitability of the vessel,
longer term shipping contracts tend to be awarded based upon a
variety of other factors relating to the vessel operator,
including:
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the operators environmental, health and safety record;
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compliance with International Maritime Organization, or IMO,
standards and the heightened industry standards that have been
set by some energy companies;
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shipping industry relationships, reputation for customer
service, technical and operating expertise;
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shipping experience and quality of ship operations, including
cost-effectiveness;
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quality, experience and technical capability of crews;
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the ability to finance vessels at competitive rates and overall
financial stability;
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relationships with shipyards and the ability to obtain suitable
berths;
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construction management experience, including the ability to
procure on-time delivery of new vessels according to customer
specifications;
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willingness to accept operational risks pursuant to the charter,
such as allowing termination of the charter for force majeure
events; and
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competitiveness of the bid in terms of overall price.
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It is likely that we will face substantial competition for
long-term charter business from a number of experienced
companies. Many of these competitors have significantly greater
financial resources than we do. It is also likely that we will
face increased numbers of competitors entering into our
transportation sectors, including in the drybulk sector. Many of
these competitors have strong reputations and extensive
resources and experience. Increased competition may cause
greater price competition, especially for long-term charters.
As a result of these factors, we may be unable to expand our
relationships with existing customers or obtain new customers
for long-term charters on a profitable basis, if at all.
However, even if we are successful in employing our vessels
under longer term charters, our vessels will not be available
for trading in the spot market during an upturn in the drybulk
market cycle, when spot trading may be more profitable. If we
cannot successfully employ our vessels in profitable time
charters our results of operations and operating cash flow could
be adversely affected.
We may
be unable to make or realize expected benefits from
acquisitions, and implementing our growth strategy through
acquisitions may harm our business, financial condition and
operating results.
Our growth strategy focuses on a gradual expansion of our fleet.
Any acquisition of a vessel may not be profitable to us at or
after the time we acquire it and may not generate cash flow
sufficient to justify our investment. In addition, our growth
strategy exposes us to risks that may harm our business,
financial condition and operating results, including risks that
we may:
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fail to realize anticipated benefits, such as new customer
relationships, cost-savings or cash flow enhancements;
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be unable to hire, train or retain qualified shore and seafaring
personnel to manage and operate our growing business and fleet;
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decrease our liquidity by using a significant portion of our
available cash or borrowing capacity to finance acquisitions;
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significantly increase our interest expense or financial
leverage if we incur additional debt to finance acquisitions;
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incur or assume unanticipated liabilities, losses or costs
associated with the business or vessels acquired; or
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incur other significant charges, such as impairment of goodwill
or other intangible assets, asset devaluation or restructuring
charges.
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Delays,
cancellations or non-completion of deliveries of newbuilding
vessels could harm our operating results.
One of our vessels, Navios TBN I is a newbuilding the delivery
of which could be delayed, not completed or cancelled, which
would delay our receipt of revenues under the charters or other
contracts related to the vessel. The shipbuilder could fail to
deliver the newbuilding vessel as agreed or their counterparty
could
12
cancel the purchase contract if the shipbuilder fails to meet
its obligations. In addition, under charters we may enter into
that are related to a newbuilding, if our delivery of the
newbuilding to our customer is delayed, we may be required to
pay liquidated damages during the delay. For prolonged delays,
the customer may terminate the charter and, in addition to the
resulting loss of revenues, we may be responsible for
additional, substantial liquidated damages.
The completion and delivery of newbuildings could be delayed,
cancelled or otherwise not completed because of:
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quality or engineering problems;
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changes in governmental regulations or maritime self-regulatory
organization standards;
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work stoppages or other labor disturbances at the shipyard;
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bankruptcy or other financial crisis of the shipbuilder;
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a backlog of orders at the shipyard;
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political or economic disturbances;
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weather interference or catastrophic event, such as a major
earthquake or fire;
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requests for changes to the original vessel specifications;
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shortages of or delays in the receipt of necessary construction
materials, such as steel;
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inability to finance the construction or conversion of the
vessels; or
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inability to obtain requisite permits or approvals.
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If delivery of a vessel is materially delayed, it could
materially adversely affect our results of operations and
financial condition and our ability to make cash distributions.
The
loss of a customer or charter or vessel could result in a loss
of revenues and cash flow in the event we are unable to replace
such customer, charter or vessel.
For the nine month period ended September 30, 2008, Mitsui
O.S.K. Lines Ltd, Cargill International S.A., Sanko Steamship
Co., Daiichi Chuo Kisen Kaisha, and Augustea Imprese Maritime
accounted for approximately 24.2%, 23.4%, 16.2%, 12.4% and
10.2%, respectively, of our total revenues. For the year ended
December 31, 2007, Cargill International S.A., The Sanko
Steamship Co., Mitsui O.S.K. Lines, Ltd., Augustea Imprese
Maritime and Daiichi Chuo Kisen Kaisha accounted for
approximately 30.0%, 22.0%, 17.0%, 13.5% and 9.4% respectively,
of our total revenues. Upon delivery of Navios TBN I, we
will have ten charters with seven customers.
We could lose a customer or the benefits of a charter if:
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the customer fails to make charter payments because of its
financial inability, disagreements with us or otherwise;
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the customer exercises certain rights to terminate the charter;
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the customer terminates the charter because we fail to deliver
the vessel within a fixed period of time, the vessel is lost or
damaged beyond repair, there are serious deficiencies in the
vessel or prolonged periods of off-hire, or we default under the
charter; or
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a prolonged force majeure event affecting the customer,
including damage to or destruction of relevant production
facilities, war or political unrest prevents us from performing
services for that customer.
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If we lose a charter, we may be unable to re-deploy the related
vessel on terms as favorable to us due to the long-term nature
of most charters and the cyclical nature of the industry or we
may be forced to charter the vessel on the spot market at then
market rates which may be less favorable that the charter that
has been terminated. If we are unable to re-deploy a vessel for
which the charter has been terminated, we will not
13
receive any revenues from that vessel, but we may be required to
pay expenses necessary to maintain the vessel in proper
operating condition. In addition, if a customer exercises any
right to purchase a vessel to the extent we have granted any
such rights, we would not receive any further revenue from the
vessel and may be unable to obtain a substitute vessel and
charter. This may cause us to receive decreased revenue and cash
flows from having fewer vessels operating in our fleet. Any
replacement newbuilding would not generate revenues during its
construction, and we may be unable to charter any replacement
vessel on terms as favorable to us as those of the terminated
charter. Any compensation under our charters for a purchase of
the vessels may not adequately compensate us for the loss of the
vessel and related time charter.
The permanent loss of a customer, time charter or vessel, or a
decline in payments under our charters, could have a material
adverse effect on our business, results of operations and
financial condition and our ability to make cash distributions
in the event we are unable to replace such customer, time
charter or vessel.
The
risks and costs associated with vessels increase as the vessels
age.
Assuming delivery of Navios TBN I in June 2009, the vessels in
our fleet will have an average age of approximately
5.5 years in June 2009, and most drybulk vessels have an
expected life of approximately
25-28 years.
We may acquire older vessels in the future. In some instances,
charterers prefer newer vessels that are more fuel efficient
than older vessels. Cargo insurance rates also increase with the
age of a vessel, making older vessels less desirable to
charterers as well. Governmental regulations, safety or other
equipment standards related to the age of the vessels may
require expenditures for alterations or the addition of new
equipment, to our vessels and may restrict the type of
activities in which these vessels may engage. We cannot assure
you that as our vessels age, market conditions will justify
those expenditures or enable us to operate our vessels
profitably during the remainder of their useful lives. If we
sell vessels, we may have to sell them at a loss, and if
charterers no longer charter out vessels due to their age, it
could materially adversely affect our earnings.
Vessels
may suffer damage and we may face unexpected drydocking costs,
which could affect our cash flow and financial
condition.
If our owned vessels suffer damage, they may need to be repaired
at a drydocking facility. The costs of drydock repairs are
unpredictable and can be substantial. We may have to pay
drydocking costs that insurance does not cover. The loss of
earnings while these vessels are being repaired and
repositioned, as well as the actual cost of these repairs, could
decrease our revenues and earnings substantially, particularly
if a number of vessels are damaged or drydocked at the same
time. Under the terms of our management agreement with Navios
ShipManagement, the costs of drydocking repairs are included in
the daily management fee of $4,000 per owned Panamax vessel and
$5,000 per owned Capesize vessel which is fixed until November
2009. From November 2009 to November 2012, we expect that we
will reimburse Navios ShipManagement for all of the actual
operating costs and expenses it incurs in connection with the
management of our fleet.
We are
subject to various laws, regulations and conventions, including
environmental laws that could require significant expenditures
both to maintain compliance with such laws and to pay for any
uninsured environmental liabilities resulting from a spill or
other environmental disaster.
The shipping business and vessel operation are materially
affected by government regulation in the form of international
conventions, national, state and local laws, and regulations in
force in the jurisdictions in which vessels operate, as well as
in the country or countries of their registration. Because such
conventions, laws and regulations are often revised, we cannot
predict the ultimate cost of complying with such conventions,
laws and regulations, or the impact thereof on the fair market
price or useful life of our vessels. Changes in governmental
regulations, safety or other equipment standards, as well as
compliance with standards imposed by maritime self-regulatory
organizations and customer requirements or competition, may
require us to make capital and other expenditures. In order to
satisfy any such requirements we may be required to take any of
our vessels out of service for extended periods of time, with
corresponding losses of revenues. In the future, market
conditions may not justify these expenditures or enable us to
operate our
14
vessels profitably, particularly older vessels, during the
remainder of their economic lives. This could lead to
significant asset write-downs.
Additional conventions, laws and regulations may be adopted that
could limit our ability to do business, require capital
expenditures or otherwise increase our cost of doing business,
which may materially adversely affect our operations, as well as
the shipping industry generally. For example, in various
jurisdictions legislation has been enacted, or is under
consideration that would impose more stringent requirements on
air pollution and other ship emissions, including emissions of
greenhouse gases and ballast water discharged from vessels. We
are required by various governmental and quasi-governmental
agencies to obtain certain permits, licenses and certificates
with respect to our operations.
The operation of vessels is also affected by the requirements
set forth in the ISM Code. The ISM Code requires shipowners and
bareboat charterers to develop and maintain an extensive
Safety Management System that includes the adoption
of a safety and environmental protection policy setting forth
instructions and procedures for safe vessel operation and
describing procedures for dealing with emergencies. The failure
of a shipowner or bareboat charterer to comply with the ISM Code
may subject such party to increased liability, may decrease
available insurance coverage for the affected vessels, and may
result in a denial of access to, or detention in, certain ports.
Currently, each of the vessels in our owned fleet is ISM
Code-certified. However, there can be no assurance that such
certification will be maintained indefinitely.
For all vessels, including those operated under our fleet, at
present, international liability for oil pollution is governed
by the International Convention on Civil Liability for Bunker
Oil Pollution Damage, or the Bunker Convention. In 2001, the IMO
adopted the Bunker Convention, which imposes strict liability on
shipowners for pollution damage and response costs incurred in
contracting states as a result of discharges, or threatened
discharges of bunker oil from all classes of ships including
drybulk vessels. The Bunker Convention also requires registered
owners of ships over a certain size to maintain insurance to
cover their liability for pollution damage in an amount equal to
the limits of liability under the applicable national or
international limitation regime (but not exceeding the amount
calculated in accordance with the Convention on Limitation of
Liability for Maritime Claims 1976, as amended, or the 1976
Convention). The Bunker Convention became effective in
contracting states on November 21, 2008. In non-contracting
states, liability for such bunker oil pollution typically is
determined by the national or other domestic laws in the
jurisdiction where the spillage occurs.
In the United States, the Oil Pollution Act of 1990, or OPA,
establishes an extensive regulatory and liability regime for the
protection and cleanup of the environment from oil spills,
including bunker oil spills from drybulk vessels as well as
cargo or bunker oil spills from tankers. The OPA affects all
owners and operators whose vessels trade in the United States,
its territories and possessions or whose vessels operate in
United States waters, which includes the United States
territorial sea and its 200 nautical mile exclusive economic
zone. Under the OPA, vessel owners, operators and bareboat
charterers are responsible parties and are jointly,
severally and strictly liable (unless the spill results solely
from the act or omission of a third party, an act of God or an
act of war) for all containment and
clean-up
costs and other damages arising from discharges or substantial
threats of discharges, of oil from their vessels. In addition to
potential liability under the OPA as the relevant federal
legislation, vessel owners may in some instances incur liability
on an even more stringent basis under state law in the
particular state where the spillage occurred.
Outside of the United States, other national laws generally
provide for the owner to bear strict liability for pollution,
subject to a right to limit liability under applicable national
or international regimes for limitation of liability. The most
widely applicable international regime limiting maritime
pollution liability is the 1976 Convention referred to above.
Rights to limit liability under the 1976 Convention are
forfeited where a spill is caused by a shipowners
intentional or reckless conduct. Certain states have ratified
the IMOs 1996 Protocol to the 1976 Convention. The
Protocol provides for substantially higher the liability limits
to apply in those jurisdictions than the limits set forth in the
1976 Convention. Finally, some jurisdictions are not a party to
either the 1976 Convention or the Protocol of 1996, and,
therefore, a shipowners rights to limit liability for
maritime pollution in such jurisdictions may be uncertain.
15
In 2005, the European Union adopted a directive on ship-source
pollution, imposing criminal sanctions for intentional, reckless
or seriously negligent pollution discharges by ships. The
directive could result in criminal liability being incurred in
circumstances where it would not be incurred under international
law as set out in the International Convention for the
Prevention of Pollution from Ships, or the MARPOL Convention.
Criminal liability for an oil pollution incident could not only
result in us incurring substantial penalties or fines but may
also, in some jurisdictions, facilitate civil liability claims
for greater compensation than would otherwise have been payable.
We currently maintain, for each of our owned vessels, insurance
coverage against pollution liability risks in the amount of
$1.0 billion per incident. The insured risks include
penalties and fines as well as civil liabilities and expenses
resulting from accidental pollution. However, this insurance
coverage is subject to exclusions, deductibles and other terms
and conditions. If any liabilities or expenses fall within an
exclusion from coverage, or if damages from a catastrophic
incident exceed the $1.0 billion limitation of coverage per
incident, our cash flow, profitability and financial position
could be adversely impacted.
The
loss of key members of our senior management team could disrupt
the management of our business.
We believe that our success depends on the continued
contributions of the members of our senior management team,
including Ms. Angeliki Frangou, our Chairman and Chief
Executive Officer, and the senior management team of Navios
Partners. The loss of the services of Ms. Frangou or one of
our other executive officers or those of Navios Holdings who
provide us with significant managerial services could impair our
ability to identify and secure new charter contracts, to
maintain good customer relations and to otherwise manage our
business, which could have a material adverse effect on our
financial performance and our ability to compete.
We are
subject to vessel security regulations and will incur costs to
comply with recently adopted regulations and may be subject to
costs to comply with similar regulations which may be adopted in
the future in response to terrorism.
Since the terrorist attacks of September 11, 2001, there
have been a variety of initiatives intended to enhance vessel
security. On November 25, 2002, the Maritime Transportation
Security Act of 2002, or MTSA, came into effect. To implement
certain portions of the MTSA, in July 2003, the U.S. Coast
Guard issued regulations requiring the implementation of certain
security requirements aboard vessels operating in waters subject
to the jurisdiction of the United States. Similarly, in December
2002, amendments to the International Convention for the Safety
of Life at Sea, or SOLAS, created a new chapter of the
convention dealing specifically with maritime security. The new
chapter went into effect in July 2004, and imposes various
detailed security obligations on vessels and port authorities,
most of which are contained in the newly created International
Ship and Port Facilities Security Code, or ISPS Code. Among the
various requirements are:
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on-board installation of automatic information systems, or AIS,
to enhance vessel-to-vessel and vessel-to-shore communications;
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on-board installation of ship security alert systems;
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the development of vessel security plans; and
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compliance with flag state security certification requirements.
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Furthermore, additional security measures could be required in
the future which could have a significant financial impact on
us. The U.S. Coast Guard regulations, intended to be
aligned with international maritime security standards, exempt
non-U.S. vessels
from MTSA vessel security measures, provided such vessels have
on board, by July 1, 2004, a valid International Ship
Security Certificate, or ISSC, that attests to the vessels
compliance with SOLAS security requirements and the ISPS Code.
We will implement the various security measures addressed by the
MTSA, SOLAS and the ISPS Code and take measures for the vessels
to attain compliance with all applicable security requirements
within the prescribed time periods. Although management does not
believe these additional requirements will have a material
financial impact on our operations, there can be no assurance
that there will not be an interruption in operations to bring
vessels into compliance with
16
the applicable requirements and any such interruption could
cause a decrease in charter revenues. Furthermore, additional
security measures could be required in the future which could
have a significant financial impact on us.
The
operation of ocean-going vessels entails the possibility of
marine disasters including damage or destruction of the vessel
due to accident, the loss of a vessel due to piracy or
terrorism, damage or destruction of cargo and similar events
that may cause a loss of revenue from affected vessels and
damage our business reputation, which may in turn lead to loss
of business.
The operation of ocean-going vessels entails certain inherent
risks that may materially adversely affect our business and
reputation, including:
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damage or destruction of vessel due to marine disaster such as a
collision;
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the loss of a vessel due to piracy and terrorism;
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cargo and property losses or damage as a result of the foregoing
or less drastic causes such as human error, mechanical failure
and bad weather;
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environmental accidents as a result of the foregoing; and
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business interruptions and delivery delays caused by mechanical
failure, human error, war, terrorism, political action in
various countries, labor strikes or adverse weather conditions.
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Any of these circumstances or events could substantially
increase our costs. For example, the costs of replacing a vessel
or cleaning up a spill could substantially lower its revenues by
taking vessels out of operation permanently or for periods of
time. The involvement of our vessels in a disaster or delays in
delivery or damages or loss of cargo may harm our reputation as
a safe and reliable vessel operator and cause us to lose
business.
A
failure to pass inspection by classification societies could
result in one or more vessels being unemployable unless and
until they pass inspection, resulting in a loss of revenues from
such vessels for that period and a corresponding decrease in
operating cash flows.
The hull and machinery of every commercial vessel must be
classed by a classification society authorized by its country of
registry. The classification society certifies that a vessel is
safe and seaworthy in accordance with the applicable rules and
regulations of the country of registry of the vessel and the
United Nations Safety of Life at Sea Convention. Our owned fleet
is currently enrolled with Nippon Kaiji Kiokai and Bureau
Veritas.
A vessel must undergo an annual survey, an intermediate survey
and a special survey. In lieu of a special survey, a
vessels machinery may be on a continuous survey cycle,
under which the machinery would be surveyed periodically over a
five-year period. Our vessels are on special survey cycles for
hull inspection and continuous survey cycles for machinery
inspection. Every vessel is also required to be drydocked every
two to three years for inspection of the underwater parts of
such vessel.
If any vessel fails any annual survey, intermediate survey or
special survey, the vessel may be unable to trade between ports
and, therefore, would be unemployable, potentially causing a
negative impact on our revenues due to the loss of revenues from
such vessel until it was able to trade again.
We are
subject to inherent operational risks that may not be adequately
covered by our insurance.
The operation of ocean-going vessels in international trade is
inherently risky. Although we carry insurance for our fleet
against risks commonly insured against by vessel owners and
operators, including hull and machinery insurance, war risks
insurance and protection and indemnity insurance (which include
environmental damage and pollution insurance), all risks may not
be adequately insured against, and any particular claim may not
be paid. We do not currently maintain off-hire insurance, which
would cover the loss of revenue during extended vessel off-hire
periods, such as those that occur during an unscheduled
drydocking due to damage to the vessel from accidents.
Accordingly, any extended vessel off-hire, due to an accident or
17
otherwise, could have a material adverse effect on our business
and our ability to pay distributions to our unitholders. Any
claims covered by insurance would be subject to deductibles, and
since it is possible that a large number of claims may be
brought, the aggregate amount of these deductibles could be
material.
We may be unable to procure adequate insurance coverage at
commercially reasonable rates in the future. For example, more
stringent environmental regulations have led in the past to
increased costs for, and in the future may result in the lack of
availability of, insurance against risks of environmental damage
or pollution. A catastrophic oil spill or marine disaster could
exceed our insurance coverage, which could harm our business,
financial condition and operating results. Changes in the
insurance markets attributable to terrorist attacks may also
make certain types of insurance more difficult for us to obtain.
In addition, the insurance that may be available to us may be
significantly more expensive than our existing coverage.
Even if our insurance coverage is adequate to cover our losses,
we may not be able to timely obtain a replacement vessel in the
event of a loss. Furthermore, in the future, we may not be able
to obtain adequate insurance coverage at reasonable rates for
our fleet. Our insurance policies also contain deductibles,
limitations and exclusions which can result in significant
increased overall costs to us.
Because
we obtain some of our insurance through protection and indemnity
associations, we may also be subject to calls, or premiums, in
amounts based not only on our own claim records, but also the
claim records of all other members of the protection and
indemnity associations.
We may be subject to calls, or premiums, in amounts based not
only on our claim records but also the claim records of all
other members of the protection and indemnity associations
through which we receive insurance coverage for tort liability,
including pollution-related liability. Our payment of these
calls could result in significant expenses to us, which could
have a material adverse effect on our business, results of
operations and financial condition.
Because
we generate all of our revenues in U.S. dollars but incur a
portion of our expenses in other currencies, exchange rate
fluctuations could cause us to suffer exchange rate losses
thereby increasing expenses and reducing income.
We will engage in worldwide commerce with a variety of entities.
Although our operations may expose us to certain levels of
foreign currency risk, our transactions are at present
predominantly U.S. dollar denominated. Transactions in
currencies other than the functional currency are translated at
the exchange rate in effect at the date of each transaction.
Expenses incurred in foreign currencies against which the
U.S. dollar rises or falls in value can increase or
decrease, making our income susceptible to fluctuation. For
example, during the year ended December 31, 2008, the value
of the U.S. dollar increased by approximately 4.4% as
compared to the Euro. A greater percentage of our transactions
and expenses in the future may be denominated in currencies
other than the U.S. dollar.
Our
operations expose us to global political risks, such as wars and
political instability that may interfere with the operation of
our vessels causing a decrease in revenues from such
vessels.
We are an international company and primarily conduct our
operations outside the United States. Changing economic,
political and governmental conditions in the countries where we
are engaged in business or where our vessels are registered will
affect us. In the past, political conflicts, particularly in the
Persian Gulf, resulted in attacks on vessels, mining of
waterways and other efforts to disrupt shipping in the area. For
example, in October 2002, the vessel Limburg, which was not
affiliated with us, was attacked by terrorists in Yemen. Acts of
terrorism and piracy have also affected vessels trading in
regions such as the Gulf of Aden and the South China Sea.
Following the terrorist attack in New York City on
September 11, 2001, and the military response of the United
States, the likelihood of future acts of terrorism may increase,
and our vessels may face higher risks of being attacked in the
Middle East region and interruption of operations causing a
decrease in revenues. In addition, future hostilities or other
political instability in regions where our vessels trade could
affect our trade patterns and adversely affect our operations by
causing delays in shipping on certain routes or making shipping
impossible on such routes, thereby causing a decrease in
revenues.
18
A government could requisition title or seize our vessels during
a war or national emergency. Requisition of title occurs when a
government takes a vessel and becomes the owner. A government
could also requisition our vessels for hire, which would result
in the governments taking control of a vessel and
effectively becoming the charterer at a dictated charter rate.
Requisition of one or more of our vessels would have a
substantial negative effect on us as we would potentially lose
all revenues and earnings from the requisitioned vessels and
permanently lose the vessels. Such losses might be partially
offset if the requisitioning government compensated us for the
requisition.
Disruptions
in world financial markets and the resulting governmental action
in the United States and in other parts of the world could have
a material adverse impact on our ability to obtain financing,
our results of operations, financial condition and cash flows
and could cause the market price of our common units to
decline.
The United States and other parts of the world are exhibiting
deteriorating economic trends are currently in a recession. For
example, the credit markets worldwide and in the United States
have experienced significant contraction, de-leveraging and
reduced liquidity, and the United States federal government,
state governments and foreign governments have implemented and
are considering a broad variety of governmental action
and/or new
regulation of the financial markets. Securities and futures
markets and the credit markets are subject to comprehensive
statutes, regulations and other requirements. The Securities and
Exchange Commission, other regulators, self-regulatory
organizations and exchanges are authorized to take extraordinary
actions in the event of market emergencies, and may effect
changes in law or interpretations of existing laws.
Recently, a number of financial institutions have experienced
serious financial difficulties and, in some cases, have entered
bankruptcy proceedings or are in regulatory enforcement actions.
The uncertainty surrounding the future of the credit markets in
the United States and the rest of the world has resulted in
reduced access to credit worldwide.
We face risks attendant to changes in economic environments,
changes in interest rates, and instability in certain securities
markets, among other factors. Major market disruptions and the
current adverse changes in market conditions and regulatory
climate in the United States and worldwide may adversely affect
our business or impair our ability to borrow amounts under our
existing credit facility or any future financial arrangements.
The current market conditions may last longer than we
anticipate. These recent and developing economic and
governmental factors may have a material adverse effect on our
results of operations, financial condition or cash flows and
could cause the price of our common units to decline
significantly.
Maritime
claimants could arrest our vessels, which could interrupt our
cash flow.
Crew members, suppliers of goods and services to a vessel,
shippers of cargo, and other parties may be entitled to a
maritime lien against a vessel for unsatisfied debts, claims or
damages against such vessel. In many jurisdictions, a maritime
lien holder may enforce its lien by arresting a vessel through
foreclosure proceedings. The arrest or attachment of one or more
of our vessels could interrupt our cash flow and require us to
pay large sums of funds to have the arrest lifted. We are not
currently aware of the existence of any such maritime lien on
our vessels.
In addition, in some jurisdictions, such as South Africa, under
the sister ship theory of liability, a claimant may
arrest both the vessel which is subject to the claimants
maritime lien and any associated vessel, which is
any vessel owned or controlled by the same owner. Claimants
could try to assert sister ship liability against
one vessel in our fleet for claims relating to another ship in
the fleet.
Risks
Inherent in an Investment in Us
Navios
Holdings and its affiliates may compete with us.
Pursuant to the omnibus agreement that we entered into with
Navios Holdings in connection with the closing of our IPO,
Navios Holdings and its controlled affiliates (other than us,
our general partner and our subsidiaries) generally agreed not
to acquire or own Panamax or Capesize drybulk carriers under
time charters
19
of three or more years without the consent of our general
partner. The omnibus agreement, however, contains significant
exceptions that allow Navios Holdings or any of its controlled
affiliates to compete with us under specified circumstances
which could harm our business.
Unitholders
have limited voting rights and our partnership agreement
restricts the voting rights of unitholders owning more than 4.9%
of our common units.
Holders of common units have only limited voting rights on
matters affecting our business. We will hold a meeting of the
limited partners every year to elect one or more members of our
board of directors and to vote on any other matters that are
properly brought before the meeting. Common unitholders may only
elect four of the seven members of our board of directors. The
elected directors will be elected on a staggered basis and will
serve for three year terms. Our general partner in its sole
discretion has the right to appoint the remaining three
directors and to set the terms for which those directors will
serve. The partnership agreement also contains provisions
limiting the ability of unitholders to call meetings or to
acquire information about our operations, as well as other
provisions limiting the unitholders ability to influence
the manner or direction of management. Unitholders will have no
right to elect our general partner and our general partner may
not be removed except by a vote of the holders of at least
662/3%
of the outstanding units, including any units owned by our
general partner and its affiliates, voting together as a single
class.
Our partnership agreement further restricts unitholders
voting rights by providing that if any person or group owns
beneficially more than 4.9% of any class of units then
outstanding, any such units owned by that person or group in
excess of 4.9% may not be voted on any matter and will not be
considered to be outstanding when sending notices of a meeting
of unitholders, calculating required votes, except for purposes
of nominating a person for election to our board, determining
the presence of a quorum or for other similar purposes, unless
required by law. The voting rights of any such unitholders in
excess of 4.9% will effectively be redistributed pro rata among
the other common unitholders holding less than 4.9% of the
voting power of all classes of units entitled to vote. Our
general partner, its affiliates and persons who acquired common
units with the prior approval of our board of directors will not
be subject to this 4.9% limitation except with respect to voting
their common units in the election of the elected directors.
Our
general partner and its affiliates, including Navios Holdings,
own a significant interest in us and have conflicts of interest
and limited fiduciary and contractual duties, which may permit
them to favor their own interests to the detriment of
unitholders.
Navios Holdings currently owns the 2.0% general partner interest
and a 49.6% limited partner interest in us, which includes both
common and subordinated units, and owns and controls our general
partner. All of our officers and three of our directors are
directors
and/or
officers of Navios Holdings and its affiliates and as such they
have fiduciary duties to Navios Holdings that may cause them to
pursue business strategies that disproportionately benefit
Navios Holdings or which otherwise are not in the best interests
of us or our unitholders. Conflicts of interest may arise
between Navios Holdings and its affiliates, including our
general partner on the one hand, and us and our unitholders, on
the other hand. As a result of these conflicts, our general
partner and its affiliates may favor their own interests over
the interests of our unitholders. These conflicts include, among
others, the following situations:
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neither our partnership agreement nor any other agreement
requires our general partner or Navios Holdings or its
affiliates to pursue a business strategy that favors us or
utilizes our assets, and Navios Holdings officers and
directors have a fiduciary duty to make decisions in the best
interests of the stockholders of Navios Holdings, which may be
contrary to our interests;
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our general partner and our board of directors are allowed to
take into account the interests of parties other than us, such
as Navios Holdings, in resolving conflicts of interest, which
has the effect of limiting their fiduciary duties to our
unitholders;
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our general partner and our directors have limited their
liabilities and reduced their fiduciary duties under the laws of
the Marshall Islands, while also restricting the remedies
available to our unitholders, and, as a result of purchasing
common units, unitholders are treated as having agreed to the
modified
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standard of fiduciary duties and to certain actions that may be
taken by our general partner and our directors, all as set forth
in the partnership agreement;
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our general partner may have substantial influence over our
board of directors decision to cause us to borrow funds in
order to permit the payment of cash distributions, even if the
purpose or effect of the borrowing is to make a distribution on
the subordinated units or to make incentive distributions or to
accelerate the expiration of the subordination period;
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our general partner is entitled to reimbursement of all
reasonable costs incurred by it and its affiliates for our
benefit;
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our partnership agreement does not restrict us from paying our
general partner or its affiliates for any services rendered to
us on terms that are fair and reasonable or entering into
additional contractual arrangements with any of these entities
on our behalf; and
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our general partner may exercise its right to call and purchase
our common units if it and its affiliates own more than 80% of
our common units.
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Although a majority of our directors will be elected by common
unitholders, our general partner will likely have substantial
influence on decisions made by our board of directors.
Our
officers face conflicts in the allocation of their time to our
business.
Navios Holdings conducts businesses and activities of its own in
which we have no economic interest. If these separate activities
are significantly greater than our activities, there will be
material competition for the time and effort of our officers,
who also provide services to Navios Holdings and its affiliates.
Our officers are not required to work full-time on our affairs
and are required to devote time to the affairs of Navios
Holdings and its affiliates. Each of our Chief Executive Officer
and our Chief Financial Officer is also an executive officer of
Navios Holdings.
Our
partnership agreement limits our general partners and our
directors fiduciary duties to our unitholders and
restricts the remedies available to unitholders for actions
taken by our general partner or our directors.
Our partnership agreement contains provisions that reduce the
standards to which our general partner and directors would
otherwise be held by Marshall Islands law. For example, our
partnership agreement:
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permits our general partner to make a number of decisions in its
individual capacity, as opposed to in its capacity as our
general partner. Where our partnership agreement permits, our
general partner may consider only the interests and factors that
it desires, and in such cases it has no fiduciary duty or
obligation to give any consideration to any interest of, or
factors affecting us, our affiliates or our unitholders.
Decisions made by our general partner in its individual capacity
will be made by its sole owner, Navios Holdings. Specifically,
pursuant to our partnership agreement, our general partner will
be considered to be acting in its individual capacity if it
exercises its call right, pre-emptive rights or registration
rights, consents or withholds consent to any merger or
consolidation of the partnership, appoints any directors or
votes for the election of any director, votes or refrains from
voting on amendments to our partnership agreement that require a
vote of the outstanding units, voluntarily withdraws from the
partnership, transfers (to the extent permitted under our
partnership agreement) or refrains from transferring its units,
general partner interest or incentive distribution rights or
votes upon the dissolution of the partnership;
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provides that our general partner and our directors are entitled
to make other decisions in good faith if they
reasonably believe that the decision is in our best interests;
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generally provides that affiliated transactions and resolutions
of conflicts of interest not approved by the conflicts committee
of our board of directors and not involving a vote of
unitholders must be on terms no less favorable to us than those
generally being provided to or available from unrelated third
parties or be fair and reasonable to us and that, in
determining whether a transaction or resolution is fair
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and reasonable, our board of directors may consider the
totality of the relationships between the parties involved,
including other transactions that may be particularly
advantageous or beneficial to us; and
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provides that neither our general partner nor our officers or
our directors will be liable for monetary damages to us, our
limited partners or assignees for any acts or omissions unless
there has been a final and non-appealable judgment entered by a
court of competent jurisdiction determining that our general
partner or directors or our officers or directors or those other
persons engaged in actual fraud or willful misconduct.
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In order to become a limited partner of our partnership, a
common unitholder is required to agree to be bound by the
provisions in the partnership agreement, including the
provisions discussed above.
Fees
and cost reimbursements, which Navios ShipManagement determines
for services provided to us, are significant, are be payable
regardless of profitability and reduce our cash available for
distribution.
Under the terms of our management agreement with Navios
ShipManagement, we pay a daily fee of $4,000 per owned Panamax
vessel and $5,000 per owned Capesize vessel for technical and
commercial management services provided to us by Navios
ShipManagement. The initial term of the management agreement is
until November 2012 and this fee is fixed until November 2009.
The daily fee paid to Navios ShipManagement includes all costs
incurred in providing certain commercial and technical
management services to us. While this fee is fixed until
November 2009, we expect that we will reimburse Navios
ShipManagement for all of the actual operating costs and
expenses it incurs in connection with the management of our
fleet until November 2012, which may result in higher fees for
that period. Certain associated costs, including oil-related
costs such as lubricants, and crewing costs have fluctuated
significantly in the past, increasing the uncertainty of our
expenses. All of the fees we are required to pay to Navios
ShipManagement under the management agreement are payable
without regard to our financial condition or results of
operations. In addition, Navios ShipManagement provides us with
administrative services, including the services of our officers
and directors, pursuant to an administrative services agreement
which has an initial term until November 2012, and we reimburse
Navios ShipManagement for all costs and expenses reasonably
incurred by it in connection with the provision of those
services. The fees and reimbursement of expenses to Navios
ShipManagement are payable regardless of our profitability and
could materially adversely affect our ability to pay cash
distributions to unitholders.
Our
partnership agreement contains provisions that may have the
effect of discouraging a person or group from attempting to
remove our current management or our general partner, and even
if public unitholders are dissatisfied, they will be unable to
remove our general partner without Navios Holdings
consent, unless Navios Holdings ownership share in us is
decreased.
Our partnership agreement contains provisions that may have the
effect of discouraging a person or group from attempting to
remove our current management or our general partner.
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The unitholders will be unable initially to remove our general
partner without its consent because our general partner and its
affiliates own sufficient units upon completion of the IPO to be
able to prevent its removal. The vote of the holders of at least
662/3%
of all outstanding common and subordinated units voting together
as a single class is required to remove the general partner.
Navios Holdings currently owns 49.6% of the total number of
outstanding common and subordinated units.
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If our general partner is removed without cause
during the subordination period and units held by our general
partner and Navios Holdings are not voted in favor of that
removal, (i) all remaining subordinated units will
automatically convert into common units, (ii) any existing
arrearages on the common units will be extinguished and
(iii) our general partner will have the right to convert
its general partner interest and its incentive distribution
rights into common units or to receive cash in exchange for
those interests based on the fair market value of the interests
at the time. A removal of our general partner under these
circumstances would adversely affect the common units by
prematurely eliminating their distribution and liquidation
preference over the subordinated units, which would otherwise
have continued until we had met certain distribution and
performance tests. Any conversion of the general
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partner interest and incentive distribution rights would be
dilutive to existing unitholders. Furthermore, any cash payment
in lieu of such conversion could be prohibitively large.
Cause is narrowly defined to mean that a court of
competent jurisdiction has entered a final, non-appealable
judgment finding our general partner liable for actual fraud or
willful or wanton misconduct in its capacity as our general
partner. Cause does not include most cases of charges of poor
business decisions such as charges of poor management of our
business by the directors appointed by our general partner, so
the removal of our general partner because of the
unitholders dissatisfaction with the general
partners decisions in this regard would most likely result
in the termination of the subordination period.
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Common unitholders elect only four of the seven members of our
board of directors. Our general partner in its sole discretion
has the right to appoint the remaining three directors.
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Election of the four directors elected by unitholders is
staggered, meaning that the members of only one of three classes
of our elected directors are selected each year. In addition,
the directors appointed by our general partner will serve for
terms determined by our general partner.
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Our partnership agreement contains provisions limiting the
ability of unitholders to call meetings of unitholders, to
nominate directors and to acquire information about our
operations as well as other provisions limiting the
unitholders ability to influence the manner or direction
of management.
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Unitholders voting rights are further restricted by the
partnership agreement provision providing that if any person or
group owns beneficially more than 4.9% of any class of units
then outstanding, any such units owned by that person or group
in excess of 4.9% may not be voted on any matter and will not be
considered to be outstanding when sending notices of a meeting
of unitholders, calculating required votes, except for purposes
of nominating a person for election to our board, determining
the presence of a quorum or for other similar purposes, unless
required by law. The voting rights of any such unitholders in
excess of 4.9% will be redistributed pro rata among the other
common unitholders holding less than 4.9% of the voting power of
all classes of units entitled to vote. Our general partner, its
affiliates and persons who acquired common units with the prior
approval of our board of directors will not be subject to this
4.9% limitation except with respect to voting their common units
in the election of the elected directors.
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We have substantial latitude in issuing equity securities
without unitholder approval.
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The
control of our general partner may be transferred to a third
party without unitholder consent.
Our general partner may transfer its general partner interest to
a third party in a merger or in a sale of all or substantially
all of its assets without the consent of the unitholders. In
addition, our partnership agreement does not restrict the
ability of the members of our general partner from transferring
their respective membership interests in our general partner to
a third party.
In
establishing cash reserves, our board of directors may reduce
the amount of cash available for distribution to
unitholders.
Our partnership agreement requires our general partner to deduct
from operating surplus cash reserves that it determines are
necessary to fund our future operating expenditures. These
reserves also will affect the amount of cash available for
distribution to our unitholders. Our board of directors may
establish reserves for distributions on the subordinated units,
but only if those reserves will not prevent us from distributing
the full minimum quarterly distribution, plus any arrearages, on
the common units for the following four quarters. Our
partnership agreement requires our board of directors each
quarter to deduct from operating surplus estimated maintenance
and replacement capital expenditures, as opposed to actual
expenditures, which could reduce the amount of available cash
for distribution. The amount of estimated maintenance and
replacement capital expenditures deducted from operating surplus
is subject to review and change by our board of directors at
least once a year, provided that any change must be approved by
the conflicts committee of our board of directors.
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Our
general partner has a limited call right that may require
unitholders to sell their common units at an undesirable time or
price.
If at any time our general partner and its affiliates, including
Navios Holdings, own more than 80% of the common units, our
general partner will have the right, which it may assign to any
of its affiliates or to us, but not the obligation, to acquire
all, but not less than all, of the common units held by
unaffiliated persons at a price not less than their then-current
market price. As a result, unitholders may be required to sell
their common units at an undesirable time or price and may not
receive any return on their investment. Unitholders may also
incur a tax liability upon a sale of their units.
At the end of the subordination period, assuming no additional
issuances of common units and conversion of our subordinated
units into common units, Navios Holdings will own 10,753,258
common units, representing a 49.6% limited partner interest in
us.
Unitholders
may not have limited liability if a court finds that unitholder
action constitutes control of our business.
As a limited partner in a partnership organized under the laws
of the Marshall Islands, unitholders could be held liable for
our obligations to the same extent as a general partner if they
participate in the control of our business. Our
general partner generally has unlimited liability for the
obligations of the partnership, such as its debts and
environmental liabilities, except for those contractual
obligations of the partnership that are expressly made without
recourse to our general partner.
We can
borrow money to pay distributions, which would reduce the amount
of credit available to operate our business.
Our partnership agreement will allow us to make working capital
borrowings to pay distributions. Accordingly, we can make
distributions on all our units even though cash generated by our
operations may not be sufficient to pay such distributions. Any
working capital borrowings by us to make distributions will
reduce the amount of working capital borrowings we can make for
operating our business.
Increases
in interest rates may cause the market price of our common units
to decline.
An increase in interest rates may cause a corresponding decline
in demand for equity investments in general, and in particular
for yield-based equity investments such as our common units. Any
such increase in interest rates or reduction in demand for our
common units resulting from other relatively more attractive
investment opportunities may cause the trading price of our
common units to decline. In addition, our interest expense will
increase, since initially our debt will bear interest at a
floating rate, subject to any interest rate swaps we may enter
into in the future.
Unitholders
may have liability to repay distributions.
Under some circumstances, unitholders may have to repay amounts
wrongfully returned or distributed to them. Under the Marshall
Islands Act, we may not make a distribution to unitholders if
the distribution would cause our liabilities to exceed the fair
value of our assets. Marshall Islands law provides that for a
period of three years from the date of the impermissible
distribution, limited partners who received the distribution and
who knew at the time of the distribution that it violated
Marshall Islands law will be liable to the limited partnership
for the distribution amount. Assignees who become substituted
limited partners are liable for the obligations of the assignor
to make contributions to the partnership that are known to the
assignee at the time it became a limited partner and for unknown
obligations if the liabilities could be determined from the
partnership agreement. Liabilities to partners on account of
their partnership interest and liabilities that are non-recourse
to the partnership are not counted for purposes of determining
whether a distribution is permitted.
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Tax
Risks
In addition to the following risk factors, you should read
Material U.S. Federal Income Tax Considerations
and
Non-U.S. Tax
Considerations on pages 49 and 55, respectively, for a
more complete discussion of the expected material
U.S. federal and
non-U.S. income
tax considerations relating to us and the ownership and
disposition of common units.
U.S.
tax authorities could treat us as a passive foreign
investment company, which could have adverse U.S. federal
income tax consequences to U.S. unitholders.
A
non-U.S. entity
treated as a corporation for U.S. federal income tax
purposes will be treated as a passive foreign investment
company, or a PFIC, for U.S. federal income tax
purposes if at least 75.0% of its gross income for any taxable
year consists of certain types of passive income, or
at least 50.0% of the average value of the entitys assets
produce or are held for the production of those types of
passive income. For purposes of these tests,
passive income generally includes dividends,
interest, gains from the sale or exchange of investment
property, and rents and royalties other than rents and royalties
that are received from unrelated parties in connection with the
active conduct of a trade or business. For purposes of these
tests, income derived from the performance of services does not
constitute passive income. U.S. unitholders of
a PFIC are subject to a disadvantageous U.S. federal income
tax regime with respect to the income derived by the PFIC, the
distributions they receive from the PFIC, and the gain, if any,
they derive from the sale or other disposition of their shares
in the PFIC.
Based on our current and projected method of operation, and on
opinion of counsel, we believe that we will not be a PFIC for
our 2008 taxable year, and we expect that we will not become a
PFIC with respect to any other taxable year. Our
U.S. counsel, Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., is of the opinion that (1) the income we
receive from time chartering activities and the assets we own
that are engaged in generating such income should not be treated
as passive income or assets, respectively, and (2) so long
as our income from time charters exceeds 25.0% of our gross
income from all sources for each taxable year after our initial
taxable year and the fair market value of our vessels contracted
under time charters exceeds 50.0% of the average fair market
value of all of our assets for each taxable year after our
initial taxable year, we should not be a PFIC for any taxable
year. This opinion is based on representations and projections
provided by us to our counsel regarding our assets, income and
charters, and its validity is conditioned on the accuracy of
such representations and projections. We expect that all of the
vessels in our fleet will be engaged in time chartering
activities and intend to treat our income from those activities
as non-passive income, and the vessels engaged in those
activities as non-passive assets, for PFIC purposes. However, no
assurance can be given that the Internal Revenue Service, or the
IRS, will accept this position.
The
preferential tax rates applicable to qualified dividend income
are temporary, and the enactment of previously proposed
legislation could affect whether dividends paid by us constitute
qualified dividend income eligible for the preferential
rate.
Certain of our distributions may be treated as qualified
dividend income eligible for preferential rates of
U.S. federal income tax to U.S. individual unitholders
(and certain other U.S. unitholders). In the absence of
legislation extending the term for these preferential tax rates,
all dividends received by such U.S. taxpayers in tax years
beginning on January 1, 2011, or later, will be taxed at
graduated tax rates applicable to ordinary income.
In addition, legislation proposed in the U.S. Congress
would, if enacted, deny the preferential rate of
U.S. federal income tax currently imposed on qualified
dividend income with respect to dividends received from a
non-U.S. corporation,
if the
non-U.S. corporation
is created or organized under the laws of a jurisdiction that
does not have a comprehensive income tax system. Because the
Marshall Islands imposes only limited taxes on entities
organized under its laws, it is likely that, if this legislation
were enacted, the preferential tax rates would no longer be
applicable to distributions received from us. In addition,
legislation has been proposed that, if enacted, would eliminate
the preferential tax rate with respect to dividends paid
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after December 31, 2007, thereby causing such dividends to
be taxed at ordinary income rates. As of the date hereof, it is
not possible to predict with any certainty whether any of this
proposed legislation will be enacted.
We may
have to pay tax on U.S. source income, which would reduce our
earnings.
Under the Code, 50.0% of the gross shipping income of a vessel
owning or chartering corporation that is attributable to
transportation that either begins or ends, but that does not
both begin and end, in the United States is characterized as
U.S. source shipping income. U.S. source shipping
income generally is subject to a 4.0% U.S. federal income
tax without allowance for deduction or, if such U.S. source
shipping income is effectively connected with the conduct of a
trade or business in the United States, U.S. federal
corporate income tax (the highest statutory rate presently is
35.0%) as well as a branch profits tax (presently imposed at a
30.0% rate on effectively connected earnings), unless that
corporation qualifies for exemption from tax under
Section 883 of the Code.
Based on an opinion of counsel, and certain assumptions and
representations, we believe that we will qualify for this
statutory tax exemption, and we will take this position for
U.S. federal income tax return reporting purposes. However,
there are factual circumstances, including some that may be
beyond our control, that could cause us to lose the benefit of
this tax exemption after this offering. Furthermore, our board
of directors could determine that it is in our best interests to
take an action that would result in this tax exemption not
applying to us in the future. In addition, our conclusion that
we qualify for this exemption, as well as the conclusions in
this regard of our counsel, Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., is based upon legal authorities that do
not expressly contemplate an organizational structure such as
ours; specifically, although we have elected to be treated as a
corporation for U.S. federal income tax purposes, we are
organized as a limited partnership under Marshall Islands law.
Therefore, we can give no assurances that the IRS will not take
a different position regarding our qualification for this tax
exemption.
If we were not entitled to the Section 883 exemption for
any taxable year, we generally would be subject to a 4%
U.S. federal gross income tax with respect to our
U.S. source shipping income or, if such U.S. source
shipping income were effectively connected with the conduct of a
trade or business in the United States, U.S. federal
corporate income tax (the highest statutory rate presently is
35.0%) as well as a branch profits tax (presently imposed at a
30.0% rate on effectively connected earnings) for those years.
Our failure to qualify for the Section 883 exemption could
have a negative effect on our business and would result in
decreased earnings available for distribution to our unitholders.
You
may be subject to income tax in one or more
non-U.S.
countries, including Greece, as a result of owning our common
units if, under the laws of any such country, we are considered
to be carrying on business there. Such laws may require you to
file a tax return with and pay taxes to those
countries.
We intend that our affairs and the business of each of our
controlled affiliates will be conducted and operated in a manner
that minimizes income taxes imposed upon us and these controlled
affiliates or which may be imposed upon you as a result of
owning our common units. However, because we are organized as a
partnership, there is a risk in some jurisdictions that our
activities and the activities of our subsidiaries may be
attributed to our unitholders for tax purposes and, thus, that
you will be subject to tax in one or more
non-U.S. countries,
including Greece, as a result of owning our common units if,
under the laws of any such country, we are considered to be
carrying on business there. If you are subject to tax in any
such country, you may be required to file a tax return with and
to pay tax in that country based on your allocable share of our
income. We may be required to reduce distributions to you on
account of any withholding obligations imposed upon us by that
country in respect of such allocation to you. The United States
may not allow a tax credit for any foreign income taxes that you
directly or indirectly incur.
We believe we can conduct our activities in such a manner that
our unitholders should not be considered to be carrying on
business in Greece solely as a consequence of the acquisition,
holding, disposition or redemption of our common units. However,
the question of whether either we or any of our controlled
affiliates will be treated as carrying on business in any
particular country, including Greece, will be largely a question
of fact to be determined based upon an analysis of contractual
arrangements, including the
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management agreement and the administrative services agreement
we have with Navios ShipManagement, and the way we conduct
business or operations, all of which may change over time.
Furthermore, the laws of Greece or any other country may change
in a manner that causes that countrys taxing authorities
to determine that we are carrying on business in such country
and are subject to its taxation laws. Any foreign taxes imposed
on us or any subsidiaries will reduce our cash available for
distribution.
FORWARD-LOOKING
STATEMENTS
Statements included in this prospectus which are not historical
facts (including our financial forecast and any other statements
concerning plans and objectives of management for future
operations or economic performance, or assumptions related
thereto) are forward-looking statements. In addition, we and our
representatives may from time to time make other oral or written
statements which are also forward-looking statements. Such
statements include, in particular, statements about our plans,
strategies, business prospects, changes and trends in our
business, and the markets in which we operate as described in
this prospectus. In some cases, you can identify the
forward-looking statements by the use of words such as
may, could, should,
would, expect, plan,
anticipate, intend,
forecast, believe, estimate,
predict, propose, potential,
continue or the negative of these terms or other
comparable terminology.
Forward-looking statements appear in a number of places and
include statements with respect to, among other things:
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forecasts of our ability to make cash distributions on the units;
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forecasts of our future financial condition or results of
operations and our future revenues and expenses;
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our anticipated growth strategies;
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future charter hire rates and vessel values;
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the repayment of debt;
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our ability to access debt and equity markets;
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planned capital expenditures and availability of capital
resources to fund capital expenditures;
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future supply of, and demand for, drybulk commodities;
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increases in interest rates;
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our ability to maintain long-term relationships with major
commodity traders;
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our ability to leverage to our advantage Navios Holdings
relationships and reputation in the shipping industry;
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our continued ability to enter into long-term, fixed-rate time
charters;
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our ability to maximize the use of our vessels, including the
re-deployment or disposition of vessels no longer under
long-term time charter;
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timely purchases and deliveries of newbuilding vessels;
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future purchase prices of newbuildings and secondhand vessels;
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our ability to compete successfully for future chartering and
newbuilding opportunities;
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the expected cost of, and our ability to comply with,
governmental regulations, maritime self-regulatory organization
standards, as well as standard regulations imposed by our
charterers applicable to our business;
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our anticipated incremental general and administrative expenses
as a publicly traded limited partnership and our expenses under
the management agreement and the administrative services
agreement with Navios ShipManagement and for reimbursements for
fees and costs of our general partner;
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the anticipated taxation of our partnership and distributions to
our unitholders;
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estimated future maintenance and replacement capital
expenditures;
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expected demand in the drybulk shipping sector in general and
the demand for our Panamax and Capesize vessels in particular;
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our ability to retain key executive officers;
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customers increasing emphasis on environmental and safety
concerns;
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future sales of our common units in the public market; and
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our business strategy and other plans and objectives for future
operations.
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These and other forward-looking statements are made based upon
managements current plans, expectations, estimates,
assumptions and beliefs concerning future events impacting us
and therefore involve a number of risks and uncertainties,
including those risks discussed in Risk Factors,
including those set forth below:
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a lack of sufficient cash to pay the minimum quarterly
distribution on our common units;
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the cyclical nature of the international drybulk shipping
industry;
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fluctuations in charter rates for drybulk carriers;
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the historically high numbers of newbuildings currently under
construction in the drybulk industry;
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changes in the market values of our vessels and the vessels for
which we have purchase options;
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an inability to expand relationships with existing customers and
obtain new customers;
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the loss of any customer or charter or vessel;
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the aging of our fleet and resultant increases in operations
costs;
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damage to our vessels; and
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general domestic and international political conditions,
including wars and terrorism.
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The risks, uncertainties and assumptions involve known and
unknown risks and are inherently subject to significant
uncertainties and contingencies, many of which are beyond our
control. We caution that forward-looking statements are not
guarantees and that actual results could differ materially from
those expressed or implied in the forward-looking statements.
We undertake no obligation to update any forward-looking
statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time
to time, and it is not possible for us to predict all of these
factors. Further, we cannot assess the impact of each such
factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to be
materially different from those contained in any forward-looking
statement.
USE OF
PROCEEDS
Unless we indicate otherwise in the applicable prospectus
supplement, we currently intend to use the net proceeds from
this offering for general partnership purposes, including future
acquisitions.
We may set forth additional information on the use of net
proceeds from the sale of securities we offer under this
prospectus in a prospectus supplement relating to the specific
offering.
THE
SECURITIES WE MAY OFFER
The descriptions of the securities contained in this prospectus,
together with the applicable prospectus supplements, summarize
all the material terms and provisions of the various types of
securities that we may
28
offer. We will describe in the applicable prospectus supplement
relating to any securities the particular terms of the
securities offered by that prospectus supplement. If we indicate
in the applicable prospectus supplement, the terms of the
securities may differ from the terms we have summarized below.
We will also include information in the prospectus supplement,
where applicable, about material United States federal income
tax considerations, if any, relating to the securities, and the
securities exchange, if any, on which the securities will be
listed.
We may sell from time to time, in one or more offerings:
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common units; and/or
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debt securities.
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This prospectus may not be used to consummate a sale of
securities unless it is accompanied by a prospectus supplement.
COMMON
UNITS
The
Units
The common units and the subordinated units represent limited
partner interests in us. The holders of units are entitled to
participate in partnership distributions and exercise the rights
and privileges available to limited partners under our
partnership agreement.
For a description of the relative rights and privileges of
holders of common units and subordinated units in and to
partnership distributions, please read the sections Cash
Distributions herein and How We Make Cash
Distributions in the prospectus dated November 12,
2007 included in our registration statement on
Form F-1,
as amended, initially filed with the SEC on October 26,
2007 and incorporated by reference in our Annual Report. For a
description of the rights and privileges of limited partners
under our partnership agreement, including voting rights, please
read The Partnership Agreement in such prospectus.
Transfer
Agent and Registrar
Duties
Continental Stock Transfer & Trust Company serves
as registrar and transfer agent for the common units. We pay all
fees charged by the transfer agent for transfers of common
units, except the following, which must be paid by unitholders:
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surety bond premiums to replace lost or stolen certificates,
taxes and other governmental charges;
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special charges for services requested by a holder of a common
unit; and
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other similar fees or charges.
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There is no charge to unitholders for disbursements of our cash
distributions. We will indemnify the transfer agent, its agents
and each of their stockholders, directors, executive officers
and employees against all claims and losses that may arise out
of acts performed or omitted for its activities in that
capacity, except for any liability due to any gross negligence
or intentional misconduct of the indemnified person or entity.
Resignation
or Removal
The transfer agent may resign, by notice to us, or be removed by
us. The resignation or removal of the transfer agent will become
effective upon our appointment of a successor transfer agent and
registrar and its acceptance of the appointment. If a successor
has not been appointed or has not accepted its appointment
within 30 days after notice of the resignation or removal,
our general partner may, at the direction of our board of
directors, act as the transfer agent and registrar until a
successor is appointed.
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Transfer
of Common Units
By transfer of common units in accordance with our partnership
agreement, each transferee of common units shall be admitted as
a limited partner with respect to the common units transferred
when such transfer and admission is reflected in our books and
records. Each transferee:
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represents that the transferee has the capacity, power and
authority to become bound by our partnership agreement;
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automatically agrees to be bound by the terms and conditions of,
and is deemed to have executed, our partnership agreement; and
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gives the consents and approvals contained in our partnership
agreement.
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A transferee will become a substituted limited partner of our
partnership for the transferred common units automatically upon
the recording of the transfer on our books and records. Our
general partner will cause any transfers to be recorded on our
books and records no less frequently than quarterly. We may, at
our discretion, treat the nominee holder of a common unit as the
absolute owner. In that case, the beneficial holders
rights are limited solely to those that it has against the
nominee holder as a result of any agreement between the
beneficial owner and the nominee holder.
Common units are securities and are transferable according to
the laws governing transfer of securities. In addition to other
rights acquired upon transfer, the transferor gives the
transferee the right to become a limited partner in our
partnership for the transferred common units. Until a common
unit has been transferred on our books, we and the transfer
agent may treat the recordholder of the unit as the absolute
owner for all purposes, except as otherwise required by law or
stock exchange regulations.
DEBT
SECURITIES
The following description, together with the additional
information we include in any applicable prospectus supplement,
summarizes the material terms and provisions of the debt
securities that we may offer under this prospectus. While the
terms we have summarized below will apply generally to any
future debt securities we may offer, we will describe the
particular terms of any debt securities that we may offer in
more detail in the applicable prospectus supplement. If we so
indicate in a prospectus supplement, the terms of any debt
securities we offer under that prospectus supplement may differ
from the terms we describe below.
The debt securities we may offer and sell pursuant to this
prospectus will be either senior debt securities or subordinated
debt securities. We will issue the senior notes under the senior
indenture, which we will enter into with a trustee to be named
in the senior indenture. We will issue the subordinated notes
under the subordinated indenture, which we will enter into with
a trustee to be named in the subordinated indenture. We use the
term indentures to refer to both the senior
indenture and the subordinated indenture. The indentures will be
qualified under the Trust Indenture Act. We use the term
debenture trustee to refer to either the senior
trustee or the subordinated trustee, as applicable.
The following summaries of material provisions of any series of
debt securities and the indentures are subject to, and qualified
in their entirety by reference to, all the provisions of the
indenture applicable to a particular series of debt securities.
General
We will describe in each prospectus supplement the following
terms relating to a series of notes:
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the title;
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any limit on the amount that may be issued;
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whether or not we will issue the series of notes in global form,
the terms and who the depository will be;
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the maturity date;
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the annual interest rate, which may be fixed or variable, or the
method for determining the rate and the date interest will begin
to accrue, the dates interest will be payable and the regular
record dates for interest payment dates or the method for
determining such dates;
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whether or not the notes will be secured or unsecured, and the
terms of any secured debt;
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the terms of the subordination of any series of subordinated
debt;
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the place where payments will be made;
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our right, if any, to defer payment of interest and the maximum
length of any such deferral period;
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the date, if any, after which, and the price at which, we may,
at our option, redeem the series of notes pursuant to any
optional redemption provisions;
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the date, if any, on which, and the price at which we are
obligated, pursuant to any mandatory sinking fund provisions or
otherwise, to redeem, or at the holders option to
purchase, the series of notes;
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whether the indenture will restrict our ability to pay
dividends, or will require us to maintain any asset ratios or
reserves;
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whether we will be restricted from incurring any additional
indebtedness;
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a discussion of any material or special United States federal
income tax considerations applicable to the notes;
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the denominations in which we will issue the series of notes, if
other than denominations of $1,000 and any integral multiple
thereof; and
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any other specific terms, preferences, rights or limitations of,
or restrictions on, the debt securities.
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Conversion
or Exchange Rights
We will set forth in the prospectus supplement the terms on
which a series of notes may be convertible into or exchangeable
for common units or other securities of ours. We will include
provisions as to whether conversion or exchange is mandatory, at
the option of the holder or at our option. We may include
provisions pursuant to which the number of shares of common
units or other securities of ours that the holders of the series
of notes receive would be subject to adjustment.
Consolidation,
Merger or Sale
The indentures do not contain any covenant which restricts our
ability to merge or consolidate, or sell, convey, transfer or
otherwise dispose of all or substantially all of our assets.
However, any successor to or acquirer of such assets must assume
all of our obligations under the indentures or the notes, as
appropriate.
Events of
Default under the Indenture
The following are events of default under the indentures with
respect to any series of notes that we may issue:
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if we fail to pay interest when due and our failure continues
for 90 days and the time for payment has not been extended
or deferred;
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if we fail to pay the principal, or premium, if any, when due
and the time for payment has not been extended or delayed;
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if we fail to observe or perform any other covenant contained in
the notes or the indentures, other than a covenant specifically
relating to another series of notes, and our failure continues
for 90 days after we
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receive notice from the debenture trustee or holders of at least
25% in aggregate principal amount of the outstanding notes of
the applicable series; and
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if specified events of bankruptcy, insolvency or reorganization
occur as to us.
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If an event of default with respect to notes of any series
occurs and is continuing, the debenture trustee or the holders
of at least 25% in aggregate principal amount of the outstanding
notes of that series, by notice to us in writing, and to the
debenture trustee if notice is given by such holders, may
declare the unpaid principal of, premium, if any, and accrued
interest, if any, due and payable immediately.
The holders of a majority in principal amount of the outstanding
notes of an affected series may waive any default or event of
default with respect to the series and its consequences, except
defaults or events of default regarding payment of principal,
premium, if any, or interest, unless we have cured the default
or event of default in accordance with the indenture. Any such
waiver shall cure the default or event of default.
Subject to the terms of the indentures, if an event of default
under an indenture shall occur and be continuing, the debenture
trustee will be under no obligation to exercise any of its
rights or powers under such indenture at the request or
direction of any of the holders of the applicable series of
notes, unless such holders have offered the debenture trustee
reasonable indemnity. The holders of a majority in principal
amount of the outstanding notes of any series will have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to the debenture trustee, or
exercising any trust or power conferred on the debenture
trustee, with respect to the notes of that series, provided that:
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the direction so given by the holder is not in conflict with any
law or the applicable indenture; and
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subject to its duties under the Trust Indenture Act, the
debenture trustee need not take any action that might involve it
in personal liability or might be unduly prejudicial to the
holders not involved in the proceeding.
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A holder of the notes of any series will only have the right to
institute a proceeding under the indentures or to appoint a
receiver or trustee, or to seek other remedies if:
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the holder has given written notice to the debenture trustee of
a continuing event of default with respect to that series;
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the holders of at least 25% in aggregate principal amount of the
outstanding notes of that series have made written request, and
such holders have offered reasonable indemnity, to the debenture
trustee to institute the proceeding as trustee; and
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the debenture trustee does not institute the proceeding, and
does not receive from the holders of a majority in aggregate
principal amount of the outstanding notes of that series other
conflicting directions within 60 days after the notice,
request and offer.
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These limitations do not apply to a suit instituted by a holder
of notes if we default in the payment of the principal, premium,
if any, or interest on, the notes.
We will periodically file statements with the debenture trustee
regarding our compliance with specified covenants in the
indentures.
Modification
of Indenture; Waiver
We and the debenture trustee may change an indenture without the
consent of any holders with respect to specific matters,
including:
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to fix any ambiguity, defect or inconsistency in the
indenture; and
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to change anything that does not materially adversely affect the
interests of any holder of notes of any series.
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In addition, under the indentures, the rights of holders of a
series of notes may be changed by us and the debenture trustee
with the written consent of the holders of at least a majority
in aggregate principal amount
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of the outstanding notes of each series that is affected.
However, we and the debenture trustee may only make the
following changes with the consent of each holder of any
outstanding notes affected:
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extending the fixed maturity of the series of notes;
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reducing the principal amount, reducing the rate of or extending
the time of payment of interest, or any premium payable upon the
redemption of any notes; or
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reducing the percentage of notes, the holders of which are
required to consent to any amendment.
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Discharge
Each indenture provides that we can elect to be discharged from
our obligations with respect to one or more series of debt
securities, except for obligations to:
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register the transfer or exchange of debt securities of the
series;
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replace stolen, lost or mutilated debt securities of the series;
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maintain paying agencies;
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hold monies for payment in trust;
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compensate and indemnify the trustee; and
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appoint any successor trustee.
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In order to exercise our rights to be discharged, we must
deposit with the trustee money or government obligations
sufficient to pay all the principal of, any premium, if any, and
interest on, the debt securities of the series on the dates
payments are due.
Form,
Exchange and Transfer
We will issue the notes of each series only in fully registered
form without coupons and, unless we otherwise specify in the
applicable prospectus supplement, in denominations of $1,000 and
any integral multiple thereof. The indentures provide that we
may issue notes of a series in temporary or permanent global
form and as book-entry securities that will be deposited with,
or on behalf of, The Depository Trust Company or another
depository named by us and identified in a prospectus supplement
with respect to that series.
At the option of the holder, subject to the terms of the
indentures and the limitations applicable to global securities
described in the applicable prospectus supplement, the holder of
the notes of any series can exchange the notes for other notes
of the same series, in any authorized denomination and of like
tenor and aggregate principal amount.
Subject to the terms of the indentures and the limitations
applicable to global securities set forth in the applicable
prospectus supplement, holders of the notes may present the
notes for exchange or for registration of transfer, duly
endorsed or with the form of transfer endorsed thereon duly
executed if so required by us or the security registrar, at the
office of the security registrar or at the office of any
transfer agent designated by us for this purpose. Unless
otherwise provided in the notes that the holder presents for
transfer or exchange, we will make no service charge for any
registration of transfer or exchange, but we may require payment
of any taxes or other governmental charges.
We will name in the applicable prospectus supplement the
security registrar, and any transfer agent in addition to the
security registrar, that we initially designate for any notes.
We may at any time designate additional transfer agents or
rescind the designation of any transfer agent or approve a
change in the office through which any transfer agent acts,
except that we will be required to maintain a transfer agent in
each place of payment for the notes of each series.
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If we elect to redeem the notes of any series, we will not be
required to:
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issue, register the transfer of, or exchange any notes of that
series during a period beginning at the opening of business
15 days before the day of mailing of a notice of redemption
of any notes that may be selected for redemption and ending at
the close of business on the day of the mailing; or
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register the transfer of or exchange any notes so selected for
redemption, in whole or in part, except the unredeemed portion
of any notes we are redeeming in part.
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Information
Concerning the Debenture Trustee
The debenture trustee, other than during the occurrence and
continuance of an event of default under an indenture,
undertakes to perform only those duties as are specifically set
forth in the applicable indenture. Upon an event of default
under an indenture, the debenture trustee must use the same
degree of care as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision,
the debenture trustee is under no obligation to exercise any of
the powers given it by the indentures at the request of any
holder of notes unless it is offered reasonable security and
indemnity against the costs, expenses and liabilities that it
might incur.
Payment
and Paying Agents
Unless we otherwise indicate in the applicable prospectus
supplement, we will make payment of the interest on any notes on
any interest payment date to the person in whose name the notes,
or one or more predecessor securities, are registered at the
close of business on the regular record date for the interest.
We will pay principal of and any premium and interest on the
notes of a particular series at the office of the paying agents
designated by us, except that unless we otherwise indicate in
the applicable prospectus supplement, we will make interest
payments by check which we will mail to the holder. Unless we
otherwise indicate in a prospectus supplement, we will designate
the corporate trust office of the debenture trustee in the City
of New York as our sole paying agent for payments with respect
to notes of each series. We will name in the applicable
prospectus supplement any other paying agents that we initially
designate for the notes of a particular series. We will maintain
a paying agent in each place of payment for the notes of a
particular series.
All money we pay to a paying agent or the debenture trustee for
the payment of the principal of or any premium or interest on
any notes which remains unclaimed at the end of two years after
such principal, premium or interest has become due and payable
will be repaid to us, and the holder of the security thereafter
may look only to us for payment thereof.
Governing
Law
The indentures and the notes will be governed by and construed
in accordance with the laws of the Republic of Marshall Islands,
except to the extent that the Trust Indenture Act is
applicable.
Subordination
of Subordinated Notes
The subordinated notes will be unsecured and will be subordinate
and junior in priority of payment to certain of our other
indebtedness to the extent described in a prospectus supplement.
The subordinated indenture does not limit the amount of
subordinated notes which we may issue. It also does not limit us
from issuing any other secured or unsecured debt.
PLAN OF
DISTRIBUTION
We may sell the securities being offered hereby in one or more
of the following ways from time to time:
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through dealers or agents to the public or to investors;
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to underwriters for resale to the public or to investors;
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directly to investors; or
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through a combination of such methods.
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We will set forth in a prospectus supplement the terms of the
offering of securities, including:
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the name or names of any agents, dealers or underwriters;
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the purchase price of the securities being offered and the
proceeds we will receive from the sale;
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any over-allotment options under which underwriters may purchase
additional securities from us;
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any agency fees or underwriting discounts and other items
constituting agents or underwriters compensation;
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any initial public offering price;
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any discounts or concessions allowed or reallowed or paid to
dealers; and
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any securities exchanges on which the securities may be listed.
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Underwriters, dealers and agents that participate in the
distribution of the securities may be deemed to be underwriters
as defined in the Securities Act and any discounts or
commissions they receive from us and any profit on their resale
of the securities may be treated as underwriting discounts and
commissions under the Securities Act.
We will identify in the applicable prospectus supplement any
underwriters, dealers or agents and will describe their
compensation. We may have agreements with the underwriters,
dealers and agents to indemnify them against specified civil
liabilities, including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with
or perform services for us or our subsidiaries in the ordinary
course of their businesses.
Certain persons that participate in the distribution of the
securities may engage in transactions that stabilize, maintain
or otherwise affect the price of the securities, including
over-allotment, stabilizing and short-covering transactions in
such securities, and the imposition of penalty bids, in
connection with an offering. Certain persons may also engage in
passive market making transactions as permitted by Rule 103
of Regulation M. Passive market makers must comply with
applicable volume and price limitations and must be identified
as passive market makers. In general, a passive market maker
must display its bid at a price not in excess of the highest
independent bid for such security; if all independent bids are
lowered below the passive market makers bid, however, the
passive market makers bid must then be lowered when
certain purchase limits are exceeded.
OUR CASH
DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS
You should read the following discussion of our cash
distribution policy and restrictions on distributions in
conjunction with specific assumptions included in this section.
In addition, you should read Forward-Looking
Statements and Risk Factors for information
regarding statements that do not relate strictly to historical
or current facts and certain risks inherent in our business.
General
Cash
Distribution Policy
Our cash distribution policy reflects a basic judgment that our
unitholders will be better served by our distributing our cash
available (after deducting expenses, including estimated
maintenance and replacement capital expenditures and reserves)
rather than retaining it. Because we believe we will generally
finance any expansion capital expenditures from external
financing sources, we believe that our investors are best served
by our distributing all of our available cash. Our cash
distribution policy is consistent with the terms of our
partnership agreement, which requires that we distribute all of
our available cash quarterly (after deducting expenses,
including estimated maintenance and replacement capital
expenditures and reserves).
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Limitations
on Cash Distributions and Our Ability to Change Our Cash
Distribution Policy
There is no guarantee that unitholders will receive quarterly
distributions from us. Our distribution policy is subject to
certain restrictions and may be changed at any time, including:
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Our unitholders have no contractual or other legal right to
receive distributions other than the obligation under our
partnership agreement to distribute available cash on a
quarterly basis, which is subject to the broad discretion of our
board of directors to establish reserves and other limitations.
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While our partnership agreement requires us to distribute all of
our available cash, our partnership agreement, including
provisions requiring us to make cash distributions contained
therein, may be amended. Although during the subordination
period, with certain exceptions, our partnership agreement may
not be amended without the approval of non-affiliated common
unitholders, our partnership agreement can be amended with the
approval of a majority of the outstanding common units after the
subordination period has ended.
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Even if our cash distribution policy is not modified or revoked,
the amount of distributions we pay under our cash distribution
policy and the decision to make any distribution is determined
by our board of directors, taking into consideration the terms
of our partnership agreement.
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Under Section 51 of the Marshall Islands Limited
Partnership Act, we may not make a distribution to you if the
distribution would cause our liabilities to exceed the fair
value of our assets.
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We may lack sufficient cash to pay distributions to our
unitholders due to decreases in net revenues or increases in
operating expenses, principal and interest payments on
outstanding debt, tax expenses, working capital requirements,
maintenance and replacement capital expenditures or anticipated
cash needs.
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Our distribution policy will be affected by restrictions on
distributions under our existing credit facility which contains
material financial tests and covenants that must be satisfied
and we will not pay any distributions that will cause us to
violate our existing credit facility or other debt instruments.
Should we be unable to satisfy these restrictions included in
the existing credit facility or if we are otherwise in default
under our existing credit facility, our ability to make cash
distributions to you, notwithstanding our cash distribution
policy, would be materially adversely affected.
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If we make distributions out of capital surplus, as opposed to
operating surplus, such distributions will constitute a return
of capital and will result in a reduction in the minimum
quarterly distribution and the target distribution levels. We do
not anticipate that we will make any distributions from capital
surplus.
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Our ability to make distributions to our unitholders depends on
the performance of our subsidiaries and their ability to
distribute funds to us. The ability of our subsidiaries to make
distributions to us may be restricted by, among other things,
the provisions of existing and future indebtedness, applicable
partnership and limited liability company laws and other laws
and regulations.
Percentage
Allocations of Available Cash from Operating Surplus
The following table illustrates the percentage allocations of
the additional available cash from operating surplus among the
unitholders and our general partner up to the various target
distribution levels. The amounts set forth under Marginal
Percentage Interest in Distributions are the percentage
interests of the unitholders and our general partner in any
available cash from operating surplus we distribute up to and
including the corresponding amount in the column Total
Quarterly Distribution Target Amount, until available cash
from operating surplus we distribute reaches the next target
distribution level, if any. The percentage interests shown for
the unitholders and our general partner for the minimum
quarterly distribution are also applicable to quarterly
distribution amounts that are less than the minimum quarterly
distribution. The percentage interests
36
shown for our general partner assume that our general partner
maintains its 2.0% general partner interest and assume our
general partner has not transferred the incentive distribution
rights.
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Marginal Percentage Interest
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Total Quarterly
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in Distributions
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Distribution
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General
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Target Amount
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Unitholders
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Partner
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Minimum Quarterly Distribution
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$0.35
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98.0
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%
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2.0
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%
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First Target Distribution
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up to $0.4025
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98.0
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%
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2.0
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%
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Second Target Distribution
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above $0.4025 up to $0.4375
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85.0
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%
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15.0
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%
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Third Target Distribution
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above $0.4375 up to $0.525
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75.0
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%
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25.0
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%
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Thereafter
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above $0.525
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50.0
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%
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50.0
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%
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PRICE
RANGE OF COMMON UNITS AND DISTRIBUTIONS
As of January 27, 2009, there were 13,631,415 common units
outstanding. Our common units began trading on the New York
Stock Exchange on November 16, 2007 at an initial offering
price of $19.00 per unit. Our common units are traded on the New
York Stock Exchange under the symbol NMM.
Historical
Prices
The following table sets forth, for the periods indicated, the
high and low sales prices for our common units, as reported on
the New York Stock Exchange, for the periods indicated. The last
reported sale price of common units on the New York Stock
Exchange on January 27, 2009 was $7.65 per common unit.
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Price Range
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High
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Low
|
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Year Ended:
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December 31, 2008
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$
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18.85
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$
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3.36
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December 31, 2007*
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|
$
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19.45
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|
$
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17.40
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Quarter Ended:
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March 31, 2009 (through January 27, 2009)
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$
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8.49
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$
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6.39
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December 31, 2008
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$
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8.7
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$
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3.10
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September 30, 2008
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$
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14.61
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$
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6.97
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June 30, 2008
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|
$
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15.26
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$
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13.81
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|
March 31, 2008
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|
$
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18.85
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|
|
$
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13.83
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December 31, 2007*
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|
$
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19.45
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|
$
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17.40
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Month Ended:
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January 31, 2009 (through January 27, 2009)
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$
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8.49
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$
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6.39
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December 31, 2008
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$
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7.14
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$
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4.13
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November 30, 2008
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$
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7.74
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$
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3.36
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Price Range
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High
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Low
|
|
October 31, 2008
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|
$
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7.68
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$
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4.72
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|
September 30, 2008
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|
$
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12.23
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|
$
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6.63
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|
August 31, 2008
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|
$
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12.00
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$
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11.17
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* |
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Period commenced on November 16, 2007. |
37
Quarterly
Distributions
Our unitholders are entitled under our partnership agreement to
receive a quarterly distribution to the extent we have
sufficient cash on hand to pay the distribution after we
establish cash reserves and pay fees and expenses. Although we
intend to continue to make strategic acquisitions and to take
advantage of our unique relationship with Navios Holdings in a
prudent manner that is accretive to our unitholders and to
long-term distribution growth there is no guarantee that we will
pay a quarterly distribution on the common units and
subordinated units in any quarter. Even if our cash distribution
policy is not modified or revoked, the amount of distributions
paid under our policy and the decision to make any distribution
is determined by our board of directors, taking into
consideration the terms of our partnership agreement and other
factors. We will be prohibited from making any distributions to
unitholders if it would cause an event of default, or an event
of default is existing, under the terms of our existing credit
facility.
Following the completion of our IPO on November 16, 2007,
the following cash distributions have been declared and paid:
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Amount of Cash
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|
Distributions for Quarter Ended
|
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Distributions
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|
Cash Distributions per Unit
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|
September 30, 2008
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|
$
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8.3 million
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$
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0.385 per unit
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June 30, 2008
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|
$
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6.5 million
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|
$
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0.35 per unit
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March 31, 2008
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$
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6.5 million
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**
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$
|
0.35 per unit
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December 31, 2007*
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|
$
|
3.2 million
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|
$
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0.175 per unit
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* |
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Prorated for the period from November 16, 2007 to
December 31, 2007. |
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** |
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Rounded up. |
MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal
income tax considerations that may be relevant to prospective
unitholders and, unless otherwise noted in the following
discussion, is the opinion of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., our U.S. counsel, insofar as
it relates to matters of U.S. federal income tax law and
legal conclusions with respect to those matters. The opinion of
our counsel is dependent on the accuracy of representations made
by us to them, including descriptions of our operations
contained herein.
This discussion is based upon provisions of the Code, Treasury
Regulations, and current administrative rulings and court
decisions, all as in effect or in existence on the date of this
prospectus and all of which are subject to change, possibly with
retroactive effect. Changes in these authorities may cause the
tax consequences of unit ownership to vary substantially from
the consequences described below. Unless the context otherwise
requires, references in this section to we,
our or us are references to Navios
Maritime Partners L.P.
The following discussion applies only to beneficial owners of
common units that own the common units as capital
assets (generally, for investment purposes). The following
discussion does not comment on all aspects of U.S. federal
income taxation which may be important to particular unitholders
in light of their individual circumstances, such as unitholders
subject to special tax rules (e.g., banks or other
financial institutions, insurance companies, broker-dealers,
tax-exempt organizations and retirement plans, individual
retirement accounts and tax-deferred accounts, or former
citizens or long-term residents of the United States) or to
persons that will hold the units as part of a straddle, hedge,
conversion, constructive sale, or other integrated transaction
for U.S. federal income tax purposes, to partnerships or
other entities classified as partnerships for U.S. federal
income tax purposes or their partners or to persons that have a
functional currency other than the U.S. dollar, all of whom
may be subject to tax rules that differ significantly from those
summarized below. If a partnership or other entity classified as
a partnership for U.S. federal income tax purposes holds
our common units, the tax treatment of its partners generally
will depend upon the status of the partner and the activities of
the partnership. If you are a partner in a partnership holding
our common units,
38
you should consult your own tax advisor regarding the tax
consequences to you of the partnerships ownership of our
common units.
No ruling has been or will be requested from the IRS regarding
any matter affecting us or prospective unitholders. The opinions
and statements made herein may be challenged by the IRS and, if
so challenged, may not be sustained upon review in a court.
This discussion does not contain information regarding any
U.S. state or local, estate, gift or alternative minimum
tax considerations concerning the ownership or disposition of
common units. Each prospective unitholder is urged to consult
its own tax advisor regarding the U.S. federal, state,
local, and other tax consequences of the ownership or
disposition of common units.
Election
to be Treated as a Corporation
We have elected to be treated as a corporation for
U.S. federal income tax purposes. Consequently, among other
things, U.S. Holders (as defined below) will not directly
be subject to U.S. federal income tax on their shares of
our income, but rather will be subject to U.S. federal
income tax on distributions received from us and dispositions of
units as described below.
U.S.
Federal Income Taxation of U.S. Holders
As used herein, the term U.S. Holder means a
beneficial owner of our common units that owns less than 10.0%
of our common units and that:
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is an individual U.S. citizen or resident (as determined
for U.S. federal income tax purposes),
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a corporation (or other entity that is classified as a
corporation for U.S. federal income tax purposes) organized
under the laws of the United States or any of its political
subdivisions,
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an estate the income of which is subject to U.S. federal
income taxation regardless of its source, or
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a trust if (i) a court within the United States is able to
exercise primary jurisdiction over the administration of the
trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust or (ii) the
trust has a valid election in effect under current Treasury
Regulations to be treated as a U.S. person.
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Distributions
Subject to the discussion below of the rules applicable to
passive foreign investment companies, or PFICs, any
distributions to a U.S. Holder made by us with respect to
our common units generally will constitute dividends, which will
be taxable as ordinary income or qualified dividend
income as described in more detail below, to the extent of
our current and accumulated earnings and profits, as determined
under U.S. federal income tax principles. Distributions in
excess of our earnings and profits will be treated first as a
nontaxable return of capital to the extent of the
U.S. Holders tax basis in its common units and
thereafter as capital gain, which will be either long-term or
short-term capital gain depending upon whether the
U.S. Holder held the common units for more than one year.
U.S. Holders that are corporations generally will not be
entitled to claim a dividend received deduction with respect to
distributions they receive from us. For U.S. foreign tax
credit purposes, dividends received with respect to the common
units will be treated as foreign source income and generally
will be treated as passive category income.
Dividends received with respect to our common units by a
U.S. Holder who is an individual, trust or estate (a
U.S. Individual Holder) generally will be
treated as qualified dividend income that is taxable
to such U.S. Individual Holder at preferential capital gain
tax rates (through 2010), provided that: (i) our common
units are readily tradable on an established securities market
in the United States (such as the New York Stock Exchange on
which we expect our common units to be traded); (ii) we are
not a PFIC for the taxable year during which the dividend is
paid or the immediately preceding taxable year (which we do not
believe we are, have been or will be, as discussed below);
(iii) the U.S. Individual Holder has owned the common
units for more than 60 days during the
121-day
period beginning 60 days before the date on which the
common units
39
become ex-dividend (and has not entered into certain risk
limiting transactions with respect to such common units); and
(iv) the U.S. Individual Holder is not under an
obligation to make related payments with respect to positions in
substantially similar or related property. Any dividends paid on
our common units that are not eligible for these preferential
rates will be taxed as ordinary income to a U.S. Individual
Holder. In the absence of legislation extending the term of the
preferential tax rates for qualified dividend income, all
dividends received by a taxpayer in tax years beginning on or
after January 1, 2011, will be taxed at rates applicable to
ordinary income.
Special rules may apply to any amounts received in respect of
our common units that are treated as extraordinary
dividends. In general, an extraordinary dividend is a
dividend with respect to a common unit that is equal to or in
excess of 10.0% of a unitholders adjusted tax basis (or
fair market value upon the unitholders election) in such
common unit. In addition, extraordinary dividends include
dividends received within a one year period that, in the
aggregate, equal or exceed 20.0% of a unitholders adjusted
tax basis (or fair market value). If we pay an
extraordinary dividend on our common units that is
treated as qualified dividend income, then any loss
recognized by a U.S. Individual Holder from the sale or
exchange of such common units will be treated as long-term
capital loss to the extent of the amount of such dividend.
In addition, under legislation proposed in the
U.S. Congress, the preferential rate of federal income tax
currently imposed on qualified dividend income would be denied
with respect to dividends received from a
non-U.S. corporation,
if the
non-U.S. corporation
is created or organized under the laws of a foreign country that
does not have a comprehensive income tax system. Because the
Marshall Islands imposes only limited taxes on corporations
organized under its laws, it is likely that, if this legislation
were enacted, the preferential tax rates imposed on qualified
dividend income would no longer be applicable to dividends
received from us. Legislation has also been proposed that, if
enacted, would limit the preferential tax rate to dividends paid
on or before December 31, 2007. Any dividends paid on our
common units that are not eligible for these preferential rates
will be taxed as ordinary income to a U.S. Individual
Holder. As of the date hereof, it is not possible to predict
with any certainty whether any of this legislation will be
enacted.
Sale,
Exchange or other Disposition of Common Units
Subject to the discussion of PFICs below, a U.S. Holder
generally will recognize capital gain or loss upon a sale,
exchange or other disposition of our units in an amount equal to
the difference between the amount realized by the
U.S. Holder from such sale, exchange or other disposition
and the U.S. Holders adjusted tax basis in such
units. The U.S. Holders initial tax basis in the
common units generally will be the U.S. Holders
purchase price for the common units and that tax basis will be
reduced (but not below zero) by the amount of any distributions
on the common units that are treated as non-taxable returns of
capital (Please read Material U.S. Federal Income Tax
Considerations U.S. Federal Income Taxation of
U.S. Holders Distributions). Such gain or
loss will be treated as long-term capital gain or loss if the
U.S. Holders holding period is greater than one year
at the time of the sale, exchange or other disposition. Certain
U.S. Holders (including individuals) may be eligible for
preferential rates of U.S. federal income tax in respect of
long-term capital gains. A U.S. Holders ability to
deduct capital losses is subject to limitations. Such capital
gain or loss generally will be treated as U.S. source
income or loss, as applicable, for U.S. foreign tax credit
purposes.
PFIC
Status and Significant Tax Consequences
In general, we will be treated as a PFIC with respect to a
U.S. Holder if, for any taxable year in which the holder
held our common units, either:
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at least 75.0% of our gross income (including the gross income
of our vessel-owning subsidiaries) for such taxable year
consists of passive income (e.g., dividends, interest, capital
gains and rents derived other than in the active conduct of a
rental business), or
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at least 50.0% of the average value of the assets held by us
(including the assets of our vessel-owning subsidiaries) during
such taxable year produce, or are held for the production of,
passive income.
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40
Income earned, or deemed earned, by us in connection with the
performance of services would not constitute passive income. By
contrast, rental income generally would constitute passive
income unless we were treated as deriving our rental
income in the active conduct of a trade or business under the
applicable rules.
Based on our current and projected methods of operation, and an
opinion of counsel, we believe that we will not be a PFIC with
respect to any taxable year. Our U.S. counsel, Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., is of the
opinion that (1) the income we receive from time chartering
activities and assets engaged in generating such income should
not be treated as passive income or assets, respectively, and
(2) so long as our income from time charters exceeds 25% of
our gross income for each taxable year after our initial taxable
year and the value of our vessels contracted under time charters
exceeds 50% of the average value of our assets for each taxable
year after our initial taxable year, we should not be a PFIC.
This opinion is based on representations and projections
provided to our counsel by us regarding our assets, income and
charters, and its validity is conditioned on the accuracy of
such representations and projections.
Our counsels opinion is based principally on its
conclusion that, for purposes of determining whether we are a
PFIC, the gross income we derive or are deemed to derive from
the time chartering activities of our wholly owned subsidiaries
should constitute services income, rather than rental income.
Correspondingly, such income should not constitute passive
income, and the assets that we or our subsidiaries own and
operate in connection with the production of such income, in
particular, the vessels we or our subsidiaries own that are
subject to time charters, should not constitute passive assets
for purposes of determining whether we are or have been a PFIC.
We expect that all of the vessels in our fleet will be engaged
in time chartering activities and intend to treat our income
from those activities as non-passive income, and the vessels
engaged in those activities as non-passive assets, for PFIC
purposes.
Our counsel believes that there is substantial legal authority
supporting our position consisting of the Code, legislative
history, case law and IRS pronouncements concerning the
characterization of income derived from time charters as
services income. However, there is no legal authority directly
on point, and we are not obtaining a ruling from the IRS on this
issue. The opinion of our counsel is not binding on the IRS or
any court. Thus, while we have received an opinion of our
counsel in support of our position, there is a possibility that
the IRS or a court could disagree with this position and the
opinion of our counsel. Although we intend to conduct our
affairs in a manner to avoid being classified as a PFIC with
respect to any taxable year, we cannot assure you that the
nature of our operations will not change in the future.
As discussed more fully below, if we were to be treated as a
PFIC for any taxable year, a U.S. Holder would be subject
to different taxation rules depending on whether the
U.S. Holder makes an election to treat us as a
Qualified Electing Fund, which we refer to as a
QEF election. As an alternative to making a QEF
election, a U.S. Holder should be able to make a
mark-to-market election with respect to our common
units, as discussed below.
Taxation
of U.S. Holders Making a Timely QEF Election
If a U.S. Holder makes a timely QEF election (an
Electing Holder), he must report for
U.S. federal income tax purposes his pro rata share of our
ordinary earnings and net capital gain, if any, for our taxable
years that end with or within his taxable year, regardless of
whether or not the Electing Holder received distributions from
us in that year. The Electing Holders adjusted tax basis
in the common units will be increased to reflect taxed but
undistributed earnings and profits. Distributions of earnings
and profits that were previously taxed will result in a
corresponding reduction in the Electing Holders adjusted
tax basis in common units and will not be taxed again once
distributed. An Electing Holder generally will recognize capital
gain or loss on the sale, exchange or other disposition of our
common units. A U.S. Holder makes a QEF election with
respect to any year that we are a PFIC by filing IRS
Form 8621 with his U.S. federal income tax return. If
contrary to our expectations, we determine that we are treated
as a PFIC for any taxable year, we will provide each
U.S. Holder with the information necessary to make the QEF
election described above.
41
Taxation
of U.S. Holders Making a Mark-to-Market
Election
If we were to be treated as a PFIC for any taxable year and, as
we anticipate, our units were treated as marketable
stock, then, as an alternative to making a QEF election, a
U.S. Holder would be allowed to make a
mark-to-market election with respect to our common
units, provided the U.S. Holder completes and files IRS
Form 8621 in accordance with the relevant instructions and
related Treasury Regulations. If that election is made, the
U.S. Holder generally would include as ordinary income in
each taxable year the excess, if any, of the fair market value
of the U.S. Holders common units at the end of the
taxable year over the holders adjusted tax basis in the
common units. The U.S. Holder also would be permitted an
ordinary loss in respect of the excess, if any, of the
U.S. Holders adjusted tax basis in the common units
over the fair market value thereof at the end of the taxable
year, but only to the extent of the net amount previously
included in income as a result of the mark-to-market election. A
U.S. Holders tax basis in his common units would be
adjusted to reflect any such income or loss recognized. Gain
recognized on the sale, exchange or other disposition of our
common units would be treated as ordinary income, and any loss
recognized on the sale, exchange or other disposition of the
common units would be treated as ordinary loss to the extent
that such loss does not exceed the net mark-to-market gains
previously included in income by the U.S. Holder.
Taxation
of U.S. Holders Not Making a Timely QEF or Mark-to-Market
Election
If we were to be treated as a PFIC for any taxable year, a
U.S. Holder who does not make either a QEF election or a
mark-to-market election for that year (a
Non-Electing Holder,) would be subject to special
rules resulting in increased tax liability with respect to
(1) any excess distribution (i.e., the portion of
any distributions received by the Non-Electing Holder on our
common units in a taxable year in excess of 125% of the average
annual distributions received by the Non-Electing Holder in the
three preceding taxable years, or, if shorter, the Non-Electing
Holders holding period for the common units), and
(2) any gain realized on the sale, exchange or other
disposition of the units. Under these special rules:
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the excess distribution or gain would be allocated ratably over
the Non-Electing Holders aggregate holding period for the
common units;
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the amount allocated to the current taxable year and any year
prior to the year we were first treated as a PFIC with respect
to the Non-Electing Holder would be taxed as ordinary
income; and
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the amount allocated to each of the other taxable years would be
subject to tax at the highest rate of tax in effect for the
applicable class of taxpayer for that year, and an interest
charge for the deemed deferral benefit would be imposed with
respect to the resulting tax attributable to each such other
taxable year.
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These penalties would not apply to a qualified pension, profit
sharing or other retirement trust or other tax-exempt
organization that did not borrow money or otherwise utilize
leverage in connection with its acquisition of our common units.
If we were treated as a PFIC for any taxable year and a
Non-Electing Holder who is an individual dies while owning our
common units, such holders successor generally would not
receive a
step-up in
tax basis with respect to such units.
U.S.
Federal Income Taxation of
Non-U.S.
Holders
A beneficial owner of our common units (other than a partnership
or an entity or arrangement treated as a partnership for
U.S. federal income tax purposes) that is not a
U.S. Holder is a
Non-U.S. Holder.
If you are a partner in a partnership (or an entity or
arrangement treated as a partnership for U.S. federal
income tax purposes) holding our common units, you should
consult your own tax advisor regarding the tax consequences to
you of the partnerships ownership of our common units.
Distributions
Distributions we pay to a
Non-U.S. Holder
will not be subject to U.S. federal income tax or
withholding tax if the
Non-U.S. Holder
is not engaged in a U.S. trade or business. If the
Non-U.S. Holder
is engaged in a U.S. trade or business, our distributions
will be subject to U.S. federal income tax to the extent
they constitute
42
income effectively connected with the
Non-U.S. Holders
U.S. trade or business. However, distributions paid to a
Non-U.S. Holder
who is engaged in a trade or business may be exempt from
taxation under an income tax treaty if the income arising from
the distribution is not attributable to a U.S. permanent
establishment maintained by the
Non-U.S. Holder.
Disposition
of Units
In general, a
Non-U.S. Holder
is not subject to U.S. federal income tax or withholding
tax on any gain resulting from the disposition of our common
units provided the
Non-U.S. Holder
is not engaged in a U.S. trade or business. A
Non-U.S. Holder
that is engaged in a U.S. trade or business will be subject
to U.S. federal income tax in the event the gain from the
disposition of units is effectively connected with the conduct
of such U.S. trade or business (provided, in the case of a
Non-U.S. Holder
entitled to the benefits of an income tax treaty with the United
States, such gain also is attributable to a U.S. permanent
establishment). However, even if not engaged in a
U.S. trade or business, individual
Non-U.S. Holders
may be subject to tax on gain resulting from the disposition of
our common units if they are present in the United States for
183 days or more during the taxable year in which those
units are disposed and meet certain other requirements.
Backup
Withholding and Information Reporting
In general, payments to a non-corporate U.S. Holder of
distributions or the proceeds of a disposition of common units
will be subject to information reporting. These payments to a
non-corporate U.S. Holder also may be subject to backup
withholding, if the non-corporate U.S. Holder:
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fails to provide an accurate taxpayer identification number;
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is notified by the IRS that he has failed to report all interest
or corporate distributions required to be reported on his
U.S. federal income tax returns; or
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|
|
in certain circumstances, fails to comply with applicable
certification requirements.
|
Non-U.S. Holders
may be required to establish their exemption from information
reporting and backup withholding by certifying their status on
IRS
Form W-8BEN,
W-8ECI or
W-8IMY, as
applicable.
Backup withholding is not an additional tax. Rather, a
unitholder generally may obtain a credit for any amount withheld
against his liability for U.S. federal income tax (and
obtain a refund of any amounts withheld in excess of such
liability) by filing a U.S. federal income tax return with
the IRS.
Tax
Consequences of Ownership of Debt Securities
A description of the material federal income tax consequences of
the registration, ownership and disposition of debt securities
will be set forth in the prospectus supplement relating to the
offering of any debt securities.
NON-UNITED
STATES TAX CONSIDERATIONS
Marshall
Islands Tax Consequences
The following discussion is based upon the opinion of
Reeder & Simpson P.C., our counsel as to matters of
the laws of the Republic of the Marshall Islands, and the
current laws of the Republic of the Marshall Islands applicable
to persons who do not reside in, maintain offices in or engage
in business in the Republic of the Marshall Islands.
Because we and our subsidiaries do not and do not expect to
conduct business or operations in the Republic of the Marshall
Islands, and because all documentation related to this offering
will be executed outside of the Republic of the Marshall
Islands, under current Marshall Islands law you will not be
subject to Marshall Islands taxation or withholding on
distributions, including upon distribution treated as a return
of capital, we make to you as a unitholder. In addition, you
will not be subject to Marshall Islands stamp, capital
43
gains or other taxes on the purchase, ownership or disposition
of common units, and you will not be required by the Republic of
the Marshall Islands to file a tax return relating to your
ownership of common units.
EACH PROSPECTIVE UNITHOLDER IS URGED TO CONSULT HIS OWN TAX,
LEGAL AND OTHER ADVISORS REGARDING THE CONSEQUENCES OF OWNERSHIP
OF COMMON UNITS UNDER THE UNITHOLDERS PARTICULAR
CIRCUMSTANCES.
SERVICE
OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES
We are organized under the laws of the Marshall Islands as a
limited partnership. Our general partner is organized under the
laws of the Marshall Islands as a limited liability company. The
Marshall Islands has a less developed body of securities laws as
compared to the United States and provides protections for
investors to a significantly lesser extent.
Most of our directors and the directors and officers of our
general partner and those of our subsidiaries are residents of
countries other than the United States. Substantially all of our
and our subsidiaries assets and a substantial portion of
the assets of our directors and the directors and officers of
our general partner are located outside the United States. As a
result, it may be difficult or impossible for United States
investors to effect service of process within the United States
upon us, our directors, our general partner, our subsidiaries or
the directors and officers of our general partner or to realize
against us or them judgments obtained in United States courts,
including judgments predicated upon the civil liability
provisions of the securities laws of the United States or any
state in the United States. However, we have expressly submitted
to the jurisdiction of the U.S. federal and New York state
courts sitting in The City of New York for the purpose of any
suit, action or proceeding arising under the securities laws of
the United States or any state in the United States, and we have
appointed CT Corporation System, 111 Eighth Avenue,
13th Floor, New York, NY 10011, to accept service of
process on our behalf in any such action.
Reeder & Simpson P.C., our counsel as to Marshall
Islands law, has advised us that there is uncertainty as to
whether the courts of the Marshall Islands would
(1) recognize or enforce against us, our general
partners officers judgments of courts of the United States
based on civil liability provisions of applicable
U.S. federal and state securities laws; or (2) impose
liabilities against us, our directors, our general partner or
our general partners officers in original actions brought
in the Marshall Islands, based on these laws.
LEGAL
MATTERS
Reeder & Simpson P.C., Marshall Islands counsel, will
provide us with an opinion as to the legal matters in connection
with the securities we are offering.
EXPERTS
The consolidated financial statements of Navios Maritime
Partners L.P. incorporated in this prospectus by reference to
the Annual Report on
Form 20-F
for the year ended December 31, 2007, have been so
incorporated in reliance on the reports of
PricewaterhouseCoopers S.A., an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
The balance sheets of Navios GP L.L.C. as of December 31,
2007 and August 8, 2007 included in this prospectus have
been so included in reliance on the report of
PricewaterhouseCoopers S.A., an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
44
EXPENSES
The following table sets forth the main costs and expenses,
other than the underwriting discounts and commissions and the
financial advisory fee, in connection with this offering, which
we will be required to pay.
|
|
|
|
|
U.S. Securities and Exchange Commission registration fee
|
|
$
|
19,650
|
|
Financial Industry Regulatory Authority, Inc. filing fee
|
|
|
|
*
|
New York Stock Exchange listing fee
|
|
|
|
*
|
Legal fees and expenses
|
|
|
|
*
|
Accounting fees and expenses
|
|
|
|
*
|
Printing and engraving costs
|
|
|
|
*
|
Transfer agent fees
|
|
|
|
*
|
Miscellaneous
|
|
|
|
*
|
Total
|
|
$
|
19,650
|
|
|
|
|
* |
|
Amounts to be provided in a prospectus supplement or in a
Current Report on Form
6-K
subsequently incorporated by reference into this prospectus. |
WHERE YOU
CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form F-3
regarding the securities covered by this prospectus. This
prospectus does not contain all of the information found in the
registration statement. For further information regarding us and
the securities offered in this prospectus, you may wish to
review the full registration statement, including its exhibits.
In addition, we file annual, quarterly and other reports with
and furnish information to the SEC. You may inspect and copy any
document we file with or furnish to the SEC at the public
reference facilities maintained by the SEC at
100 F Street, NE, Washington, D.C. 20549, at
prescribed rates or from the SECs website on the Internet
at www.sec.gov free of charge. Please call the SEC at
1-800-SEC-0330
for further information on public reference rooms.
We are subject to the information requirements of the Securities
Exchange Act of 1934, and, in accordance therewith, are required
to file with the SEC annual reports on
Form 20-F
within six months of our fiscal year-end, and provide to the SEC
other material information on
Form 6-K.
These reports and other information may be inspected and copied
at the public reference facilities maintained by the SEC or
obtained from the SECs website as provided above.
As a foreign private issuer, we are exempt under the Securities
Exchange Act from, among other things, certain rules prescribing
the furnishing and content of proxy statements, and our
directors and principal unitholders and the executive officers
of our general partner are exempt from the reporting and
short-swing profit recovery provisions contained in
Section 16 of the Exchange Act. In addition, we are not
required under the Exchange Act to file periodic reports and
financial statements with the SEC as frequently or as promptly
as U.S. companies whose securities are registered under the
Exchange Act, including the filing of quarterly reports or
current reports on
Form 8-K.
However, we furnish or make available to our unitholders annual
reports containing our audited consolidated financial statements
prepared in accordance with U.S. GAAP and make available to
our unitholders quarterly reports containing our unaudited
interim financial information for the first three fiscal
quarters of each fiscal year.
We make our periodic reports as well as other information filed
with or furnished to the SEC available, free of charge, through
our website, at www.navios-mlp.com, as soon as reasonably
practicable after those reports and other information are
electronically filed with or furnished to the SEC.
45
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Members of Navios GP L.L.C.:
In our opinion, the accompanying balance sheets of Navios GP
L.L.C. present fairly, in all material respects, the financial
position of Navios GP L.L.C. (the Company) at
December 31, 2007 and August 8, 2007, in conformity
with accounting principles generally accepted in the United
States of America. These financial statements are the
responsibility of the Companys management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheets are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
balance sheets, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall balance sheet presentation. We believe that our audits
of the balance sheets provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers S.A.
Athens, Greece
January 27, 2009
F-2
NAVIOS GP
L.L.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
August 8,
|
|
|
|
Note
|
|
|
2007
|
|
|
2007
|
|
|
|
(In thousands of U.S. Dollars)
|
|
|
ASSETS
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Investment in Navios Maritime Partners L.P.
|
|
|
|
|
|
|
32
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
33
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
$
|
33
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Members Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Members equity
|
|
|
|
|
|
$
|
1
|
|
|
|
1
|
|
Retained earnings
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total members equity
|
|
|
|
|
|
|
33
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and members equity
|
|
|
|
|
|
$
|
33
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these balance
sheets.
F-3
NAVIOS GP
L.L.C.
(In
Thousands of U.S. Dollars)
|
|
NOTE 1:
|
NATURE OF
OPERATIONS
|
Navios GP L.L.C. (the Company), a Marshall Islands
limited liability company, was formed on August 7, 2007 to
become the general partner of Navios Maritime Partners L.P. (the
Partnership). The Company is a wholly owned
subsidiary of Navios Maritime Holdings Inc. (Navios
Maritime). On August 8, 2007, Navios Maritime
contributed $1 to the Company in exchange for a 100.0% ownership
interest. The Companys investment in the Partnership for
its 2.0% general partner interest amounted to $32 as of
December 31, 2007. There have been no other transactions
involving the Company as of December 31, 2007.
|
|
NOTE 2:
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
(a) Cash and cash equivalents: Cash and
cash equivalents consist of cash deposits held on call with
banks.
(b) Investment in an
affiliate: Investment in an affiliate is an
investment in an entity over which the Company has significant
influence, but which it does not exercise control. This type of
investment is accounted for by the equity method of accounting.
Under this method, the Company records an investment in the
stock of an affiliate at cost, and adjusts the carrying amount
for its share of the earnings or losses of the affiliate
subsequent to the date of investment and reports the recognized
earnings or losses in income. Dividends received from an
affiliate reduce the carrying amount of the investment. When the
Companys share of losses in an affiliate equals or exceeds
its interest in the affiliate, the Company does not recognize
further losses, unless the Company has incurred obligations or
made payments on behalf of the affiliate.
|
|
NOTE 3:
|
SUBSEQUENT
EVENTS
|
On July 1, 2008, the Company acquired additional 63,906
general partnership units in order to maintain its 2% general
partner interest in the Partnership. The total acquisition cost
of the units amounted to $918.
F-4
NAVIOS GP
L.L.C.
BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
Note
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands of U.S. Dollars)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Investment in Navios Maritime Partners L.P.
|
|
|
|
|
|
|
1,032
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
1,033
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
$
|
1,033
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Members Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts due to related parties
|
|
|
|
|
|
|
573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
|
|
|
|
573
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
Members Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Members equity
|
|
|
|
|
|
$
|
1
|
|
|
|
1
|
|
Retained earnings
|
|
|
|
|
|
|
459
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total members equity
|
|
|
|
|
|
|
460
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and members equity
|
|
|
|
|
|
$
|
1,033
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these balance
sheets.
F-5
|
|
NOTE 1:
|
NATURE OF
OPERATIONS
|
Navios GP L.L.C. (the Company), a Marshall Islands
limited liability company, was formed on August 7, 2007 to
become the general partner of Navios Maritime Partners L.P. (the
Partnership). The Company is a wholly owned
subsidiary of Navios Maritime Holdings Inc. (Navios
Maritime). On August 8, 2007, Navios Maritime
contributed $1 to the Company in exchange for a 100.0% ownership
interest.
On July 1, 2008, the Company acquired additional 63,906
general partnership units in order to maintain its 2% general
partnership interest in the Partnership. The total acquisition
cost of the units amounted to $918.
The Companys investment in the Partnership for its 2.0%
general partner interest amounted to $1,032 at
September 30, 2008. There have been no other transactions
involving the Company as of September 30, 2008.
Balance due to related parties: Included in
the current liabilities as at September 31, 2008 is an
amount of $573 which represents the current liabilities due to
Navios Holdings and its subsidiaries. The balance consists of a
payable amount of $918 which was paid by Navios Holdings on
behalf of General Partner relating to the acquisition of 63,906
general partnership units and a receivable amount of $512 for
the receipt of the Partnerships dividend by Navios Holding
on behalf of General Partner of the investment income from
dividends of Navios Partners amounting to $345.
F-6
Navios
Maritime Partners L.P.
Representing
Limited Partnership Interests
PRELIMINARY PROSPECTUS SUPPLEMENT
,
2011
J.P. Morgan
Wells Fargo Securities
S. Goldman Capital
LLC