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Activist Investor Applies Pressure to Navios Maritime Partners Management

Mike Schuler
Total Views: 714
July 22, 2021

Investment company MRMP-Managers, LLC has sent a letter to NYSE-listed Navios Maritime Partners (NMM) and its CEO Angeliki Frangou detailing concerns regarding the management and direction of the company, and accusing her of “imprudent and illogical” decisions that have hurt shareholder value.

NMM is a publicly traded limited partnership that owns and operates a fleet of over 90 dry bulk vessels and containerships. Angeliki Frangou has been Chairman and CEO since 2005 and she also serves as the Chairman and CEO of Navios Acquisition (NYSE: NNA), an affiliated corporation.

MRMP filed a Schedule 13D report with the SEC disclosing an aggregate 5.8% stake in NMM, and included an attached letter from MRMP’s Ned Sherwood and press release communicating “serious concerns” regarding Frangou’s decisions that “seem designed to benefit other entities in the Navios group” and “run counter to her duty as Chairman & CEO of NMM.”

“Our group has had over thirty years of success investing in various companies that are operated by experienced multi-generation families,” said Sherwood. “Angeliki Frangou is a member of a shipping family that spans generations. We are confident in her ability to manage NMM’s fleet of approximately 95 dry bulk and containerships. However, we have been confused by some of her recent financial decisions – decisions which seem imprudent and illogical – that run counter to sound business principles.”

After surging in Q4 2020 and Q1 2021, NMM’s shares have struggled since the second quarter of this year and currently trade at a major discount compared to analysts’ estimated market value despite improvements in both the container and dry bulk shipping markets.

In Sherwood’s letter, he calls into question $200 million worth of recent at the money (“ATM”) offerings by the company and purchases of approximately $185 million of ships at market values from “largely related parties.”

“In other words, why would anyone with a fleet of ships valued at approximately 50 cents on the dollar sell them to others at this discount (which is essentially what issuing ATM equity is doing) in order to buy more ships at 100 cents on the dollar?” the letter states.

Sherwood and MRMP also suggest that Frangou and management implement a range of policies, such as share buybacks, selling assets and paying down debt, and/or increasing dividends to shareholders, which MRMP said will “benefit the unit holders of NMM and assure that we are not treated as second class holders.”

“We hope that Angeliki Frangou takes our suggestions seriously and follows them, as we are certain that most shareholders would welcome fair and equitable treatment that benefits NMM only and not its affiliates,” said Sherwood.

Specifically, Sherwood and MRMP suggest that:

  1. NMM cease all ATM LP equity issuance at values less than 85% of a reasonable estimate of fleet value. In fact, NMM should begin LP share buybacks in order to take advantage of the current discounted price.
  2. If NMM continues to trade at approximately 50% or less of market value, the GP should endeavor to sell ships from their fleet to realize proceeds closer to the 100% of market value and pay down debt, buyback LP interests or distribute proceeds to LP holders.
  3. In our opinion, the current debt level at NMM is reasonable (if not below the norm) versus comparable companies, therefore, NMM’s GP and management should set a distribution percentage of no less than 75% of estimated annual free cash flow. MLP’s are supposed to distribute the bulk of their free cash flow to LP holders, and Angeliki Frangou’s erratic policies and reluctance to distribute cash lead to uncertainty and discounted equity valuations.
  4. Given the curious behavior and policies of Angeliki Frangou as GP, we believe an independent investigation should be undertaken to determine whether the GP’s actions are in any way due to conflicts of interest with other related entities. The investigation also should review ship management contracts and compare rates against other ship management entities.

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