Navios Maritime Acquisition Corporation
Q1 2017 Earnings Call Transcript

Published: 17 May 2017

[Operator:]

Thank you for joining us for Navios Maritime Acquisition Corporation's First Quarter 2017 Earnings Conference Call. With us today from the Company are Chairman and CEO, Angeliki Frangou; Vice Chairman, Ted Petrone; and Chief Financial Officer, Leonidas Korres. As a reminder, this conference call is being webcast. To access the webcast, please visit the Investors section of Navios Acquisition's website at www.navios-acquisition.com. You'll see the webcast link in the middle of the page and a copy of the presentation referenced in today's earnings conference call also be found there. Now I'll review the safe harbor statement. This conference call could contain forward-looking statements under the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Acquisition. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Acquisition's management and are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. Such risks are more fully discussed in Navios Acquisition's filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Acquisition does not assume any obligation to update the information contained in this conference call. The agenda for today's conference call is as follows. First, Mrs. Frangou will offer opening remarks. Then Mr. Petrone will give an operational update and industry overview. Next Mr. Korres will review Navios Acquisition's financial results, and lastly we'll open the call to take questions. Now I'll turn the call over to Navios Acquisition's Chairman and CEO, Angeliki Frangou. Angeliki?

[Angeliki Frangou:]

Thank you, Laura. Good morning to all of you joining us on today's call. For the first quarter of 2017, Navios Acquisition reported EBITDA of $37.4 million and a net income of $5.6 million. We also declared a dividend of $0.05 per share for the quarter, resulting in a dividend yield of approximately 12%. Our business model has two distinct characteristics. First, we seek long-term charters when available. This provides above market earnings during times in which period employment is unavailable and the spot rates are contracting. For example, in the first quarter of 2017, NNA average charter rate for its fleet was about 42% higher than the average spot market. Second, we enjoy economies of scale through our relationship with Navios Holdings. NNA's operating costs were approximately 17% lower than the average of our listed peers. These efficiencies created savings of $22.8 million in respect of 2016. Slide 3 shares our company highlights. NNA has 36 modern high-quality vessels with an average age of 6.3 years diversified between crude, product and chemical tankers. All vessels are generating cash flow, as our fleet is 90.4% fixed for 2017. On cost side, operating costs are fixed through mid-2018. Please now turn to Slide 4. We are a leading tanker company and a sponsor of Navios Midstream Partners. We expect to receive about $21.3 million in distributions from Navios Midstream in 2017. Our ownership interest in Navios Midstream also has about $138 million or $0.92 to NNA's per share NAV. This value of our ownership interest is equal to more than half of NNA share price. Slide 5 details Navios Acquisition key developments. As I said a moment ago, NNA reported $37.4 million of EBITDA and $5.6 million of net income in the first quarter of 2017. This is equal to $0.04 per share. Our strategy continues to provide charters that outperform the market. In fact, in Q1 2017, we enjoyed charter rates that were 42% higher than the spot market average. In retrospect this strategy created charters that generate about $55 million in revenue above the market average for the last 12 months. On the cost side, we continue to benefit from the management agreements in place with our sponsor, NM. Our actual operating costs are estimated to be about 17% below our listed peers for 2016, translating into a $22.8 million savings for 2016. These savings were in addition to a $33.2 million savings estimated for 2015. Navios Holdings executed a letter-of-intent to purchase 100% of FSL Asset Management and for not less than 50.1% of FSL Trust. No assurances can be provided that we'll close on this transaction in full or in part. During the quarter, we financed the $24 million debt facility secured by the chemical tankers, Nave Cosmos and Nave Polaris. Maturity for the debt facility was extended to 2021 and with an interest of LIBOR plus 300 basis points, a savings of about 100 basis points compared to the previous debt facility. Slide 6 details our chartering strategy by which we balance market opportunity and charter period. We protect from market volatility by obtaining attractive period charters. About 87.4% of our fleet is contracted out for the remaining nine months of 2017. Any market improvement will be captured through one of the following three mechanism; open days, days fixed on floating rates, or third, days with base rate and profit sharing. Slide 7 further details our chartering strategy. Our long-term charters protect our cash flow in a correcting market. As you can see for the first quarter of 2017, NNA average charter rates for the combined fleet was 42% higher than the average spot rate. Based on the last 12 months performance, NNA generated about $54 million higher revenue than the market average. Slide 8 reflects our management philosophy as we transition through industry cyclicality. We purchased new buildings when we felt the market miscalculate the risk reward profile and subsequently shifted to our growing vessels on the water. We also fixed our vessels on long-term charters when we determined that the value of stable cash flows out-weight any potential upside. Additionally structuring contracts with a profit-sharing element exposes to market upsides while protecting our downside. Today we have no new building commitments and we intend to use a significant cash flow to delever our balance sheet and provide the cash to our shareholders. Slide 9 shows the estimated operating cost savings of NNA in 2016. I note that the third-party metrics we use to measure our cost efficiency has recently been revised. Accordingly we determine to judge our efficiencies going forward based on the public results of our peers. As a result, we have reviewed our peers' actual operating cost by analyzing their 20-Fs and related disclosures. As you can see on Slide 9, our analysis reveal that NNA's operating cost were approximately 17% lower than the average of the listed peers. These efficiencies created savings of $22.8 million in 2016. When performing the same analysis for the three-year period of 2014 through 2016, NNA's aggregate operating cost savings were about $88.3 million. We believe that these savings demonstrate the substantial competitive benefit of the relationship between NM and NNA and the value delivers to all our stakeholders, and we believe that because of the changing methodologies of third-party report computing efficiencies based on actual operating results is the most persuasive way to demonstrate operating efficiencies. Slide 10 demonstrates our strong liquidity position. We have $72.1 million in cash as of March 31, 2017, and net debt to capitalization is at 61.4%, an 20% improvement since 2012. Moreover we have no committed growth CapEx and no significant debt maturities until Q4 of 2021. Slide 11 shows the low breakeven for 2017 under current conditions. In 2017, 90.4% of our fleet is contracted with an average rate of $17,833 compared to a fully-loaded cost of $17,429 per day. As a result, our breakeven for our open days is only $8,576 per day. Our daily cost includes operating expenses, dry docking, general and administrative expense, interest expense and capital repayment. At this point, I would like to turn the call over to Mr. Ted Petrone. Ted?

[Ted Petrone:]

Thank you, Angeliki. Please turn to Slide 13. Navios Acquisition continues the Navios Group policy of locking in secured cash flow with creditworthy counterparties. In 2016, we extended the coverage of our fleet for approximately 30 total years of coverage with new fixtures, continuations and exercised optional periods at higher levels with profit sharing. We have continued that trend this year adding about 8.5 years of coverage through the beginning of May. Please turn to Slide 14. Navios Acquisition's diversified fleet consists of 36 vessels with an average age of 6.3 years, totaling 3.9 million deadweight. The fleet consists of eight VLCCs, 18 MR2 product tankers, 8 LR1 product tankers and two chemical tankers. Please turn to Slide 15. Chartering strategy revolves around capturing market opportunity while also developing defendable cash flow from a diverse group of first class charters. We earned $7.6 million of profit sharing in 2016 and have 36.7% of our fixed days covered by profit sharing this year. Please turn to Slide 17. Navios Midstream brings Navios Acquisition flexibility and liquidity while providing a new platform in the wet sector for dividend seeking investors. NNA owns 59% of Navios Midstream Partners, including a 2% GP interest, with a market value of approximately $137 million as of yesterday's closing price. Turn to Slide 18. Navios Midstream Partners' fleet consist of six VLCCs, is fixed with average charter duration of 4.1 years and is expected to provide approximately $400 million in long-term revenue with top-tier counterparties including Navios Acquisitions back-stop. In 2016, Navios Midstream earned $66.2 million of EBITDA, including approximately $5 million of profit sharing. Through Q1 of 2017, Navios Midstream earned $14.7 million of EBITDA. Navios Midstream declared a cash dividend of $0.4225 per unit for Q1 of this year. This distribution provides NNA with approximately $21.3 million in annualized distributions. Turning to Slide 20. According to the IEA, refinery capacity is expected to increase by 10.3 million barrels per day from 2017 to 2022, including all additions, expansions and upgrades. About 74% of that capacity will be added in Asia and the Middle East with the IEA projecting China and other non-OECD Asia to increase refinery capacity by 3.4 million barrels a day and 1.8 million barrels per day, respectively. New low capacity in Asia is forcing rationalization of old for high cost capacity in the OECD. Because of this structural shift, the growth in ton miles of refined oil products is expected to continue to outpace the general demand for refined products. Please turn to Slide 21. As expected, refineries have opened or expanded in Saudi Arabia and China. These refineries are now contributing significant volumes of product export. In 2016, Saudi Arabia exported an average of 1.4 million barrels per day of products in order to capture higher revenue per barrel, while crude prices remained low. This was 26% higher than 2015. Chinese exports in 2016 were up 34%, led by diesel, which was up 116% over 2015 exports. Through February, total exports are up 21% from 2016. These developments should support product tanker trade East of Suez this year. Turning to Slide 22. U.S. crude production has increased by over 78% since the end of 2008, reaching approximately 9 million barrels per day in February of this year. U.S. has increased its total product exports by about 450% to about 5 million barrels per day since 2004. U.S. Gulf refineries, which benefit from inexpensive domestic crude and natural gas supplies, are finding that national export markets at aiming Mexico and Latin America, as well as Africa. Turning to Slide 23. Oil refineries vary greatly in their quantity, variety and specification of products that they produce. As depicted in this slide, regional surpluses and deficits, combined with relatively low cost transportation, drive arbitrage trades and increased product ton miles. Increasing worldwide products and balances point to an increased ton mile development. Please turn to Slide 24. 2016 saw a 6% net fleet growth. 9.4 million deadweight delivered versus 12.9 million deadweight projected and a scrap of 8,000 deadweight. Through April, the fleet grew by 1.8%, including 2.9 million deadweight of deliveries and 300,000 deadweight of demolitions. About 6% of the product tanker fleet is 20 years of age or older. As of the beginning of May, there were 219 product tankers on order and 187 which are 20 years of age or older. Given historical non-deliveries, the total order book is about equal to those ships 20 years of age or older. Turning to Slide 26. World crude consumption is generally grown for that past 30 years and declines in '08 and '09 due to global financial crisis. Starting in 2010, world crude oil and refined product consumption returned to its pattern of growth. The main structural drivers going forward are moderate VLCC fleet growth, increasing demand from the Asian economies, particularly China and India, as well as growth in the U.S. and the Eurozone. The IMF projected global GDP growth for '17 and '18 at 3.5 % and 3.6%, respectively, led by emerging developing markets growth of 4.5% in '17 and 4.8% in 2018. Growth in emerging market is a key driver in future oil demand. Increases in world GDP growth year-on-year have generally led to higher time charter rates for VLCCs. Please turn to Slide 27. According to BP's latest worldwide oil demand projections to 2035, more than half of the increase in demand will come from China and India. A significant portion of additional demand will come from the Middle East, meaning that less crude will leave that area as exports. Majority of supply increases will come from non-OPEC Atlantic-based sources, and in conjunction with less Middle East exports, this should increase ton miles of VLCCs going forward. Please turn to Slide 28. As noted at the top half of Slide 28 in terms of ton miles, the movement of crude from West Africa and South America to China uses about as many VLCCs as a movement from the Arabian Gulf even though the Arabian Gulf shipped about 2x more oil to China. With relatively steady demand in the U.S., increases in crude production have led to increased exports adding to ton miles. From November of 2016 to January of this year, the U.S. export is about 2 million barrels per month to China. In fact, in February, exports to China reached 9.6 million barrels, the single largest destination to the U.S. crude that month. Near-term new crude export streams in West Africa, Brazil and Atlantic based suppliers to the new refineries in the Eastern hemisphere should help increase ton miles and support VLCC rates. The expansion of West to East crude movements can be seen in the lower part of the slide, which shows spot VLCC fixtures from low imports West of Suez headed to the East continues to expand as a portion of total fixtures. Please turn to Slide 29. China is the world's second largest consumer of oil, importing more than half of its requirements. Chinese imports have more than doubled since January of '09, representing a 13% CAGR. China crude imports reached an all-time record of 9.2 million barrels per day in March and have averaged 8.5 million barrels per day through April of this year, which represents almost 1 million barrels per day increase, or 13% over 2016. Additional refinery openings going forward should add about 1.1 million barrels per day in crude demand by the end of this year, with a further 2.4 million per day to come on stream from '18 to 2020. As you can see in the table below, on a per capita basis, U.S. oil consumption is 6.9x that of China, European usage is 3.1x, and world average is 1.5x. If China goes to world per capita consumption levels, China would require an additional 271 VLCCs. Assuming all crude is imported by sea, this represents an expansion of the existing fleet by about 40%. The chart on the upper right shows China's per capita energy consumption, exceeding Europe's by the year 2030. Please turn to Slide 30. Slide 30 shows the balance between the new building order book and the pool of scrapped candidates. Even with the recent pickup in confirmed new building orders to current contracted order book of 98 VLCCs, is less than the 107 vessels that are 17 years of age or older. Given the outlook for continued ton mile growth, the supply and demand fundamentals remain healthy going forward. Please turn to Slide 31. Non-deliveries remain high last year at 36%. Have continued that trend into this year, as we have a 34% non-delivery rates through April. Forecast for net fleet growth for 2017 is approximately 31 VLCCs or approximately 4.4%. Deliveries are expected to be less than the number of VLCCs needed for the expected increase in demand. We note two VLCCs strapped through April, which already equals a total for all of 2016. Thank you. This concludes my review. And I would like to turn the call over to Leonidas Korres for the Q1 financial results. Leo?

[Leonidas Korres:]

Thank you, Ted. I will discuss the financial results for the first quarter ended March 31, 2017. Please turn to Slide 33. Revenue for Q1 2017 decreased by 19.8% to $64.5 million from $80.4 million in Q1 2016, reflecting the shortening of the tanker market and the sale of one MR2 product tanker and two chemical tankers in 2016. Our revenue was also affected by the scheduled dry docking of one VLCC. With almost 100% fleet utilization, we achieved a time charter equivalent of $19,475 per day, reduced from the $22,722 per day achieved in the first quarter of 2016. Operating expenses were $23.4 million and G&A expenses were $2.8 million, reflecting our low cost structure, given our relationship with Navios Holdings. Equity in net earnings from affiliated companies was $2.8 million, reduced by $2.1 million compared to Q1 of 2016, mainly reflecting our equity portion in Navios Midstream earnings. EBITDA for Q1 2017 decreased by 35.3% to $37.4 million from $57.8 million EBITDA in Q1 2016. Other expenses include depreciation, amortization of $14.2 million and interest expense of finance cost of $18.8 million. Net income for the quarter was $5.6 million, or $0.04 per share. Slide 34 provides selected balance sheet data as of March 31, 2017. Cash and cash equivalents, including restricted cash, increased to $72.1 million. Vessels, net of depreciation, was $1.3 billion. Investments and affiliates of $193.2 million mainly reflects Navios Acquisition interest in Navios Midstream Partners. Receivable from related parties increased by $15.9 million, reflecting mainly advances paid for scheduled current and forthcoming dry dockings and management fees under the terms of our management agreement, and a $5.3 million paid toward working capital contribution to Navios Group too. As of March 31, $50 million was drawn under the loan facility NNA extended to Navios Holdings. Total assets amounted $1.7 billion. Total debt as of March 31, 2017 was $1.1 billion. Net debt to book capitalization ratio declined to 61.4%. As of March 31, 2017, Navios Acquisition was in compliance with all of the covenants of its credit facilities in ship mortgage notes. Turning to Slide 35. Our financial strength has enabled us to announce a dividend of $0.05 per share for the first quarter of 2017 equivalent to $0.20 per share on an annualized basis. The dividend will be paid on June 14, 2017, to shareholders on record as of June 7, 2017. At this point, I would like to highlight that given our 59% ownership in Navios Midstream Partners, we expect to receive, on an annual basis, approximately $21.3 million in dividends from NAP at the time of distribution of $1.69 per unit. And now, I will pass the call back to Angeliki. Angeliki?

[Angeliki Frangou:]

Thank you, Leo. This concludes our formal presentation. We open the call to questions.

[Operator:]

Thank you. [Operator Instructions]. Our first question comes from the line of Noah Parquette of JP Morgan.

[Noah Parquette:]

Thanks. I just wanted to ask about - you guys highlighted the FSL transaction, the tanker fleet there. Can you talk a little bit what the strategy is at the Navios Group and can we expect those ships potentially find a home at NNA, or just a little color on that would be helpful. Thanks.

[Angeliki Frangou:]

I mean, the company has 17 product tankers mainly and two crude tankers. Inevitably this is the home for this vessel and the overall company, but it will be - we are in an early stage in LOI and we'll have to go through due diligence and then formalize the structure.

[Noah Parquette:]

Okay. And just a little bit…

[Angeliki Frangou:]

The [indiscernible] that I'd like to give you a little bit of a color on this. This is where Navios has a global reach. We know all the counterparties in the market where you have the ability to really structure it in. I mean, being able to transact with banks, being able to refinance maturities because this is a beautiful fleet. As I said, it is a company that has good vessels. What they are doing the maturity on vessels creates the point where it creates also the ability for Navios to step in and find the transaction.

[Noah Parquette:]

Yes. Okay. On the fleet employment side, on the MR fleet you guys looked like it was business as usual putting in place those short-term or one-year-ish charters with profit sharing. We see that the fleet supply growth is dropping off sharply at the end of the year. Do you guys have any plans to shift that strategy somewhat to give more exposure, or is it going to be staying like that?

[Angeliki Frangou:]

No, our strategy let's say, what will be this we have done five vessels recently, all with the profit sharing with counterparties that we have seen our experience and have outperformed because now we have enough knowledge of who is doing better and what. So we have selected counterparties that have been outperforming even the indices, so it is attractive to us. And on the VLCCs, vessels are coming in the second half at around Q4, which is also the most attractive period for putting period charters. We do not change in our strategy. The product tankers is the ones that you need earlier, and in the beginning, we used to have a shorter duration in the product tankers. Now we have moved and that's why I think it is indicative, five vessels all here with profit sharing with an additional optionality on the second here at higher floors [ph] and profit sharing.

[Noah Parquette:]

Okay. That's all I have. Thank you.

[Angeliki Frangou:]

Thank you.

[Operator:]

Our next question comes from the line of Prashant Rao of Citigroup.

[Prashant Rao:]

Hi, good morning. This is Prashant Rao for Chris Wetherbee. I just wanted to follow-up on the FSL agreement. I know that it's still early days Angeliki, and things has to be finalized. But in terms of how NNA might take an interest in parts of that fleet, could we expect may be that there might be some partial interest with like equity income? Is that an option for to take some of it, or are you leaning towards more direct transfer as you get financing comes available? Just any sense of what we're thinking about there and then in terms of how the timing might work out after the potential September quarter on the transaction?

[Angeliki Frangou:]

This is - it is actually too early to say the exact mechanism how it will happen. I want to say this is a good fleet, good EBITDA. The nice way and a nice opportunity to be in a product tank and at the time where we think is attractive to expand. I mean, overall, as Ted has already said, it is - I mean, the fleet on the product tank it has - is not expanding, so it is good attractive opportunity to step-in or one look without pushing up the prices doing a piece by piece and creating a nice addition, you are almost increasing by 50% your fleet.

[Prashant Rao:]

Okay. That's helpful. Thank you. And in terms of the existing fleet at NNA, there is some maybe opportunities for some vessels there or just some rejuvenation. I have been looking particularly at the VLCCs. Looks like the FSL fleet has 2,000 about 10-year old VLs, which is younger than the older range of these 15 VLCC fleet. Is that something that might we could potentially see given that those older VLCCs and existing fleets are getting their special survey [ph]?

[Angeliki Frangou:]

No, there is no VLCCs in the FSL transaction. There is only FM Axis, two FM Axis [ph]. So you do not have VLs. So there is two good FM Axis [ph] and 15 product tankers and chemical tanks.

[Prashant Rao:]

My mistake, I am sorry. Thank you. And then just one last question on the - I noticed the discussion on NAP talked about VLCC rates improving off of the 1Q lows and they have bounced back nicely in the last five, six weeks. Just in terms of looking forward the next couple of quarters, do you expect a little bit more support - generally we see a seasonal weaknesses but you're progressive until the Q4 pickup. Do you expect things to be a little bit more flattish this year and is that the ton mile effect that's popping up the rates? Just any color on how you're thinking about the quarter-to-quarter seasonality as we work through this trough? And then, I guess, a broader question is you mentioned 2013 being the last trough. Are there echoes of that this year and how is this turning the cycle maybe similar or dissimilar to 2013 in your view?

[Angeliki Frangou:]

I think that we expect that the seasonality will play a role in the end of the year. I mean, we expect that to see some kind of a stronger market, and I'd like Ted speak a little bit to that. But you will see - market may have the volatility. Don't forget commodity price is down within a week from $44 a barrel temporary to now being approximately $50. It's an amazing swing and that creates usually more demand for lot of the cargo. So I think we will be in interesting territory with seasonality on usually a stronger second half as usually stand but I'll Ted give you a little bit.

[Ted Petrone:]

Yes, I think when you look at what OPEC is doing and they are probably going to continue to cut at the Middle East, but there is four countries filling the gap here; Libya, Nigeria, Iran, U.S., so most of that's done coming out in Iran, except for Iran, and so the ton mile issue I think will help. And again as you get into the fourth quarter and the Northern hemisphere cools and you start - looks like the stockpiles may have been brought down again from there as to continue to tie [ph]. Then I think this ton mile issue will help to the VLCCs go forward, and it is like you said we have the views open second half. I think they are well positioned. We'll take our time. Accessing when and how to look at that market. I don't see comparison to '13. I think there has been a lot of noise with new building orders but if you look at the slide when we talked about our 98 vessels confirmed and 107 that is six to 17 years in age or older, so they are into scrapping zone. And if rates do stay now lower than expected, we've seen two scrapings already. I think you'll see some scrapping. I think we're looking at 4% or 5% fleet growth maybe, similar next year. But I think the ton miles here is saving us by the Atlantic stepping in. I think OPEC really place themselves into quarter. I'd like to see how this plays out over next 18 months.

[Prashant Rao:]

Yes, that's very interesting. Thank you for the time. I'll turn it over.

[Angeliki Frangou:]

Thank you.

[Operator:]

Our next question comes from the line of Amit Mehrota of Deutsche Bank.

[Amit Mehrota:]

Good afternoon, everybody. Thanks for taking my questions. So I just wanted to talk about the breakeven levels over the next couple of years. The debt repayment I saw was $35 million next year. It basically triples in 2019 to almost $100 million. I'm assuming you may see some step-up in dry docking expenses. If you can just help us on how we should think about breakeven levels trending from the $14,400 per day level from this year into next year? Thank you.

[Angeliki Frangou:]

Very nice but I want to tell you the breakeven doesn't change a lot. I mean, what we are describing is really the maturities of our debt. For 2018, we have $32 million, which is easily refinanceable as we have a loan to value are well in place and is an easy refinancing. And in 2019, you have $95 million. Our breakeven for next year is a little bit slightly lower than the $17.5 million. And don't forget that breakeven, if you do your calculation, it should be around $15,000 for whatever we has said. And you have a lot of VLCCs that even today, all the VLCCs are coming for renewal. And even if assume that market goes nowhere, you have quite significant covered and you can see that breakeven for open day won't change materially.

[Amit Mehrota:]

Okay. So you're just assuming.

[Angeliki Frangou:]

Understanding what I'm saying. Maturities are well financed. We can do it easily. This is actually loan to value of today's market, so we see no problem. And there is $32 million in '18, $95 million in '19, so breakeven is same or lower next year and the same - even further down because you will use the interest and on our fleet contracted revenue, you're going to around $15,000 per day today for next year and you have all the VLCCs that even if you assume a $27,000 environment, which I don't believe will be by the end of year, you have quite significantly cover and your contracted revenues well in place.

[Amit Mehrota:]

Right. So the assumption is that you just roll those maturities into a new facility and don't repay them because you could argue that if you repay them your breakevens would actually come down even more and the leverage would come down even more obviously?

[Angeliki Frangou:]

Yes. Listen, it depends on the market. What I'm trying to explain, there is not looming maturity that you'll be, wow, I have to deal and I miss my [indiscernible]. There is nothing here over particular. You may - instead of $95 million, you may finance $70 million. This is a detail. What I'm trying to explain is seeing the balance sheet, this is maturities that are refinanceable with existing conditions. That's all I'm trying to say.

[Amit Mehrota:]

Absolutely that makes sense. And just related to that, you mentioned loan to value. It was one of my later questions but now since you brought it up, is there - since I guess that number, the loan to value, has probably improved a little bit. Can you - Leo or Angeliki, can you just share with us where you think your loan to value is today on a consolidated basis?

[Angeliki Frangou:]

Listen, we don't give but I'll tell you on the bank financing, I mean, the $450 million bank finance. It must be around somewhere around 70% or slightly below 70%. So you are well in the line, and you have an uptrend as you very well said, and this is something that is interesting. The low point of the valuations go somewhere in Q1 for product tankers and you are well - this was a correct comment, values have moved up.

[Amit Mehrota:]

Right. Can I just one - couple quick ones as well for me is on the dividend of $0.20 per year. You obviously have the balance sheet and the capability to pay it. I mean, that's I think undisputable, but it's obviously high relative to the market value of the equity today. And so Angeliki, you've shown an willingness in the past that other companies to forgo the dividend, to redeploy cash and maybe other areas you can think the market is not giving you credit for that payout. Is that 12% plus yield kind of reasonable to you? Obviously I'm assuming you think it's too high. But is it enough for you to say, I'm not getting enough credit for this $0.20 per year. Let me redeploy it at maybe the lower point in the cycle for asset acquisitions?

[Angeliki Frangou:]

Listen, in markets where we stepped and stopped dividends was when market conditions really were quite different. So our dividend policy is stable. We don't see any market conditions that really - we see that the product tanker market and the crude, we don't see anything unusual. I can even say that, as the seasonality will start in, it's going to improve. So on that market, on product tankers and crude, we don't see conditions that will really make you think about this and we have been dividend payout through the entire cycle. It is well positioned.

[Amit Mehrota:]

I was just referring to cutting it from the position of strength but I understand what you're saying. One last quick one from me is the secured holding, loan to holdings. I know $50 million is drawn. Just in your scope is Navios Acquisition Corp, is there - do you expect that $50 million balance to stay constant, or do you expect that to maybe come down as some of the dry bulk market actually has just gotten a little bit more rational, so holdings position may actually be tough really [ph] or a little bit better? Any thoughts on the evolution of that loan over the next two to three quarters?

[Angeliki Frangou:]

Amit, you know that I cannot comment on that but the reality is that the dry bulk has improved extensively.

[Amit Mehrota:]

Yes, but you can - I mean, I understand you can't comment on it from a hold lease perspective but as the CEO of Navios Acquisition Corp, do you have an expectation that the balance of that holdings, which is an asset on your balance sheet, to change?

[Angeliki Frangou:]

I mean, I don't - I see that the good thing is that there is [indiscernible] and there is asset long and it will be done. The reality is that we see that the overall shipping differences between the assets have been balanced. We see economic activity returning and I think one thing that I like to see it from a point of - from a shipping point is that you can see a deflationary market is appealing from Europe to the U.S. So I think that is an overall nice environment.

[Amit Mehrota:]

Right. Okay, well, I tried - I hope you're not too angry with me for attempting that question. Thank you very much for taking the time.

[Angeliki Frangou:]

Thank you.

[Operator:]

Our next question comes from the line of Herman Hildan of Clarksons Platou.

[Herman Hildan:]

Good day, everyone.

[Angeliki Frangou:]

Hello.

[Herman Hildan:]

I just have a short question really. I mean, you briefly talked about it how we've seen asset prices move up, both from crude and the product side of things over the last, call it, couple of months. And I'm just curious to see what your opinion is on what's changed over the last couple of months and also whether you have any preference for the crude or product side in the short-term, or where you see the best opportunity?

[Angeliki Frangou:]

I think in essence, I think, what you see more reaction is really on the product values were more beaten up at this point and it comes also in another way, I mean, basically you have seen that charterers want to fix with profit sharing, which was - at one point was almost disappearing and that gives the perspective that big counterparties want to get dollars. They want to secure dollars for the future and they want profit sharing. I think that is an indication that the market has bigger strength than we see today, which is also seasonally low.

[Ted Petrone:]

Right. I think I agree with Angeliki, was that charterers want to give you downside protection and have the upside. They want to control this deal and they are looking the supply/demand going forward and they are concerned about going to get good quality still with good quality ownership behind it.

[Herman Hildan:]

It's the same feedback that we're getting from our brokers that obviously when oil price was low, it is much harder for their companies to meet the long-term, call it, time charters because they had an whole spending limit and view sense is different and the willingness to take longer duration charters as well, or is it more just on willingness to share the upside in order to control this deal. What's your…

[Ted Petrone:]

I think there is a lot of charters like to take some longer term deals off the market because it's the time to do it. If they are taking with profit sharing, let's say that they are concerned about to control [indiscernible] but we're not going to catalyze our earnings going forward.

[Herman Hildan:]

Well, that's all from me. Thank you very much.

[Angeliki Frangou:]

Thank you.

[Ted Petrone:]

Thank you.

[Operator:]

Our final question comes from the line of Donald Bogden of Wells Fargo.

[Donald Bogden:]

Good afternoon, guys. Thank you for taking my question. We canvassed the FSL deal earlier but I just had a follow-up on overall liquidity within the S&P market for M-block [ph] transactions like that. We've rather just seen an uptick in the past two, three months of M-block [ph] deals for fleets. How do you see liquidity in that market moving forward? Obviously lot of people trying to renew fleet right now. Are they still M-block [ph] fleets for sales being pushed by owners or by banks, or is that market drying up a bit?

[Angeliki Frangou:]

In reality this is totally depends on a particular problem that you're trying to solve. So it's not a liquid fleet end market. I will say it is more situation where you're trying to solve certain problems. In this kind a situation, you're able to do this deals because of purely the [indiscernible] to really be with the maturity for that company and we solve the problem. That in essence is an opportunity. And this all going to be - whatever you have squeezing the market, you will have situations where these things develop. The bank market is more strict, is more selective. There is a lot of banks that have moved out and that always provides opportunities.

[Donald Bogden:]

Okay. Thank you for that color. Rest of my questions have been answered.

[Angeliki Frangou:]

Thank you.

[Operator:]

That was our final question. I will now turn the floor back over to Mrs. Angeliki Frangou for any additional or closing remarks.

[Angeliki Frangou:]

Thank you. This concludes our presentation. Thank you.

[Operator:]

Thank you, ladies and gentlemen. This does conclude today's conference call and you may now disconnect, and have a wonderful day.