Navios Maritime to redeem first priority notes ship mortgage notes

By Rebecca Melvin

Concord, N.H., Dec. 14 – Navios Maritime Holdings Inc. plans to redeem all of its 7 3/8% first priority ship mortgage notes due Jan. 15, 2022 and $50 million of its outstanding 11¼% senior secured notes due on Aug. 15, 2022, using proceeds of $550 million of debt financing together with available cash, according to a press release on Tuesday.

After the partial redemption of the 11¼% notes there will be $105 million of the issue remaining outstanding.

The package of debt financing includes $287 million of commercial bank facilities and sale-leaseback agreements and $262.6 million of two PIK loan facilities.

The PIK loans provide for advances of $150 million of additional liquidity, release by the lender of about $300 million of collateral, including about $158.9 million from the ship mortgage notes, allowing Navios to grant additional collateral as security for the commercial credit facilities and sale leaseback agreements, and an initial 18-month period during which there will be no cash interest or amortization. Interest payments during this initial period will be made in the form of a junior debt instrument, or unsecured convertible debentures.

The PIK convertibles have an interest rate of 18% until the senior secured notes are repaid in full and 16½% thereafter or cash at 13½% after the initial 18-month period. Amortization is $10 million quarterly beginning in the third quarter of 2023. The term is four years, and the convertibles are non-callable for 18 months. The fee is $24 million upfront to the lender, paid in the form of convertibles.

The collateral for the first lien debt is coverage of about 20% and is in the form of a first priority partnership interest pledge on 2,112,708 Navios Maritime Partners LP common units. The second lien collateral is in the form of 12,765 shares of Navios South American Logistics Inc., 1,070,491 NMM common units and membership interests of Navios GP LLC.

The fee and all PIK interest on the loans will be paid in the form of unsecured convertible debentures. The unsecured convertible debentures have a five-year term, carry PIK interest at an annual rate of 4% and are convertible, in whole or in part, at any time at the election of the lender into shares of common stock of the company at the conversion price formula fixed on Dec. 13. The holder of the unsecured convertible debentures will be entitled to vote on an “as converted” basis along with the holders of common stock of the company.

The other half of the financing, which includes two commercial bank facilities and four sale-leaseback agreements, is expected to close by the first half of January 2022.

The first credit facility has a two-year term and a 5.8-year amortization profile with annual interest of Libor plus 325 basis points to 450 bps, based on certain conditions.

The second credit facility has a three-year term and a 4.9-year amortization profile with annual interest of Libor plus 285 bps to 375 bps, based on conditions.

The sale and leaseback agreements have seven-year terms on average and 9.4-year amortization profiles with an effective interest rate of about 5.3%

These facilities will be secured by 18 drybulk vessels, 17 of which are now collateral for the ship mortgage notes plus an additional collateral of seven drybulk vessels that are subject to bareboat charters and sale and leaseback agreements.

Navios Maritime Holdings’ board of directors formed a special committee of independent and disinterested directors to evaluate and negotiate with the lender the terms of the loans with the assistance of its independent financial and legal advisers.

Latham & Watkins LLP acted as legal adviser and Pareto Securities AS acted as financial adviser to the special c. Thompson Hine LLP acted as legal adviser to Navios Holdings. Fried, Frank, Harris, Shriver & Jacobson LLP and the Ince Group Plc acted as legal advisers and S. Goldman Advisors LLC acted as financial adviser to the lender.

Navios Maritime is a Monaco-based drybulk commodities seaborne shipping and logistics company.

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