Oct 31, 2009
Executives
Nicolas Bornozis – President of Capital Link, Investor Relations Advisor Angeliki Frangou – Chairman and CEO Michael McClure – CFO George Achniotis – EVP, Business Development
Analysts
Ken Hoexter – Merrill Lynch Noah Parquette – Cantor Fitzgerald Bascome Majors – Citigroup
Operator
Thank you for standing by ladies and gentlemen, and welcome to the Navios Maritime Partners conference call on the third quarter 2009 financial results. We have with us, Ms.
Angeliki Frangou, Chairman and CEO; Mr. George Achniotis, Executive Vice President for Business Development; and Mr.
Michael McClure, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode.
(Operator instructions) I must advise you that this conference is being recorded today, Thursday, October 29th, 2009. We will now pass the floor to Mr.
Nicolas Bornozis, President of Capital Link, Investor Relations Advisor for Navios Maritime Partners. Please go ahead, sir.
Nicolas Bornozis
Thank you and good morning to all of our participants. This is Nicolas Bornozis, Capital Link, Investor Relations Advisor to Navios Maritime Partners L.P.
Yesterday, after market closed, the company released financial results for the third quarter and nine months period of 2009. The press release has been distributed publicly and is also available on the company’s Website under the Investor Relations section at www.navios-mlp.com.
On the Website in the same section and also under events, you can access and download the slides used in today’s conference call and webcast, and you can also access the webcast itself. You are also welcome to call us at 212-661-7566 or e-mail us at [email protected], and we will send you the press release and the slides.
Today, in addition to the conference call, there is also a live audio and slides webcast, which can be accessed as I mentioned to the company’s website at www.navios-mlp.com. The webcast will also be available as an archive after the conference call.
Please note that the slides are user-controlled, so by clicking on the proper button, you can move to the next or to the previous slide on your own. Before we proceed with the presentation, I have to take you through the forward-looking statement disclaimer as displayed on slide number 2 of the presentation.
Please note that statements in this presentation and webcast, which are not statements of historical facts are forward-looking statements. These forward-looking statements are based on the information available to, and the expectations and assumptions deemed reasonable to the company at the time this presentation was made.
Although the company believes that the assumptions underlying such statements are reasonable, it can give no assurance that they will be attained. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information or future events, unless it is required to do so under the securities laws.
The company makes no prediction or statement about the performance of its common units. A full description of the forward-looking statement disclaimer can be found in the press release and also on slide number 2 of the presentation.
Please be kind enough to take a minute and read the story. Now, I will turn over the floor to Ms.
Angeliki Frangou, Chairman and Chief Executive Officer of Navios Maritime Partners. Please go ahead, Angeliki.
Thank you.
Angeliki Frangou
Thank you Nicolas and good morning to all of you joining us on today’s call. I am pleased with our financial results for the third quarter.
We previously announced a distribution of $0.405 for the third quarter of 2009. We are optimistic about the growth of the world’s economy a good outlook for the drybulk industry.
Economic growth is projected to be over 3% global for 2010, and the IMS generated forecast earlier this month. Emerging markets generally in China specially, the growth trends into the drybulk industry are expected to outperform it.
Demand seems very healthy, however, we continue to monitor the supply side in terms of the new vessel delivery. We have done a great deal of work positioning Navios Partners, so that we can take advantage of the continued demand in our sector.
Slide 5 fits for the pillars of our conservative business model. We have grown our fleet overtime, and we are ready to have almost 11 vessels that’s relatively young, as our vessels are almost 10 years younger than the industry average.
The fleet also enjoys long-term charter coverage with an average remaining cover of four years. The fleet is chartered out to strong counterparties that are all ensured by a AA+ rating EU governmental agency.
We have also been able to steadily increase distribution from our minimum distribution of 35% [ph] a quarter in the second quarter of 2008, with a current distribution that we recently announced of $0.405 per quarter. This represents an increase of almost 16%, leasing more than 12 months.
We have also provided continued operating visibility, as we have recently obtained a fixed rate management services for our vessels until November of 2011. Please turn to slide 7.
Our hard work has also paid off in another way. In the past six months, we have driven access to capital market through equity offerings at a total of almost $80 million in gross offering proceeds.
As you know, we completed our more recent offering this month, when the (inaudible) exercised their overallotment option, as a result with a gross offering proceeds of approximately $39 million. This transaction obviously reflects our continued ability to access the market in a traditional manner and reflect a general acceptance of Navios Partners as an MLP to investors.
Our most recent deal was completed at an increase of $1.80 per share or 17.5% premium over our last offering price. Let’s now turn to slide 8 which demonstrates how we have been able to use the proceeds from the offering in an accretive manner.
As you can see, we acquired Navios Apollon for $32 million from Navios Holdings. The Navios Apollon is a 2000 built Ultra-Handymax vessel.
With this acquisition, we have entered the Ultra-Handymax segment, which enhances the fleet and reduces the long-term ability, given the ability of the particular segment. The Navios Apollon is subject to a 3-year charter, which expires in November 2012 for a net daily charter rate of $23,700 and will contribute an annual EBITDA of approximately $6.7 million.
Navios Partners is a beneficiary of the insurance, charter insured from a AA+ rated EU governmental agency. This acquisition is accretive to Navios Partners as we acquire the vessel at 4.8 times forward EBITDA multiple.
Let’s now turn to slide 9. We have worked to improve operating visibility on operating expenses.
As you may recall, the Original Management Agreement, which was executed between Navios Partners and Navios Holdings at the time of our IPO provided for a fixed fee for an initial 2-year period ending 16th of November, 2009, of $4,000 per day for the Panamax vessel, and $5,000 per day for a Capesize vessel. We have extended our fixed average of management fee for an additional two-year period ending in November of 2011, of $4,500 per Ultra-Handymax vessel per day, this is a newly established rate, and $4,400 per day for the Panamax vessel, which is a 10% increase from the previous, $5,500 per day for the Capesize vessel, which is also a 10% increase from the previous.
And at this time, I would like to turn the call over to Mr. Mike McClure, CFO of the Navios Partners who will take you through the results of our quarter.
Mike?
Michael McClure
Thank you Angeliki and good morning to our listeners. I will be discussing the unaudited financial results for the third quarter and nine months ended September 30th 2009.
For your information, we anticipate issuing the Q3 6-K financial report later today. On slide 11, as previously announced, our Board of Directors approved an increase in Q3’s cash distribution of $0.405 per common unit.
This represents a 1.3% increase over the prior quarterly distribution and the third increase in distribution since Q1 2008. The record date for the third quarter distribution is November 9th and the payment date is November 12th.
The total distribution amounts to $11.6 million, of which $8.2 million will be for the common units and $3.4 million for the GP and subordinated units. We are pleased with the distribution coverage.
Common unit coverage is 2.24 times and the total unit coverage is 1.59 times. For US tax purpose, Navios Partners is one of the few MLP to report a cumulative annual distribution to common unit holders on Form 1099.
It is expected that a significant portion of the distribution will be a return of capital, with the balances as qualified dividend income. Turning to slide 12, Navios Partners’ distribution of $0.405 per unit represents a 15.7% increase over the quarterly minimum distribution of $0.35.
The distribution run rate on an annual basis is 1.62 per common unit and provides an effective annual yield of approximately 13.1% based on yesterday’s closing price. The financial results review begins on slide 14 entitled Significant Growth in Key Operating Metrics.
The favorable quarterly pattern of EBITDA, Operating Surplus, and net income are shown for the seven quarters from Q1 2008 through Q3 2009. The consecutive higher results primarily reflect the significant profitable growth by the company from increases in the number of operating vessels and favorable changes in the daily charter-out rate.
The company’s initial quarterly distribution during the first two quarters of 2008 was $0.35 per unit. Q3 2008 distribution was increased by 10% to $0.385 per unit, followed by another increase for Q4 2008 to $0.40 per unit.
The latest quarterly distribution of $0.405 per unit represents an increase of 1.3% for an equivalent annual distribution of $1.62. Turning to slide 15, Q3 2009 financial results are shown and are compared to third quarter of 2008.
Operating Surplus for the quarter ended September 30th was $13.1 million, a quarterly high for Navios Partners and is $3.5 million higher than the corresponding quarter in 2008. Operating Surplus is a non-GAAP financial measure used to assist in evaluating a partnership stability in a quarterly cash distribution.
Time charter revenue for the quarter ended September 30th was $23.7 million, generated from 920 vessel operating days, fueling the time charter equivalent of $25,779 per day earned from the long-term charter-out employment. Fleet utilization was 100% for the quarter.
Time charter revenue for the corresponding quarter in 2008 was $21.3 million and reflected 828 vessel operating days. Net income for the third quarter of 2009 was $10.8 million as compared to $8.9 million for Q3 2008.
This is a 21.3% increase as compared to the third quarter of 2008, and reflects profitable growth primarily from the delivery of an additional Panamax vessel in the second quarter of 2009. We estimate that our annual replacement reserve for the current year will be approximately $8 million for replacing our existing owned vessel at the end of their useful line.
For the third quarter of 2009, $2 million was reserved. During the third quarter ended September 30th, Navios Partners operated 10 vessels, an increase of one vessel as compared to the same quarter last year, as the Navios Sagittarius delivered on June 10th, 2009.
On the bottom half of slide 15, Operating Surplus for the nine months ended September 30th, was $35.1 million. This was an increase of $12.4 million or 54.6% over the Operating Surplus for the corresponding nine months of 2008.
Net income for the nine months of 2009 was $23.3 million, including $6.1 million non-cash expense related to the issuance of 1 million subordinated units to Navios Holdings for the Navios Bonavis transaction, which occurred last quarter. Excluding this non-cash item, net income becomes $29.4 million for the nine months ended September 30th, 2009.
This compares very favorably to the $19.9 million for the comparable period of 2008. For the nine months ended September 30th, 2009, time charter revenue increased by $13.5 million or 25.2% to $67 million as compared to $53.5 million for the same period in 2008.
EBITDA increased by $10.8 million or 30.1% to $46.7 million for the nine-month period ended September 30th, as compared to $35.9 million for the same period of 2008. For the nine months, EBITDA represents net income before interest, depreciation and amortization and before non-cash consideration for the release of the obligation to acquire the Navios Bonavis.
The vessels in the fleet have consistently performed well as utilization for both nine-month period exceeded 99.2%. On slide 16, selected balance sheet data is provided for the two periods ending September 30th, 2009 and December 31st, 2008.
Cash and cash equivalents including restricted cash had balances of $64.2 million and $28.4 million for the two respective periods. Q3’s balance sheet includes net proceeds from the follow-on offering of $33.2 million, while the net proceeds of $4.3 million from the underwriters overallotment option will be reflected in next quarter’s balance sheet.
As we enter into the current quarter, total assets of $380.3 million, includes a net acquisition value of the rights of Navios Sagittarius of $34.4 million, plus a net owned vessel value of $280 million, which are reported as historical costs. Navios Partners has a credit facility in place for original borrowing of up to $295 million, of which $40 million was repaid in January of 2009, and $195 million remains drawn as of September 30th, 2009.
The availability of $60 million related to the acquisition of TBN I has been terminated. In addition, the net debt to asset value ratio has improved to 38.5% as of the quarter ended September 30th, 2009.
For 2009, the credit facility has a spread of 225 basis points and no principal repayments are scheduled for the first quarter of 2012. As of September 30th, 2009, Navios Partners have been complaint to the financial covenants of this credit facility.
Turning to the fleet and operations overview section, starting on slide 18, our operating fleet will consist of 11 vessels to fund delivery to Navios Apollon by the end of this month. The fleet will contain one Capesize, nine Panamax and one Ultra-Handymax vessel.
The combined fleet provides a carrying capacity of approximately 906,000 deadweight. Navios Partners’ fleet is young relative to the global fleet, with an average age of 6.8 years as compared to the industry average of approximately 16 years.
Three of the Panamax vessels are presently chartered in, giving the company current earnings capacity without capital outlay, whereas the company has the option to acquire these vessels in the future through exercise of different options. Please note that these option amount de-escalate overtime and are currently in the money.
As Angeliki mentioned, the Navios Apollon is expected to deliver to the Navios Partners’ fleet this week. Earlier, the Navios Sagittarius was delivered in to the fleet on June 10th, and the Navios Hope was delivered in July 2008.
These are examples of dropdown vessels and demonstrate the benefits from having a strong relationship with Navios Holdings. Slide 19 demonstrates our strong relationship with key players in our industry.
We have built a portfolio of quality charters, which provide vessel employment with an average remaining contract life of approximately 4.1 years, with a diversified customer base. One of the attributes we seek in our charter counterparties is strong credit quality.
In addition, we have ensured our charter-out contracts with AA+ insurance. The net result of these activities is a creation of visible, secure, and stable long-term base of revenues and distributable cash flow for our unit holders.
Slide 20 identifies the amount of the net daily charter-out rate for each vessel within the fleet and a corresponding expiration date of the current charter. Navios Partners has currently contracted 100% of its available days on a charter-out basis for 2009 and 2010.
82% for 2011 and 76% for 2012. By design, the expiration dates are staggered and the charter duration extends to January 2011 at the earlier and November 2018 at the later.
As Navios Holdings has the history of chartering out vessels well ahead of their charter completion date, the company will have many opportunities to renew charters over an extended time period, with strong creditworthy counterparties. As our objective is to continue to grow Navios Partners’ fleet on an accretive basis and increase cash available for distribution.
And now, I will pass the call to George Achniotis, our Executive Vice President of Business Development to discuss the industry section. George?
George Achniotis
Thank you Mike and good morning all. Please turn to slide 22.
In September, the Baltic Exchange Dry Index is below 2,200 for the first time since May. This was largely due to a weakness of the Capesize market.
The Panamax and Handymax market remain resilient, as was the underlying demand for smaller vessels. In general, freight rates were mainly affected by a market softening in Chinese domestic fleet prices, international iron ore import prices, the reduced poor congestion at Chinese iron ore terminal.
Subsequent to Q3, there have been reported some gains in Chinese domestic steel prices. In addition, Chinese iron ore imports have rebounded and boosted our daily earnings by 40% in the last month.
The recent drybulk rate reflects a number of markets, including changing setting pattern resulting in the inefficient use of the drybulk fleet for delays and increased traffic. The net result is a relevantly balanced drybulk market, despite the record new buildings having entered the market space.
While Chinese iron ore port congestion eases, Australia’s coal port remains substantial, with 60 to 70 [ph] Panamaxs having being waiting to load at this terminal in recent weeks. Moving to slide 23, In October, the IMF generated this forecast for world GDP growth in 2010 to 3.1%.
This includes a GDP growth outside of the emerging market and increased prospect for improved raw material demand globally. While drybulk freight growth is projected in 2010 at over 5%, the current indications are positive.
The world lead indicator produced by the organization for economic corporation and development grows for a fixed trade market in August, up by 3.2% from 0.6% [ph] in July compared with growth of 7% late 2008. This suggests that global industrial production growth returns positive over the coming three to six months.
Turning now to slide 24, the major driver in the growth of seaborne trade is the increasing demand for natural resources, aided for steel, energy and coal. The demand is primarily driven by the industrialization and urbanization of the developing nations led by China.
Emerging economies, which now contribute over 60% of the world GDP contribute overwhelmingly to drive out demand. As an example, the BRIC countries accounted for 45% of global steel demand in 2008.
China by itself will account for 24% of global world drybulk trade and 53% of the iron ore trade. China’s economy has strengthened since the beginning of the year, and mostly the indicators continue to improve.
For example, Chinese new launch in September rose above market expectations to 517 billion Yuan compared to 410 billion Yuan in August, according to the People’s Bank of China. China’s GDP rose by 8.9% year-on-year in the third quarter, the fastest pace this year, an outcome 7.9% in the second quarter of ’09.
Much of these was attributable to steel spending and record lending growth in September of 2009. This was up approximately 37% from September of 2008.
China’s appetite for iron ore and coal, met and steel has been the strength of the drybulk market so far in 2009. With regard to iron ore and met coal, China’s industrial production in September was up 14% year-on-year, compared with 12.3% in August.
In coal, China’s power consumption continues to rise – September power consumption rose by 10.2% from a year earlier. China’s year-to-date total coal imports are a record-breaking 86.5 million tons, easily exceeding the previous annual record of 51 million tons set in 2007.
China has gone from being the world’s second largest exporter of coal in 2000, one of the largest net importers in 2009. Triggered by the global financial crisis, the Chinese government is now trying to balance external and internal growth, in deciding first Chinese buyers to the (inaudible).
Specifically government stimulus is targeting the Chinese consumer and previously neglected infrastructure development in the central and western provinces. Moving on to slide 25, throughout 2009, approximately 19 [ph] vessels paid their front haul from the Atlantic to the Pacific, for every one vessel that pay their backhaul from the Pacific to the Atlantic.
It is now quite common to draw Pacific tonnage to service Trans-Atlantic routes. This eases tonnage supply within the Pacific and closes it in days to arrive.
These new trading route in efficiency is replacing port congestion as a major factor in determining the rate. An example of changing trading patters is that coal loading port of Richards Bay.
This port as it goes from a supplier to the Pacific market at the beginning of the decade from Atlantic supplier, it has now resorted supplying the Pacific market again. Today, there’s virtually no trading from the Pacific to Atlantic as the Pacific importers dominate.
It demonstrates how changing trading partner are also affecting starting on the Panamax and Handymax vessels. As previously discussed, China has become a net importer of coal and is on target to import over 100 million tons of coal in 2009.
This forces China’s neighboring coal importers to go further appeal for their full requirement. Turning to slide 26, China’s iron ore import increased 30% to a new record in September.
Imports reached 64.6 million tons compared to 49.7 million tons in August, and the previous record of 58.1 million tons in July. In the first nine months of 2009, China imported 469 million tons of iron ore, 36% more than during the same period last year.
Current Chinese iron ore stockpile require approximately 70 million tons, which continue to be roughly prevailing to one month of consumption. Chinese steel production in September was 50.7 million tons, up 28% year-on-year and the third consecutive month over 50 million tons.
For year-to-date, China’s crude steel production was 420 million tons, up 7.5% from the same period last year, as digesting an eventual 2009 total with approximately 560 million tons. End use demand clearly remains extremely strong in China, with our current steel demand in September up 49.4% year-on-year and flat month-on-month.
The increase in our current steel demand is supported by Edison data for end user demand, which shows permit up 36.4% and vehicle production up 84.7% year-on-year. Official world steel production studies mix for September saw an increase in steel production in the world, excluding China.
Total crude steel production reached 107 million tons, a 0.5% increase from August and roughly the same level as in September last year. For the first nine months, steel production was down 16.4%.
There is vital blast furnaces in Europe, Greece amounting to 23.5 million tons of annual capacity have resulted in a major increase in steel production in September. Production in Europe was 13.2 million tons, a 25% increase from August and the highest level since October last year, before we started cutting production.
Moving to slide 27, as a consequence of a strong Chinese demand for commodities in 2009, there has been slower activity on the demolition market. Fewer drybulk ships were sold for demolition in the third quarter of 2009 than in any quarter since Q3 of last year.
To put these reasons, slow down the demolitions in perspective, during the last 12 months, the 10.2 million deadweight tons were sent for demolition. This exceeds the all-time record of 12.3 million deadweight tons, were up in all of 1986 [ph].
On a percentage basis, however, this has led to about 3% of the current fleet compared to more than 6% in the mid-1980s crisis. Turning to slide 28, major questions surround the scheduled building order book.
In 2008, we experienced slippage of 21%. Through the first three quarters of this year, slippage has almost doubled to approximately 38%.
By vessel type, the slippage has been in drybulk carriers, followed by containers, which are down 18%, and tankers which are down 10%. The experience of 2009 has indicated a difficult in builders in meeting their delivery date.
Nonetheless, this has not presented deliveries in the year-to-date of approximately 30 million deadweight ton exceeding the previous record total of 25 million deadweight tons in 2006. The order book for 2010 of 800 million deadweight tons that represent almost 90% of the existing fleet and threatens to dampen any upswing in demand.
However, this is on favor. There remains a real doubt as to whether Europe can meet this ambitious delivery schedules and whether these new buildings can be final.
Indeed, many forecasters are discounting deliveries by 25% to 40%. In conclusion, the long-term support, and extended continuous strength in Chinese GDP and some additional recovery in all ECP industrial production.
A growing sense for demand fundamentals outside China may have bottomed along with increasing Chinese coastal trade, continuing worldwide congestion and changing trading pattern has brought the refraining optimists back to the market. A key factor to watch at this point will be the supply side of the equation.
Should year-to-date trends continue, current freight rates should be updated. This concludes our presentation.
I would now like to turn the call over to Angeliki for any closing remarks. Angeliki?
Angeliki Frangou
Thank you George, and this completes our formal presentation. We are opening the call to questions.
Operator
(Operator instructions) From Merrill Lynch, your first question comes from Ken Hoexter. Please go ahead sir.
Ken Hoexter – Merrill Lynch
Angeliki Frangou
This is a regular Navios side from the previous time, because today you will not be able to have a $24,000 gross, $23,700 net for three years. So, you mentioned, these can be yearly rate around, you could have $18,000 or $19,000 for it one year, but not a three-year rate.
So, the reality, this is a very good charter, it brings us in the end of 2012. By the time the vessel, you have generated about 21 million down this vessel, we bought it for 32 million, so you are down to about $11 million.
So, for us, this is going to be around 11 years old. So, to me, that is a risk that even if you take the cycle of as a residual value risk, it’s very, very good, because you still have over 10 years on the life of that vessel, while you are up sitting at about 11 million.
So, this is a good cash flow because for Navios Partners’ gains ability to be an accretive deal in case of distribution and at the same time, you come to a very good residual value risk for the vessel.
Ken Hoexter – Merrill Lynch
Okay. Great.
And so, you mentioned that obviously sorority wasn’t obvious vessel. So, you are not seeing much in the way of any kind of startup discussions for any longer-term charters in the market now then, right?
Angeliki Frangou
There is a period charter, but you know, today I think it’s not a moment in having in front of you 2010, I wouldn’t take that as the time to do long-term charters. If you really are in a need, you do it, but your charter, your major charter in period activity should have happened in 2008.
Ken Hoexter – Merrill Lynch
Okay. And just two quick ones on the vessel, who is this vessel chartered to?
Angeliki Frangou
We can’t disclose, but you have the exact time charters, you are going to see, which of our counterparty has increasing percentage. I think it would be easy.
Ken Hoexter – Merrill Lynch
Okay. And this vessel also is insured as the other ones, right?
Angeliki Frangou
Yes, yes.
Ken Hoexter – Merrill Lynch
Okay. Wonderful, thanks for the time.
Angeliki Frangou
Thank you.
Operator
Thank you. Now from Cantor Fitzgerald, you have a question from Noah Parquette.
Please go ahead.
Noah Parquette – Cantor Fitzgerald
Good morning.
Angeliki Frangou
Good morning.
Noah Parquette – Cantor Fitzgerald
Just going back to the vessel, why is it that you chose the Supermax vessel class? I mean, was it simply a function of the charter being attractive or can we expect – explain more into that vessel class?
Angeliki Frangou
I think that Navios Partners has to be in every asset class. It has Capesize, Panamax, it is important that Ultra-Handymax, Supermax is also part of the equation to have a diversified portfolio.
It gives us a less risk from a residual value or the re-charting on the back end. Also, I mean, and now their function is to do Navios Partners is all about cash flows.
We are the only company that provides distributions. We increased our distribution.
And so, what we evaluate the market is the cash flows. It’s very important to be able to do accretive deal with a relatively small amount of money.
We made an accretive deal that you needed to fix duration and vessel on an acceptable risk.
Noah Parquette – Cantor Fitzgerald
Okay, great. And going to more macro questions.
Obviously Chinese steel production has surged this year, but the government is talking a lot about curbing overproduction, overcapacity, how successful do you think they will be next year, can we see – do you expect to see some sort of leveling off of production, or are we going to see another large increase?
Angeliki Frangou
I think China has made it clear this year that it was one company that was more quick on the fiscal stimulus, it has all the needs on the infrastructure development, it’s not that theoretically. So, they made the roads, the railways and all the infrastructure development.
I don’t see that China is going to stop that. We have seen China growing easily in these very tough year at over 9%.
So, I think this is something that we are not going to see China stopping that situation.
Noah Parquette – Cantor Fitzgerald
But specifically the steel production, I mean, the steel production really is 25% this year, I mean, do you expect sometime again, steel prices have been weak?
Angeliki Frangou
We balance between the western world and China. I don’t think China will stop producing.
That’s my opinion.
Noah Parquette – Cantor Fitzgerald
Okay. And then just one more question.
You have kind of, it’s a little bit more long term, the dollar has depreciated quite a bit in the last year, obviously the drybulk markets business is conducted in dollars. And you know there has been talks of eventually (inaudible) losing affinity of the world reserve currency, what kind of effect will that happen in the drybulk market five or ten years out in your opinion?
Angeliki Frangou
First of all, it won’t be within my lifetime that the dollar is not going to be in the reserve currency. So, we still however review the vault.
United States is the biggest economy, with the addition of the next three economies not even reaching the level of US as an economy, the level of the economy is huge. So, in my lifetime, I don’t think that dollar is going to be less of the reserve currency.
And another thing is you have to be very aware is that where dollar denominated index, the evaluation on that dollar has a positive effect to the shipping, to the freight. So, this is one thing that you should always keep in mind.
Noah Parquette – Cantor Fitzgerald
Right, you don’t have any sort of inflation index into your charters, built into your charters, do you?
Angeliki Frangou
No, but inflation is good for assets.
Noah Parquette – Cantor Fitzgerald
Okay, all right. Thank you.
Angeliki Frangou
In an ultimate worst-case scenario of the world, inflation dollar devaluation, shipping is a best beneficiary of that. I don’t say that this will happen, but let’s take the worst case.
This is not a very bad scenario for shipping.
Noah Parquette – Cantor Fitzgerald
Yes, I agree. I just want to get your opinion.
Okay, thanks.
Angeliki Frangou
Thanks.
Operator
Thank you very much. Now from Citi, you have a question from Matthew Troy.
Please go ahead sir.
Bascome Majors – Citigroup
Hi guys, this is Bascome Majors in for Matthew Troy. How are you doing?
Angeliki Frangou
Hello.
George Achniotis
Hi.
Bascome Majors – Citigroup
Hi. I was looking at the vessel that you guys added that will be online in 4Q, and I was just trying to get an idea if you could walk us through how that might affect the expense lines on a per-day basis or something along those lines going forward.
Angeliki Frangou
We have now a new agreement which you can see. It is a clearly articulated in United States [ph] all uncertainty out of Navios Partners.
It’ s 4,500 for Ultra-Handymax per day, and 4,400 for Panamax, and 5,500 for Capesize. So, I think you can very clearly do your model on this.
As you have the charter-out rate and you have the cost or the chartering. This is for the next two years until end of 2011.
Bascome Majors – Citigroup
Okay. And as far as depreciation per quarter or year on that vessel?
Angeliki Frangou
It is 25-year life, so you take that and –
Bascome Majors – Citigroup
Got you. And as far as your borrowing strategy, have you guys thought anymore about exposure to variable rates or you are going to continue as is for the time being?
Angeliki Frangou
What do you mean – I think that we are still living in a deflationary market. So, we do not fix a rate.
I think it would have been a disaster if we did that. We have some companies suffering from that.
Bascome Majors – Citigroup
All right. That’s all I have.
Thanks for the time.
Angeliki Frangou
Thank you.
Operator
Thank you very much indeed. (Operator instructions) As there are no further questions at this time, we now pass the floor back to Angeliki Frangou for closing remarks.
Angeliki Frangou
Thank you for attending our third quarter of 2009 results for Navios Partners. Thank you.
Operator
And with many thanks to all our takers today, that does conclude our conference. Thank you for participating.
You may now all disconnect.