Navios Maritime Holdings won a decision from a London arbitration tribunal that holds Brazilian mining giant Vale responsible for its part in a joint venture to build and operate an iron-ore terminal.
Navios South American Logistics, a subsidiary of the New York-listed dry bulk company, said the contract for an iron ore transhipment facility near an existing Navios terminal in Nueva Palmira, Uruguay, is in "full force and effect."
In 2013, the two signed a deal for Navios to build the facility, which would have handled up 5 million tonnes of Vale’s iron ore over 20 years. At the time of the deal, the Greek bulker owner said the terminal would have generated between $35m and $50m in operating earnings annually.
But earlier this year, Vale tried to back out of the deal.
Chief executive Angeliki Frangou said that Navios had spent some $142m on the $150m project, which was expected to generate between $400m and $700m in operating profit over the contract’s term.
In June, Frangou said the issue would go to London arbitration. The arbitration tribunal also determined that Navios may be entitled to damages calculated by reference to guaranteed volumes and agreed tariffs for the contract should Vale further repudiate the deal. Vale declined to comment on that matter.
A positive for Navios bonds
A Clarksons Platou Securities report says the ruling is a positive for 2022 bonds issue by Navios South American Logistics as the ruling could increase the company's cash flow by $35m annually.
Likewise, the ruling has positive implications for the parent company. Navios South American Logistics may be able to issue an increased dividend to shareholders, with the majority shareholding parent being the main beneficiary.
Another scenario, Clarksons says, is an intercompany loan to Navios. Clarksons says the loan can be backed by some $55m of equity value in other Navios subsidiaries.
