This ratio is key to Navios Partners’ strategy for its $2bn debt pile

Navios Maritime Partners grew its net borrowing during the second quarter, lifting total debt closer to $2bn.

But that is not the figure at the core of the New York-listed shipowner’s financial strategy.

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Chief executive Angeliki Frangou said the Piraeus-based company delivered a net loan-to-value (LTV) ratio, a measure of financial leverage, of 31.6% during the second quarter.

That is a significant improvement on the ratio of 43.1% reported a year earlier.

Contrast that with Navios Partners’ total debt pile, which increased by 5.7% to $1.97bn over the same time frame.

“We continue to execute on our strategic initiative by focusing on things that we can control, such as reducing leverage and modernising our energy-efficient fleet,” Frangou told analysts during an earnings call.

Navios Partners, which owns container ships, bulkers and tankers, is aiming to ratchet down its leverage to between 20% and 25%.

Frangou reiterated comments made in the company’s last earnings report that it is on a “gliding path” to reach that target.

Navios calculates its net LTV by adding up its $2.11bn debt and bareboat charter liabilities, then subtracting its $318m cash balance, and dividing the resulting figure by the value of its $5.66bn fleet.

The chief executive said the company’s progress towards its leverage goal allowed it to return capital to shareholders, not in the form of larger dividends but instead as a stock buyback.

Navios Partners spent $9.7m to snap up 200,000 of its own shares as part of a wider $100m repurchase programme.

The company also spent money on fleet modernisation, including a $264m deal to exercise options for four LR2 newbuildings.

Answering a question from Jefferies analyst Omar Nokta about the reasoning behind the buyback move, Frangou said the company is working to improve its net asset value while also focusing on its leverage target.

“We are driving NAV by reinvesting in our business. That is clear from day one,” she said.

“We bought over half a billion of vessels and we contracted them out — over $560m of contracted revenue. But at the same time … we are achieving our goals, meaning we brought down our leverage to towards 31%.”