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IPO Analysis: Navios Maritime Midstream Partners LP (NYSE: NAP)

By Peter Staas on Nov. 18, 2014

Navios Maritime Midstream Partners LP completed its initial public offering on Nov. 13 at a price of $15 per share and gave up about 8 percent of its value on its inaugural day of trading.

Don’t let the fledgling publicly traded partnership’s name fool you: A spin-off from Navios Maritime Acquisition Corp (NYSE: NNA), Navios Maritime Midstream Partners specializes in tankers, floating pipelines that transport crude oil and other hydrocarbons overseas.

The MLP’s initial asset base comprises four very large crude carriers (VLCC) that operate under multiyear contracts with an average of 7.7 years remaining.

Navios Maritime Midstream Partners’ counterparties on these agreements are Taiwan-based Formosa Petrochemical Corp (Taipei: 6505, OTC: FPTCF) and China Ocean Shipping Company (COSCO), a state-owned logistics company. The financial strength of these customers reduces the risk of potential default.

Vessels in this class have a cargo capacity of between 200,000 and 320,000 deadweight tons and usually transport crude oil over long-haul routes from the Middle East and Africa to Northern Europe and the Far East.

(Click table to enlarge.)Navios Maritime Midstream Partners -- Inital Fleet

Although the Shinyo Ocean and Shinyo Kannika’s fixtures expire in 2.3 years, Navios Maritime Acquisition has offered to cover any potential shortfall between the vessels’ existing day-rates and the replacement time charters.

All four of these vessels operate under charters that include a profit-sharing element, which ensures that Navios Maritime Midstream Partners will participate in any upside in the prevailing day-rates for VLCCs.

For example, the profit share on the Shinyo Coean is calculated twice annually based on the daily value of the Baltic Exchange Route AG/Japan for the previous two quarters adjusted for voyage-related expenses. Navios Maritime Midstream Partners and the charterer split any daily profit above $43,500.

Drop-down transaction from Navios Maritime Acquisition will drive much of Navios Maritime Midstream Partners’ growth.

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