Navigator Gas Reports Third Quarter 2024 Results
LONDON, Nov. 06, 2024 (GLOBE NEWSWIRE) --
Third Quarter Financial Highlights
On November 6, 2024, the Board of Navigator Holdings Ltd. (NYSE:NVGS) declared a cash dividend of $0.05 per share for the quarter ended September 30, 2024, (the "Dividend") under the Company's Return of Capital policy. The Dividend will be paid on December 17, 2024, to all shareholders of record as of the close of business U.S. Eastern Time on November 25, 2024.
Also as part of the Company's Return of Capital policy for the quarter ended September 30, 2024, the Company expects to repurchase approximately $1.1 million of common stock between November 11, 2024, and December 31, 2024, subject to operating needs, market conditions, legal requirements, stock price and other circumstances, such that the Dividend and share repurchases together equal 25% of net income for the quarter ended September 30, 2024.
The Company repurchased 141,824 shares of common stock in the open market during the quarter ended September 30, 2024, at an average price of $16.67 per share, totaling $2.3 million as part of the Company's Return of Capital policy related to the quarter ended June 30, 2024.
The Company reported total operating revenue of $141.8 million for the three months ended September 30, 2024, compared to $137.8 million for the three months ended September 30, 2023.
Net Income attributable to stockholders of the Company was $18.2 million for the three months ended September 30, 2024, compared to $19.1 million for the three months ended September 30, 2023.
EBITDA1 was $65.8 million for the three months ended September 30, 2024, compared to $70.4 million for the three months ended September 30, 2023.
Adjusted EBITDA1 was $67.7 million for the three months ended September 30, 2024, compared to $72.2 million for the three months ended September 30, 2023.
Basic earnings per share attributable to stockholders1 was $0.26 for the three months ended September 30, 2024, compared to $0.26 per share for the three months ended September 30, 2023.
Adjusted basic earnings per share attributable to stockholders1 was $0.29 per share for the three months ended September 30, 2024, compared to $0.29 per share for the three months ended September 30, 2023.
The Company reduced its debt by $24.1 million to $801.6 million during the three months ended September 30, 2024, compared to a reduction of $35.1 million to $825.7 million at June 30, 2024.
Cash, cash equivalents, and restricted cash was $127.7 million as of September 30, 2024. Together with available but undrawn credit facilities of $68.5 million, the Company's total liquidity as at September 30, 2024 was $196.2 million, compared to $182.0 as at December 31, 2023.
_____________________________
1 EBITDA and Adjusted EBITDA, Adjusted Net Income Attributable to stockholders of Navigator Holdings Ltd., and adjusted basic earnings per share are not measurements prepared in accordance with U.S. GAAP. EBITDA represents net income before net interest expense, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA before profit/loss on sale of vessel and unrealized gain/loss on non-designated derivative instruments and unrealized foreign currency exchange. Adjusted basic earnings per share represents basic earnings per share adjusted to exclude unrealized gains or losses on non-designated derivative instruments and unrealized foreign currency exchange and any profit or loss on the sale of any vessel. Adjusted Net Income Attributable to stockholders of Navigator Holdings Ltd. represents net income attributable to stockholders of Navigator Holdings Ltd. before unrealized (gain)/loss on non-designated derivative instruments, unrealized foreign currency exchange and (profit)/loss from sale of vessel. Management believes that EBITDA, Adjusted EBITDA and Adjusted Basic earnings per share are useful to investors in evaluating the operating performance of the Company. EBITDA, Adjusted EBITDA and Adjusted Basic earnings per share do not represent and should not be considered alternatives to consolidated net income, earnings per share, cash generated from operations or any other GAAP measure. See "Reconciliation of Non-GAAP Financial Measures" below for a reconciliation of EBITDA, Adjusted EBITDA and Adjusted Basic earnings per share to, in each case, the closest comparable GAAP measure.
Other Highlights and Developments
Operational Update
Average daily time charter equivalent ("TCE") across the fleet increased to $29,079 for the three months ended September 30, 2024, compared to $26,278 for the three months ended September 30, 2023 and $29,550 for the three months ended June 30, 2024.
Utilization across the fleet remained robust at 90.9% for three months ended September 30, 2024 compared to 93.4% for three months ended June 30, 2024 and the same 93.4% for the three months ended September 30, 2023.
During the three months ended September 30, 2024 the arbitrage between the price of ethylene in the U.S. compared to the price of ethylene in the rest of the world was temporarily impacted as a consequence of adverse weather in the Houston area from hurricane Beryl causing production to be shut-down on a precautionary basis. This resulted in lower demand for ethylene shipments from the U.S.. However to partially offset this temporary lower demand for ethylene shipping we were able to switch cargos and instead carry increased shipments of ethane. As U.S. ethylene production normalized, demand for ethylene shipping has returned.
For the three months ended September 30, 2024, we had on average 31 vessels engaged under time charters, 16 vessels on spot voyage charters and contracts of affreightment ("COAs") and nine vessels were operated in the independently managed Unigas Pool. For the 12-month period commencing October 1, 2024, we have 41% of our available days covered under time charter with fixed earnings. In this period our midsize and fully refrigerated vessels are almost exclusively employed on time charters, our semi-refrigerated vessels are expected to be employed under a mix of time charters and spot voyage charters, and most of our ethylene-capable vessels are expected to be employed in the spot voyage market.
The average handysize 12-month forward-looking market assessment for semi-refrigerated vessels for the third quarter of 2024 increased by $12,000 per calendar month ("pcm"), to an average of $940,000 pcm compared to the $928,000 pcm in the second quarter of 2024. The fully-refrigerated 12-month forward-looking market assessment for the third quarter of 2024 remained unchanged from the second quarter of 2024 at $838,000 pcm. The handysize ethylene 12-month forward looking market assessment for the third quarter of 2024 decreased by $90,000 pcm from $1,198,000 pcm to $1,107,000 pcm compared to the second quarter of 2024.
Ethylene exports are expected to increase during the fourth quarter of 2024 compared to the third quarter of 2024 due to improvements in trading conditions and the price arbitrage between the price of ethylene in the U.S. compared to the price of ethylene in the rest of the world, all primarily driven by low U.S. gas prices.
Ethylene Export Terminal
We own a 50% share in an ethylene export marine terminal at Morgan's Point, Texas (the "Ethylene Export Terminal") through a joint venture (the "Export Terminal Joint Venture"). The Ethylene Export Terminal throughput for the three months ended September 30, 2024, was 121,634 metric tons, compared to 249,857 metric tons for the three months ended September 30, 2023. Our share of the results of our equity investment in the Ethylene Export Terminal was $2.2 million for the three months ended September 30, 2024, compared to $3.8 million for the three months ended September 30, 2023. This reduction was primarily a result of adverse weather caused by hurricane Beryl in August 2024 and other planned and unplanned maintenance on pipeline infrastructure in the U.S. Gulf coast area, leading to fewer available export cargoes and reduced demand for ethylene capable vessels.
We, together with Enterprise Products Partners L.P, our joint venture partner, have agreed to invest in an expansion of the Ethylene Export Terminal (the "Terminal Expansion Project"). The expansion is expected to increase the export capacity from approximately one million tons of ethylene per annum to at least 1.55 million tons per annum. All major project equipment has been delivered with support infrastructure and new pipes being assembled, with operations scheduled to commence in late December 2024. The first new multi-year offtake contract related to the expansion has been signed, and another customer has agreed to extend and upsize its current offtake with the associated contract expected to be signed during the fourth quarter of 2024. We continue to expect that additional capacity will be contracted during the remainder of the construction phase.
The total capital contributions required from us for the Terminal Expansion Project are expected to be approximately $130 million. The Company expects to finance this using existing cash resources and distributions from the Export Terminal Joint Venture during the course of the expansion. Of the expected total of $130 million, $67 million has been contributed as of September 30, 2024, with approximately $63 million to be contributed during the fourth quarter of 2024. It is anticipated that additional debt will be raised in 2025 to recoup some of the cash reserves expended on the Terminal Expansion Project and the Company is currently assessing options in this respect.
Return of Capital Policy
The Company's current Return of Capital policy, which is subject to operating needs, market conditions, legal requirements, stock price and other circumstances, is based on paying out quarterly cash dividends of $0.05 per share of common stock and returning additional capital in the form of additional cash dividends and/or Share Repurchases (as defined below), such that the two elements combined equal at least 25% of net income for the applicable quarter.
As part of the Return of Capital policy, we expect to repurchase the Company's common stock (the "Share Repurchases") and any such Share Repurchases will be made via open market transactions, privately negotiated transactions or any other method permitted under U.S. securities laws and the rules of the U.S. Securities and Exchange Commission.
Declarations of any dividends in the future, and the amount of any such dividends, are subject to the discretion of the Company's Board. The Return of Capital policy does not oblige the Company to pay any dividends or repurchase any of its shares in the future and it may be suspended, discontinued or modified by the Company at any time, for any reason. Further, the timing of any Share Repurchases under the Return of Capital policy will be determined by the Company's management and will depend on operating needs, market conditions, legal requirements, stock price, and other circumstances.
Vessel Newbuildings
On August 23, 2024, the Company entered into contracts (the "Contracts") to build two new 48,500 cubic meter capacity liquefied ethylene gas carriers (the "Newbuild Vessels") with Jiangnan Shipyard (Group) Co., Ltd. and China Shipbuilding Trading Co., Ltd., in China.
The Newbuild Vessels are scheduled to be delivered to the Company in March 2027 and July 2027 respectively, at an average shipyard price of $102.9 million per vessel. The Newbuild Vessels will be able to carry a wide variety of gas products, ranging from the most complex petrochemical gases, such as ethylene and ethane, to LPG and clean ammonia. The Newbuild Vessels will be fitted with dual-fuel engines to facilitate ethane as a low-carbon intensity transitional fuel, and made retrofit-ready for using ammonia as a fuel in the future. Additionally, the Newbuild Vessels will be capable of transiting through both the old and new larger Panama Canal locks, providing enhanced flexibility.
As part of the agreements made on August 23, 2024, the Company has an option for two additional newbuilding vessels of the same specification and price as the Newbuild Vessels, with expected delivery to the Company in November 2027 and January 2028 respectively if the option is exercised. The option expires on November 21, 2024.
August 2024 Senior Secured Term Loan and Revolving Credit Facility
On August 9, 2024, the Company entered into a Senior Secured Term Loan and Revolving Credit Facility (the "August 2024 Facility") with Crédit Agricole Corporate and Investment Bank, ING Bank N.V., and Skandinaviska Enskilda Banken AB (Publ), to refinance its March 2019 secured term loan that was due to mature in March 2025, to fund the repurchase of the Navigator Aurora pursuant to the Company's existing October 2019 sale and leaseback arrangement related to that vessel which, based on a termination notice we issued to the lessor in May 2024, terminated on October 29, 2024, and for general corporate and working capital purposes. The August 2024 Facility has a term of six years maturing in August 2030, is for a maximum principal amount of $147.6 million, decreases quarterly followed by a final balloon payment in August 2030 of $63.9 million, and bears interest at a rate of Term SOFR plus 190 basis points, which margin includes a 5-basis point sustainability-linked element.
2024 Senior Unsecured Bonds ("2024 Bonds")
On October 17, 2024 the Company successfully issued $100 million of new Senior Unsecured Bonds ("2024 Bonds") in the Nordic bond market. The new 2024 Bonds will mature in October 2029 and bear a fixed coupon of 7.25% per annum.
In connection with the 2024 Bonds issuance, the Company exercised a call option to repurchase $100 million of its existing $100 million Senior Unsecured Bonds issued in 2020 ("2020 Bonds") with ISIN NO0010891955 and maturity date in September 2025. Navigator exercised the call option on the 2020 Bonds at 101.6% of par value plus accrued interest and the transaction settled on November 1, 2024.
Unaudited Results of Operations for the three months ended September 30, 2024 compared to the three months ended September 30, 2023
`
Three months ended September 30, 2023
Three months ended September 30, 2024
Percentage change
(in thousands, except Percentage change)
Operating revenues
$
125,541
$
128,777
2.6%
Operating revenues, Unigas Pool
12,227
13,040
6.6%
Total operating revenue
137,768
141,817
2.9%
Brokerage commission
1,788
1,845
3.2%
Voyage expenses
20,561
21,651
5.3%
Voyage expenses, Luna Pool collaborative arrangements
19
,
(100.0) %
Vessel operating expenses
39,565
43,465
9.9%
Depreciation and amortization
32,353
33,290
2.9%
General and administrative costs
7,357
9,379
27.5%
Total operating expenses
101,643
109,630
7.9%
Operating Income
36,125
32,187
(10.9) %
Unrealized (loss) on non-designated derivative instruments
(972)
(5,177)
432.6%
Interest expense
(17,339)
(14,252)
(17.8) %
Interest income
1,768
1,898
7.4%
Unrealized foreign exchange (loss)/gains
(850)
3,282
(486.3) %
Income before taxes and share of result of equity method investments
18,732
17,938
(4.2) %
Income taxes
(1,120)
(674)
(39.8) %
Share of result of equity method investments
3,771
2,214
(41.3) %
Net Income
21,383
19,478
(8.9) %
Net income attributable to non-controlling interest
(2,270)
(1,306)
(42.5) %
Net Income attributable to stockholders of Navigator Holdings Ltd.
$
19,113
$
18,172
(4.9) %
Operating Revenues. Operating revenues, net of address commissions, was $128.8 million for the three months ended September 30, 2024, an increase of $3.2 million or 2.6% compared to $125.5 million for the three months ended September 30, 2023. This increase was primarily due to:
an increase of approximately $10.6 million attributable to an increase in average monthly time charter equivalent rates, which increased to an average of approximately $29,079 per vessel per day ($884,478 per vessel per calendar month) for the three months ended September 30, 2024, compared to an average of approximately $26,278 per vessel per day ($799,279 per vessel per calendar month) for the three months ended September 30, 2023;
a decrease of approximately $3.0 million attributable to a decrease in fleet utilization, which decreased to 90.9% for the three months ended September 30, 2024, compared to 93.4% for the three months ended September 30, 2023;
a decrease of approximately $5.4 million or 5.2%, attributable to a 221 day decrease in vessel available days for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. This decrease was primarily a result of increased drydocking during the three months ended September 30, 2024, compared to the three months ended September 30, 2023; and
an increase of approximately $1.0 million primarily attributable to an increase in invoiced pass through voyage expense for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
The following table presents selected operating data for the three months ended September 30, 2024 and 2023, which we believe is useful in understanding the basis of movements in our operating revenues.
Three months endedSeptember 30, 2023
Three months endedSeptember 30, 2024
* Fleet Data:
Weighted average number of vessels
47.0
47.0
Ownership days
4,324
4,324
Available days
4,276
4,055
Earning days
3,995
3,684
Fleet utilization
93.4%
90.9%
** Average daily Time Charter Equivalent
$26,278
$29,079
* Fleet Data - Our nine owned smaller vessels in the independently managed Unigas Pool and the vessels owned by Pacific Gas in our Luna Pool prior to their acquisition by the Navigator Greater Bay Joint Venture are not included in this data.
** Non-GAAP Financial Measure - Time charter equivalent - TCE is a measure of the average daily revenue performance of a vessel. TCE is not calculated in accordance with U.S. GAAP. For all charters, we calculate TCE by dividing total operating revenues (excluding collaborative arrangements and revenues from the Unigas Pool), less any voyage expenses (excluding collaborative arrangements), by the number of earning days for the relevant period. TCE excludes the effects of the collaborative arrangements as earnings days and fleet utilization, on which TCE is based, is calculated only in relation to our owned vessels. Under a time charter, the charterer pays substantially all of the vessel's voyage related expenses, whereas for voyage charters, also known as spot market charters, we pay all voyage expenses and charge our customers for these costs through our sales invoicing. TCE is a shipping industry performance measure used primarily to compare period-to-period changes in a company's performance despite changes in the mix of charter types (i.e., voyage charters, time charters and contracts of affreightment) under which the vessels may be employed. We include average daily TCE, as we believe it provides additional meaningful information in conjunction with net operating revenues. Our calculation of TCE may not be comparable to that reported by other companies.
Three-Month Reconciliation of Operating Revenues to TCE
The following table represents a reconciliation of operating revenues to TCE. Operating revenues are the most directly comparable financial measure calculated in accordance with U.S. GAAP for the periods presented.
Three months ended September 30, 2023
Three months ended September 30, 2024
(in thousands, except earning days and average daily time charter equivalent rate)
*** Operating revenue
$
125,541
$
128,777
*** Voyage expenses
20,561
21,651
Operating revenue less voyage expenses
$
104,980
$
107,126
Earning days
3,995
3,684
Average daily time charter equivalent rate
$
26,278
$
29,079
***Operating revenue and voyage expenses excluding Luna Pool Collaborative Arrangements and our nine owned vessels in the independently managed Unigas Pool.
Operating Revenues, Unigas Pool. Operating revenues, Unigas Pool was $13.0 million an increase of 6.6% for the three months ended September 30, 2024, compared to $12.2 million for the three months ended September 30, 2023, and represents our share of the revenues earned from our nine vessels operating within the independently managed Unigas Pool, based on agreed pool points.
Brokerage Commissions. Brokerage commissions, which typically vary between 1.25% and 2.5% of operating revenues, were generally unchanged at $1.8 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
Voyage Expenses. Voyage expenses increased by $1.1 million or 5.3% to $21.7 million for the three months ended September 30, 2024, from $20.6 million for the three months ended September 30, 2023. These voyage expenses are pass through costs, corresponding to an increase in operating revenues of the same amount.
Vessel Operating Expenses. Vessel operating expenses increased by $3.9 million or 9.9% to $43.5 million for the three months ended September 30, 2024, from $39.6 million for the three months ended September 30, 2023. Average daily vessel operating expenses increased by $756 per vessel per day, or 10%, to $8,437 vessel per day for the three months ended September 30, 2024, compared to $7,680 per vessel per day for the three months ended September 30, 2023, with the increase primarily driven by the timing of maintenance costs incurred for the year during the three months ended September 30, 2024 compared to three months ended September 30, 2023
Depreciation and Amortization. Depreciation and amortization increased by $0.9 million to $33.3 million for the three months ended September 30, 2024 compared to $32.4 million for the three months ended September 30, 2023. Depreciation and amortization included amortization of capitalized drydocking costs of $5.6 million and $4.4 million for the three months ended September 30, 2024 and 2023, respectively.
General and Administrative Costs. General and administrative costs increased by $2.0 million or 27.5% to $9.4 million for the three months ended September 30, 2024, from $7.4 million for the three months ended September 30, 2023, primarily driven by non-recurring costs related to the public offering of a total of 7.0 million common shares by BW Group.
Unrealized (Loss)/ Gains on Non-Designated Derivative Instruments. The unrealized loss of $5.2 million on non-designated derivative instruments for the three months ended September 30, 2024, relates to fair value losses on interest rate swaps associated with a number of our secured term loan and revolving credit facilities, as a result of a decrease in forward Secured Overnight Financing Rate ("SOFR") interest rates, compared to an unrealized loss of $1.0 million for the three months ended September 30, 2023.
Interest Expense. Interest expense decreased by $3.1 million, or 17.8%, to $14.3 million for the three months ended September 30, 2024, from $17.3 million for the three months ended September 30, 2023. This is primarily a result of decreases in U.S dollar SOFR rates, and a reduction in debt due to scheduled quarterly repayments, and repayments made against our available revolving credit facilities.
Unrealized Foreign Exchange (Loss)/Gains. The unrealized gain of $3.3 million on foreign exchange for the three months ended September 30, 2024, relates to gains on foreign currency cash balances held, driven primarily by the Indonesian Rupiah strengthening against the U.S. dollar during the three months ended September 30, 2024, compared to an unrealized loss of $0.8 million for the three months ended September 30, 2023. In previous periods, unrealized foreign exchange gains and losses were reported as part of interest expense. Given the movement on foreign exchange during the quarter ended September 30, 2024 is significant, the Company is presenting foreign exchange gains and losses separately.
Income Taxes. Income taxes relate to taxes on our subsidiaries and businesses incorporated around the world including those incorporated in the United States of America. Income taxes were $0.7 million for the three months ended September 30, 2024, compared to $1.1 million for the three months ended September 30, 2023, primarily related to movements in current tax plus deferred tax in relation to our equity investment in the Ethylene Export Terminal.
Share of Result of Equity Method Investments. The share of the result of the Company's 50% ownership in the Export Terminal Joint Venture was income of $2.2 million for the three months ended September 30, 2024, compared to income of $3.8 million for the three months ended September 30, 2023. The decrease was primarily due to lower volumes exported through the Ethylene Export Terminal in August 2024, being 121,634 tons for the three months ended September 30, 2024, compared to 249,857 tons for the three months ended September 30, 2023. This reduction was primarily due to adverse weather caused by hurricane Beryl in August 2024 and other planned and unplanned maintenance on pipeline infrastructure in the U.S. Gulf coast area, leading to fewer available export cargoes and reduced demand for ethylene capable vessels.
Non-Controlling Interests. The Company entered into a sale and leaseback arrangement for Navigator Aurora in November 2019 with a wholly-owned special purpose vehicle of a financial institution ("Lessor SPV"). Although we do not hold any equity investments in this Lessor SPV, we have determined that we are the primary beneficiary of this entity and accordingly, we are required to consolidate this variable interest entity ("VIE") into our financial results. The net income attributable to the Lessor SPV was $0.4 million for the three months ended September 30, 2024, and $0.4 million for the three months ended September 30, 2023.
In September 2022, the Company entered into the Navigator Greater Bay Joint Venture to acquire five ethylene vessels, Navigator Luna, Navigator Solar, Navigator Castor, Navigator Equator, and Navigator Vega. The joint venture is owned 60% by the Company and 40% by Greater Bay Gas Co Ltd., ("Greater Bay"). The Navigator Greater Bay Joint Venture is accounted for as a consolidated subsidiary in our consolidated financial statements, with the 40% owned by Greater Bay accounted for as a non-controlling interest. $0.9 million is presented as part of the non-controlling interest in our financial results to Greater Bay for the three months ended September 30, 2024, compared to $1.9 million for the three months ended September 30, 2023.
Reconciliation of Non-GAAP Financial Measures
The following table shows a reconciliation of Net Income to EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023:
Three months ended September 30, 2023
Three months ended September 30, 2024
Nine months ended September 30, 2023
Nine months ended September 30, 2024
(in thousands)
Net Income
$
21,383
$
19,478
$
67,728
$
71,239
Net interest expense
15,571
12,354
44,621
38,700
Income taxes
1,120
674
4,269
3,041
Depreciation and amortization
32,353
33,290
96,374
100,080
EBITDA2
70,427
65,796
212,992
213,060
Unrealized loss on non-designated derivative instruments
972
5,177
2,028
7,205
Unrealized foreign exchange loss/(gains)*
850
(3,282)
275
(879)
(Profit) from sale of vessel
,
,
(4,941)
,
Adjusted EBITDA2
$
72,249
$
67,691
$
210,354
$
219,386
The following table shows a reconciliation of Net Income attributed to stockholders of Navigator Holdings Ltd. to Adjusted Net Income attributable to stockholders of Navigator Holdings Ltd., for the three and nine months ended September 30, 2024 and 2023:
_____________________________
2 EBITDA and Adjusted EBITDA, Adjusted Net Income Attributable to stockholders of Navigator Holdings Ltd., and adjusted basic earnings per share are not measurements prepared in accordance with U.S. GAAP. EBITDA represents net income before net interest expense, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA before profit/loss on sale of vessel and unrealized gain/loss on non-designated derivative instruments and unrealized foreign currency exchange. Adjusted basic earnings per share represents basic earnings per share adjusted to exclude unrealized gains or losses on non-designated derivative instruments and unrealized foreign currency exchange and any profit or loss on the sale of any vessel. Adjusted Net Income Attributable to stockholders of Navigator Holdings Ltd. represents net income attributable to stockholders of Navigator Holdings Ltd. before unrealized (gain)/loss on non-designated derivative instruments, unrealized foreign currency exchange and (profit)/loss from sale of vessel. Management believes that EBITDA, Adjusted EBITDA and Adjusted Basic earnings per share are useful to investors in evaluating the operating performance of the Company. EBITDA, Adjusted EBITDA and Adjusted Basic earnings per share do not represent and should not be considered alternatives to consolidated net income, earnings per share, cash generated from operations or any other GAAP measure. See "Reconciliation of Non-GAAP Financial Measures" below for a reconciliation of EBITDA, Adjusted EBITDA and Adjusted Basic earnings per share to, in each case, the closest comparable GAAP measure.
Three months ended September 30, 2023
Three months ended September 30, 2024
Nine months ended September 30, 2023
Nine months ended September 30, 2024
(in thousands except earnings per share and number of shares)
Net Income attributable to stockholders of Navigator Holdings Ltd.
$
19,113
$
18,172
$
64,505
$
63,985
Unrealized (gain)/loss on non-designated derivative instruments
972
5,177
2,028
7,205
(Profit)/loss from sale of vessel
,
,
(4,941)
,
Unrealized foreign exchange loss/(gains)*
850
(3,282)
275
(879)
Adjusted Net Income attributable to stockholders of Navigator Holdings Ltd.
$
20,935
$
20,067
$
61,867
$
70,311
Earnings per share attributable to stockholders of Navigator Holdings Ltd.
Basic earnings per share
$
0.26
$
0.26
$
0.87
$
0.89
Diluted earnings per share
$
0.26
$
0.26
$
0.86
$
0.88
Adjusted Basic earnings per share2
$
0.29
$
0.29
$
0.83
$
0.98
Adjusted Diluted earnings per share2
$
0.28
$
0.29
$
0.83
$
0.97
Basic weighted average number of shares
73,449,619
69,539,875
74,376,149
71,728,124
Diluted weighted average number of shares
74,032,887
70,237,014
74,887,326
72,371,636
* In preparing these unaudited condensed consolidated financial statements, management has disaggregated certain income statement line items. This disaggregation was performed to enhance clarity and to provide users with greater insight into the Company's financial position. Unrealized foreign exchange gains and losses is separately disclosed and disaggregated from interest expense. Prior period balances were reclassified to conform to the current period presentation.
Unaudited Results of Operations for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023
Nine months ended September 30, 2023
Nine months ended September 30, 2024
PercentageChange
(in thousands, except Percentage Change)
Operating revenues
$
364,271
$
381,398
4.7%
Operating revenues, Unigas Pool
37,479
41,250
10.1%
Operating revenues, Luna Pool collaborative arrangements
7,355
—
(100.0) %
Total operating revenue
409,105
422,648
3.3%
Brokerage commission
5,217
5,340
2.4%
Voyage expenses
56,394
52,957
(6.1) %
Voyage expenses, Luna Pool collaborative arrangements
5,561
—
(100.0) %
Vessel operating expenses
124,236
129,077
3.9%
Depreciation and amortization
96,374
100,080
3.8%
General and administrative costs
22,335
27,179
21.7%
(Profit) from sale of vessel
(4,941)
—
(100.0) %
Other income
(96)
—
(100) %
Total operating expenses
305,080
314,633
3.1%
Operating Income
104,025
108,015
3.8%
Unrealized loss on non-designated derivative instruments
(2,028)
(7,205)
255.3%
Write off of deferred financing costs
(171)
—
—
Interest expense
(48,268)
(43,760)
(9.3) %
Interest income
3,647
5,060
38.7%
Unrealized foreign exchange (loss)/gains
(275)
879
(420.1) %
Income before taxes and share of result of equity method investments
56,930
62,989
10.6%
Income taxes
(4,269)
(3,041)
(28.8) %
Share of result of equity method investments
15,067
11,291
(25.1) %
Net Income
67,728
71,239
5.2%
Net income attributable to non-controlling interest
(3,223)
(7,254)
125.1%
Net Income attributable to stockholders of Navigator Holdings Ltd.
$
64,505
$
63,985
(0.8) %
Operating Revenues. Operating revenues, net of address commissions, were $381.4 million for the nine months ended September 30, 2024, an increase of $17.1 million or 4.7% compared to $364.3 million for the nine months ended September 30, 2023. This increase was principally due to:
an increase in operating revenues of approximately $30.3 million attributable to an increase in average monthly time charter equivalent rates, which increased to an average of approximately $28,994 per vessel per day ($881,893 per vessel per calendar month) for the nine months ended September 30, 2024, compared to an average of approximately $26,371 per vessel per day ($705,911 per vessel per calendar month) for the nine months ended September 30, 2023;
a decrease in operating revenues of approximately $6.0 million attributable to a decrease in fleet utilization, which declined to 91.2% for the nine months ended September 30, 2024, compared to 92.9% for the nine months ended September 30, 2023;
a decrease in operating revenues of approximately $3.7 million or 1.2% attributable to a 151 day decrease in vessel available days for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023; and
a decrease in operating revenues of approximately $3.5 million primarily attributable to a decrease in pass through voyage costs for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
The following table presents selected operating data for the nine months ended September 30, 2024 and 2023, which we believe are useful in understanding the basis for movement in our operating revenues.
Nine months endedSeptember 30, 2023
Nine months endedSeptember 30, 2024
* Fleet Data:
Weighted average number of vessels
47.0
47.0
Ownership days
12,668
12,878
Available days
12,571
12,420
Earning days
11,675
11,328
Fleet utilization
92.9
%
91.2
%
** Average daily Time Charter Equivalent
$
26,371
$
28,994
* Fleet Data - Our nine owned smaller vessels in the independently managed Unigas Pool and the vessels owned by Pacific Gas in our Luna Pool prior to their acquisition by the Navigator Greater Bay Joint Venture are not included in this data.
** Non-GAAP Financial Measure - Time charter equivalent - TCE is a measure of the average daily revenue performance of a vessel. TCE is not calculated in accordance with U.S. GAAP. For all charters, we calculate TCE by dividing total operating revenues (excluding collaborative arrangements and revenues from the Unigas Pool), less any voyage expenses (excluding collaborative arrangements), by the number of earning days for the relevant period. TCE excludes the effects of the collaborative arrangements as earnings days and fleet utilization, on which TCE is based, is calculated only in relation to our owned vessels. Under a time charter, the charterer pays substantially all of the vessel's voyage related expenses, whereas for voyage charters, also known as spot market charters, we pay all voyage expenses and charge our customers for these costs through our sales invoicing. TCE is a shipping industry performance measure used primarily to compare period-to-period changes in a company's performance despite changes in the mix of charter types (i.e., voyage charters, time charters and contracts of affreightment) under which the vessels may be employed. We include average daily TCE, as we believe it provides additional meaningful information in conjunction with net operating revenues. Our calculation of TCE may not be comparable to that reported by other companies.
Nine-Month Reconciliation of Operating Revenues to TCE
The following table represents a reconciliation of operating revenues to TCE. Operating revenues are the most directly comparable financial measure calculated in accordance with U.S. GAAP for the periods presented.
Nine months ended September 30, 2023
Nine months ended September 30, 2024
(in thousands, except earning daysand average daily time charter equivalent rate)
Fleet Data:
*** Operating revenue
$
364,271
$
381,398
*** Voyage expenses
56,394
52,957
Operating revenue less voyage expenses
$
307,877
$
328,441
Earning days
11,675
11,328
Average daily time charter equivalent rate
$
26,371
$
28,994
*** Operating revenue and voyage expenses excluding Luna Pool Collaborative Arrangements and our nine owned vessels in the independently managed Unigas Pool.
Operating Revenues, Unigas Pool. Operating revenues, Unigas Pool was $41.3 million for the nine months ended September 30, 2024, an increase of 10.1% compared to $37.5 million for the nine months ended September 30, 2023 and represents our share of the revenues earned from our nine vessels operating within the Unigas Pool, based on agreed pool points.
Operating Revenues, Luna Pool Collaborative Arrangements. Luna Pool earnings were aggregated and then allocated (after deducting pool overheads and managers' fees) to the pool participants in accordance with the Pooling Agreement. Operating revenues - Luna Pool collaborative arrangements was $nil for the nine months ended September 30, 2024, compared to $7.4 million for the nine months ended September 30, 2023 and represented our share of pool net revenues generated by the other participant's vessels in the pool, prior to the acquisition of the vessels by Navigator Greater Bay Joint Venture. This decrease was a result of the Company no longer accounting for any of the pool vessels' earnings under the Luna Pool collaborative arrangement following the acquisition of the final vessel Navigator Vega on April 13, 2023.
Brokerage Commissions. Brokerage commissions, which typically vary between 1.25% and 2.5% of operating revenues, increased by $0.1 million to $5.3 million for the nine months ended September 30, 2024 an increase of 2.4% compared to $5.2 million for the nine months ended September 30, 2023, primarily due to an increase in operating revenues on which brokerage commissions are based.
Voyage Expenses. Voyage expenses decreased by $3.4 million or 6.1% to $53.0 million for the nine months ended September 30, 2024, from $56.4 million for the nine months ended September 30, 2023. These voyage expenses are pass through costs, corresponding to a decrease in operating revenues of the same amount.
Voyage Expenses, Luna Pool Collaborative Arrangements. Voyage expenses, Luna Pool collaborative arrangements were $nil for the nine months ended September 30, 2024, compared to $5.6 million for the nine months ended September 30, 2023. These Voyage expenses, Luna Pool collaborative arrangements represent the other participant's share of pool net revenues generated by our vessels in the pool, prior to the acquisition of the vessels by Navigator Greater Bay Joint Venture. This decrease was primarily a result of the arrangements ending with the acquisition of the final vessel Navigator Vega on April 13, 2023.
Vessel Operating Expenses. Vessel operating expenses increased by $4.8 million or 3.9% to $129.1 million for the nine months ended September 30, 2024, from $124.2 million for the nine months ended September 30, 2023. Average daily vessel operating expenses increased by $323 per vessel per day, or 3.9%, to $8,537 per vessel per day for the nine months ended September 30, 2024, compared to $8,214 per vessel per day for the nine months ended September 30, 2023.
Depreciation and Amortization. Depreciation and amortization increased by $3.7 million to $100.1 million for the nine months ended September 30, 2024, from $96.4 million for the nine months ended September 30, 2023. Depreciation and amortization included amortization of capitalized drydocking costs of $16.7 million and $13.6 million for the nine months ended September 30, 2024 and 2023, respectively.
General and Administrative Costs. General and administrative costs increased by $4.8 million or 21.7% to $27.2 million for the nine months ended September 30, 2024, from $22.3 million for the nine months ended September 30, 2023. The increase is in part due to non-recurring costs related to the public offering of a total of $7.0 million common shares by BW Group incurred in the nine months ended September 30, 2024.
Unrealized Loss on Non-designated Derivative Instruments. The unrealized loss of $7.2 million on non-designated derivative instruments for the nine months ended September 30, 2024 relates to a fair value loss on interest rate swaps across a number of our secured term loan and revolving credit facilities, as a result of a decrease in forward SOFR interest rates relative to the fixed rates applicable on these secured term loan and revolving credit facilities. This is compared to an unrealized loss on non-designated derivative instruments of $2.0 million for the nine months ended September 30, 2023.
Interest Expense. Interest expense decreased by $4.5 million, or 9.3%, to $43.8 million for the nine months ended September 30, 2024, from $48.3 million for the nine months ended September 30, 2023. This is primarily a result of a decrease in U.S dollar SOFR rates, reductions in debt due to scheduled quarterly repayments, and repayments made against our available revolving credit facilities.
Unrealized Foreign Exchange (Loss)/Gains. The unrealized gain of $0.9 million on foreign exchange for the nine months ended September 30, 2024, relates to gains on foreign currency cash balances held, primarily driven by the Indonesian Rupiah strengthening against the U.S. dollar during the period, compared to an unrealized loss of $0.3 million for the nine months ended September 30, 2023. In previous periods, unrealized foreign exchange gains and losses were reported as part of interest expense. Given the movement on foreign exchange during the nine months ended September 30, 2024 is significant, the Company is presenting foreign exchange gains and losses separately.
Income Taxes. Income taxes relate to taxes on our subsidiaries and businesses incorporated around the world including those incorporated in the United States of America. Income taxes were $3.0 million for the nine months ended September 30, 2024, compared to $4.3 million for the nine months ended September 30, 2023, primarily as a result of movements in current and deferred taxes on our portion of the profits from the Ethylene Export Terminal.
Share of Result of Equity Method Investments. The share of the result of the Company's 50% ownership in the Export Terminal Joint Venture was an income of $11.3 million for the nine months ended September 30, 2024, compared to an income of $15.1 million for the nine months ended September 30, 2023. This decrease is a result of reduced throughput rates of 566,524 tons for the nine months ended September 30, 2024, compared to 778,170 tons for the nine months ended September 30, 2023.
Non-Controlling Interest. We entered into a sale and leaseback arrangement in November 2019 with a wholly-owned special purpose vehicle of a financial institution ("Lessor SPV"). Although we do not hold any equity investments in this Lessor SPV, we have determined that we are the primary beneficiary of this entity and accordingly we are required to consolidate this VIE into our financial results. The net income attributable to the Lessor SPV was $1.5 million for the nine months ended September 30, 2024 and was $1.2 million for the nine months ended September 30, 2023 and this is presented as a non-controlling interest.
In September 2022, the Company entered into the Navigator Greater Bay Joint Venture to acquire five ethylene vessels, Navigator Luna, Navigator Solar, Navigator Castor, Navigator Equator and Navigator Vega. The joint venture is owned 60% by the Company and 40% by Greater Bay Gas. The Navigator Greater Bay Joint Venture is accounted for as a consolidated subsidiary in our consolidated financial statements, with the 40% owned by Greater Bay Gas accounted for as a non-controlling interest. A gain attributable to Greater Bay Gas of $5.5 million is presented as the non-controlling interest in our financial results for the nine months ended September 30, 2024 compared to $2.0 million for the nine months ended September 30, 2023.
Liquidity and Capital Resources
Liquidity and Cash Needs
Our primary sources of funds are cash and cash equivalents, cash from operations, undrawn bank borrowings, and proceeds from bond issuances. As of September 30, 2024, we had cash, cash equivalents and restricted cash of $127.7 million. Together with available but undrawn credit facilities of $68.5 million, the Company's total liquidity as at September 30, 2024 was $196.5 million.
As of September 30, 2024, our total current liabilities exceeded our total current assets by $71.5 million, primarily as a result of the Company repaying amounts under available Revolving Credit Facilities and as our $210 million Term Loan Facility matures in September 2025. We believe, given our current cash balances, that our financial resources, including the cash expected to be generated within the year, will be sufficient to meet our liquidity and working capital needs for the next twelve months taking into account our existing capital commitments and debt service requirements. In September 2025, the Company has debt obligations falling due, including our secured $210 million Term Loan Facility which has a final balloon repayment of $110 million.
The Company repaid $23.8 million of the $111.8 million Term Loan and Revolving Credit Facility held with Crédit Agricole in December 2023 and a further $4.7 million during the first quarter of 2024. The Company repaid $40.0 million of the $210 million Term Loan and Revolving Credit Facility in August 2024. As of September 30, 2024 the Company has $68.5 million available to be redrawn in accordance with the terms of the Term Loan and Revolving Credit Facilities which mature in September 2028 and September 2025 respectively.
Our secured term loan facilities and revolving credit facilities require that the borrowers have liquidity of no less than (i) $35.0 million or $50.0 million, as applicable to the relevant loan facility, or (ii) 5% of total debt (which was $40.4 million as of September 30, 2024), whichever is greater.
On August 9, 2024, the Company entered into the August 2024 Facility with Crédit Agricole Corporate and Investment Bank, ING Bank N.V., and Skandinaviska Enskilda Banken AB (Publ), and refinanced its March 2019 secured term loan that was due to mature in March 2025, and to funded the repurchase of the Navigator Aurora pursuant to the Company's existing October 2019 sale and leaseback arrangement related to that vessel which, based on a termination notice we issued to the lessor in May 2024, terminated on October 29, 2024, and for general corporate and working capital purposes. The March 2019 secured term loan was fully repaid. The August 2024 Secured Term Facility has a term of six years maturing in August 2030 and is for a maximum principal amount of $147.6 million of which $100.8 million was drawn during the third quarter of 2024. The remainder of the maximum available principal amount was drawn down on October 29, 2024. The balance amortizes quarterly followed by a final balloon payment in August 2030 of $63.9 million, and bears interest at a rate of Term SOFR plus 190 basis points, which margin includes a 5-basis point sustainability-linked element.
On October 17, 2024 the Company successfully issued $100 million of new Senior Unsecured Bonds ("2024 Bonds") in the Nordic bond market. The new 2024 Bonds will mature in October 2029 and bear a fixed coupon of 7.25% per annum.
In connection with the 2024 Bonds issuance, the Company exercised a call option to repurchase $100 million of its existing $100 million Senior Unsecured Bonds issued in 2020 ("2020 Bonds") with ISIN NO0010891955 and maturity date in September 2025. Navigator exercised the call option on the 2020 Bonds at 101.6% of par value plus accrued interest and the transaction settled on November 1, 2024.
Our primary uses of funds are drydocking and other vessel maintenance expenditures, voyage expenses, vessel operating expenses, general and administrative costs, insurance costs, expenditures incurred in connection with ensuring that our vessels comply with international and regulatory standards, financing expenses, quarterly repayment of bank loans and the Terminal Expansion Project. We also expect to use funds in connection with our Return of Capital policy. In addition, our medium-term and long-term liquidity needs relate to debt repayments, repayment of bonds, potential future vessel newbuildings, related investments, vessel acquisitions, and or related port or terminal projects.
As of September 30, 2024, we had $1,069.8 million in outstanding future obligations, which includes principal repayments on long-term debt, including our bonds, commitments in respect of the Navigator Aurora Facility (as defined below), capital contributions to our Ethylene Terminal Expansion Project, vessels under construction and office lease commitments. Of the total outstanding obligations $812.7 million , $217.0 million matures during the twelve months ending September 30, 2025, and $595.7 million matures after September 30, 2025.
Capital Expenditures
Liquefied gas transportation by sea is a capital-intensive business, requiring significant investment to maintain an efficient fleet and to stay in regulatory compliance.
On August 23, 2024, the Company entered into contracts to build two new 48,500 cubic meter capacity liquefied ethylene gas carriers (the "Newbuild Vessels") with Jiangnan Shipyard (Group) Co., Ltd. and China Shipbuilding Trading Co., Ltd., in China. The Newbuild Vessels are scheduled to be delivered to the Company in March 2027 and July 2027 respectively, at an average shipyard price of $102.9 million per vessel. The Newbuild Vessels will be able to carry a wide variety of gas products, ranging from the most complex petrochemical gases, such as ethylene and ethane, to LPG and clean ammonia. The Newbuild Vessels will be fitted with dual-fuel engines to facilitate ethane as a low-carbon intensity transitional fuel, and made retrofit-ready for using ammonia as a fuel in the future. Additionally, the Newbuild Vessels will be capable of transiting through both the old and the new Panama Canal locks, providing enhanced flexibility.
As part of the agreements made on August 23, 2024, the Company has an option for two additional newbuilding vessels of the same specification and price as the Newbuild Vessels, with expected delivery to the Company in November 2027 and January 2028 respectively if the option is exercised. The option expires on November 21, 2024.
We may invest further in terminal infrastructure, such as the expansion of our existing Ethylene Export Terminal. The total capital contributions required from us to fund our share of the construction cost of the Terminal Expansion Project are expected to be approximately $130 million, of which $67 million has been contributed as of September 30, 2024, and which figure includes $8 million contributed during the third quarter of 2024.
Cash Flows
The following table summarizes our cash, cash equivalents and restricted cash provided by/(used in) operating, investing and financing activities for the nine months ended September 30, 2024 and 2023:
Nine months ended September 30, 2023
Nine months ended September 30, 2024
(in thousands)
Net cash provided by operating activities
$
115,532
$
165,021
Net cash (used in) investing activities
(162,577
)
(33,098
)
Net cash (used in)/provided by financing activities
72,243
(161,595
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
274
(879
)
Net increase/(decrease) in cash, cash equivalents and restricted cash
$
25,472
$
(30,551
)
Operating Cash Flows. Net cash provided by operating activities for the nine months ended September 30, 2024, increased to $165.0 million, from $115.5 million for the nine months ended September 30, 2023, an increase of $49.5 million. This increase was primarily due to an increase in net income of $3.5 million (after adding back the non-cash unrealized gain/loss on derivative instruments and our share of the result from equity method investments), and to changes in working capital of $43.1 million during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
Net cash flow from operating activities principally depends upon charter rates attainable, fleet utilization, fluctuations in working capital balances, repairs and maintenance activity, amount and duration of drydocks and changes in foreign currency rates.
We are required to drydock each vessel once every five years until it reaches 15 years of age, after which we drydock vessels approximately every two and a half years. Drydocking each vessel, including travelling to and from the drydock, can take approximately 30 days in total, being approximately 5-10 days of voyage time to and from the shipyard and approximately 15-20 days of actual drydocking time. 12 of our vessels completed their respective drydockings during the nine months ended September 30, 2024,
We estimate the current cost of a five-year drydocking for one of our vessels to be approximately $1.0 million, a ten-year drydocking cost to be approximately $1.3 million, and the 15-year and 17-year drydocking costs to be approximately $1.5 million each (including the cost of classification society surveys). As our vessels age and our fleet expands, our drydocking expenses will increase. Ongoing costs for compliance with environmental regulations are primarily included as part of drydocking, such as the requirement to install ballast water treatment plants, and classification society survey costs, with a balance included as a component of our operating expenses.
Investing Cash Flows. Net cash used in investing activities was $33.1 million for the nine months ended September 30, 2024, primarily related to contributions to our investment in the Terminal Expansion Project of $32.0 million and $20.6 million as initial payments for the two new vessels under construction, offset by distributions received from our investment in the Export Terminal Joint Venture of $19.4 million.
Net cash used in investing activities was $162.6 million for the nine months ended September 30, 2023, primarily as a result of $191.7 million for the acquisition of four vessels by the Navigator Greater Bay Joint Venture, offset by proceeds from the sale of the Navigator Orion of $20.7 million and distributions received from our investment in the Export Terminal Joint Venture of $24.8 million.
Financing Cash Flows. Net cash used in financing activities was $161.6 million for the nine months ended September 30, 2024, primarily as a result of our regular quarterly debt repayments and repayment of our $107 million Secured Term Loan Facility totaling $189.3 million, quarterly dividend payments of $10.8 million, and $56.0 million under our Return of Capital policy and our other share repurchase programs, offset by drawdown of our August 2024 facility of $100.8 million.
Net cash provided by financing activities was $72.2 million for the nine months ended September 30, 2023 primarily as a result of the drawdowns of $123.6 million on our Greater Bay JV Secured Term Loan to partially finance the acquisition of four vessels; as well as $27.3 million received as a capital contribution from the non-controlling interest for those vessels, a drawdown of $200.0 million on our March 2023 Secured Term Loan which provided the financing to repay two maturing secured term loan facilities totaling $209.5 million, and offset by $47.6 million under our Return of Capital policy and our other share repurchase programs.
Terminal Facility
General. In March 2019, Navigator Ethylene Terminals LLC ("Marine Terminal Borrower"), our wholly-owned subsidiary, entered into a Credit Agreement (the "Terminal Facility") with ING Capital LLC and SG Americas Securities, LLC for a maximum principal amount of $75.0 million, to be used for the payment of capital contributions to our Export Terminal Joint Venture for construction costs of our Ethylene Export Terminal.
Term and Facility Limits. The Terminal Facility is now converted into a term loan with a final maturity of December 31, 2025. Based on the committed throughput agreements for the Ethylene Export Terminal, a total of $69.0 million was drawn under the Terminal Facility of which $14.7 million was outstanding as of September 30, 2024.
Interest. The Terminal Facility is subject to quarterly repayments of principal and interest. Interest is payable at a rate of Compounded SOFR ("Comp SOFR") plus 275 to 300 basis points over the remaining term of the Terminal Facility. We have entered into floating to fixed interest rate swap agreements for approximately 80% of the amounts drawn under the Terminal Facility. The Comp SOFR element of the interest rate payable by the Marine Terminal Borrower under these interest rate swap agreements is 0.369% and 0.3615% per annum.
Financial Covenants. Under the Terminal Facility, the Marine Terminal Borrower must maintain a minimum debt service coverage ratio (as defined in the Terminal Facility) for the prior four calendar fiscal quarters (or shorter period of time if data for the prior four fiscal quarters is not available) of no less than 1.10 to 1.00.
Restrictive Covenants. The Marine Terminal Borrower can only pay dividends if the Marine Terminal Borrower satisfies certain customary conditions, including maintaining a debt service coverage ratio for the immediately preceding four consecutive fiscal quarters and the projected immediately succeeding four consecutive fiscal quarters of not less than 1.20 to 1.00 and where no default or event of default has occurred or is continuing. The Terminal Facility also limits the Marine Terminal Borrower from, among other things, incurring further indebtedness or entering into mergers and divestitures. The Terminal Facility also contains general covenants that require the Marine Terminal Borrower to vote its interest in the Export Terminal Joint Venture to cause the Export Terminal Joint Venture to maintain adequate insurance coverage and maintain its property (but only to the extent the Marine Terminal Borrower has the power under the organizational documents of the Export Terminal Joint Venture to cause such actions).
Secured Term Loan Facilities, Revolving Credit Facilities and Terminal Facility
General. Navigator Gas L.L.C., our wholly-owned subsidiary, and certain of our vessel-owning subsidiaries have entered into various secured term loan facilities and revolving credit facilities as summarized in the table below. For additional information regarding our secured term loan facilities and revolving credit facilities, please read "Item 5—Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Secured Term Loan Facilities and Revolving Credit Facilities" in the Company's 2023 Annual Report.
The table below summarizes our facilities as of September 30, 2024:
Facility agreement
Original facility amount
Principal amount outstanding
Interest rate
Facility maturity date
(in millions)
Terminal Facility
$
75.0
$
14.7
Comp SOFR + 300 BPS
December 2025
September 2020
210.0
110.8
Comp SOFR + 276 BPS
September 2025
August 2021 Amendment and Restatement Agreement
67.0
37.8
Fixed 378 BPS
June 2026
October 20193
69.1
36.4
Term SOFR + 201 BPS
October 2026
DB Credit Facility A
57.7
13.2
Comp SOFR + 247 BPS
April 2027
Santander Credit Facility A
81.0
19.0
Comp SOFR + 247 BPS
May 2027
December 2022
111.8
58.2
Term SOFR + 209 BPS
September 2028
DB Credit Facility B
60.9
21.6
Comp SOFR + 247 BPS
December 2028
Santander Credit Facility B
55.8
20.9
Comp SOFR + 247 BPS
January 2029
March 2023 Secured Term Loan
200.0
150.1
Comp SOFR + 210 BPS
March 2029
Greater Bay JV Secured Term Loan
151.3
133.5
Term SOFR + 220 BPS
December 2029
August 2024 Secured Term
147.6
100.8
Term SOFR + 190 BPS
August 2030
Total
$
1,287.2
$
717.0
August 2024 Secured Term Loan and Revolving Credit Facility. On August 9, 2024, the Company entered into the August 2024 Facility with Crédit Agricole Corporate and Investment Bank, ING Bank N.V., and Skandinaviska Enskilda Banken AB (Publ), and refinanced its March 2019 secured term loan that was due to mature in March 2025, and to funded the repurchase of the Navigator Aurora pursuant to the Company's existing October 2019 sale and leaseback arrangement related to that vessel which, based on a termination notice we issued to the lessor in May 2024, terminated on October 29, 2024, and for general corporate and working capital purposes. The March 2019 secured term loan was fully repaid. The August 2024 Secured Term Facility has a term of six years maturing in August 2030 and is for a maximum principal amount of $147.6 million of which $100.8 million was drawn during the third quarter of 2024 and the balance of $46.8 million was drawn on October 29, 2024. The outstanding balance amortizes quarterly followed by a final balloon payment in August 2030 of $63.9 million and bears interest at a rate of Term SOFR plus 190 basis points, which margin includes a 5-basis point sustainability-linked element.
Financial Covenants. Our secured term loan facilities and revolving credit facilities contain financial covenants requiring the borrowers, among other things, to ensure that:
borrowers maintain a certain level of cash and cash equivalents based on the number of vessels in our fleet or in the relevant facilities, up to an amount of $50 million and;
borrowers must maintain a minimum ratio of shareholder equity to total assets, or value adjusted total assets, of 30%.
Restrictive Covenants. The secured facilities provide that the borrowers may not declare or pay dividends to shareholders out of operating revenues generated by the vessels securing the indebtedness if an event of default has occurred and is continuing. The secured term loan facilities and revolving credit facilities also typically limit the borrowers from, among other things, incurring further indebtedness or entering into mergers and divestitures. The secured facilities also contain general covenants that require the borrowers to maintain adequate insurance coverage and to maintain the vessels. In addition, the secured term loan facilities include customary events of default, including those relating to a failure to pay principal or interest, a breach of covenant, representation or warranty, a cross-default to other indebtedness and non-compliance with security documents.
Other than as stated, our compliance with the financial covenants listed above is measured as of the end of each fiscal quarter. As of September 30, 2024 we were in compliance with all covenants under our secured term loan facilities and revolving credit facilities.
The borrowers are also required to deliver semi-annual compliance certificates, which include providing valuations of the vessels securing the applicable facility from an independent ship broker. Upon delivery of the valuation, if the market value of the collateral vessels is less than 125% to 135% of the outstanding indebtedness under the applicable facilities, the borrowers must either provide additional collateral or repay any amount in excess of 125% to 135% of the market value of the collateral vessels, as applicable. This covenant is measured semi-annually on June 30 and December 31 each year.
_____________________________
3 The October 2019 loan facility relates to the Navigator Aurora Facility held within a lessor entity (for which legal ownership resides with a financial institution) that we are required to consolidate under U.S. GAAP into our financial statements as a variable interest entity. Please read Note 15—Variable Interest Entities to the unaudited condensed consolidated financial statements for additional information.
2020 Senior Unsecured Bonds
General. On September 10, 2020, the Company issued 5-year senior unsecured bonds with a maturity in 2025 in an aggregate principal amount of $100 million with Nordic Trustee AS as the bond trustee (the "2020 Bonds"). The net proceeds of the issuance of the 2020 Bonds were used to redeem in full all of our previously outstanding 2017 Bonds. The 2020 Bonds were governed by Norwegian law and were listed on the Nordic ABM which is operated and organized by Oslo Børs ASA.
In September 2023 we purchased $9.0 million of the 2020 Bonds in the open market using cash on hand. These purchased 2020 Bonds were not cancelled or redeemed.
Interest. Interest on the 2020 Bonds was payable at a fixed rate of 8.0% per annum, calculated on a 360-day year basis, payable semi-annually in arrears on March 10 and September 10 of each year.
Financial Covenants. The 2020 Bond Agreement contained financial covenants requiring us, among other things, to ensure that:
we and our subsidiaries maintain a minimum liquidity of no less than $35 million; and
we and our subsidiaries maintain an Equity Ratio (as defined in the 2020 Bond Agreement) of at least 30%.
Our compliance with the covenants listed above is measured as of the end of each fiscal quarter. As of September 30, 2024, we were in compliance with all covenants under the 2020 Bonds.
Redemption. The Company exercised a call option on the 2020 Bonds at 101.6% of par value plus accrued interest and the transaction settled on November 1, 2024.
Lessor VIE Debt - Navigator Aurora
In October 2019, we entered into a sale and leaseback transaction to refinance one of our vessels, Navigator Aurora¸ with a lessor, OCY Aurora Ltd, a special purpose vehicle ("SPV") and wholly owned subsidiary of Ocean Yield Malta Limited. The SPV was determined to be a VIE. We are deemed under U.S. GAAP to be the primary beneficiary of the VIE and as a result we are required to consolidate the SPV into our results. The loan described below under "—Navigator Aurora Facility" relates to the VIE. Although we have no control over the funding arrangements of this entity, we are required to consolidate this loan facility into our financial results.
In October 2019, the SPV which owns the Navigator Aurora entered into secured financing agreements for $69.1 million consisting of a USD denominated loan facility, the "Navigator Aurora Facility". The Navigator Aurora Facility was a seven year unsecured loan provided by OCY Malta Limited, the parent of OCY Aurora Ltd., The Navigator Aurora Facility is subordinated to a further bank loan where OCY Aurora Ltd is the guarantor and Navigator Aurora was pledged as security. The Navigator Aurora Facility attracted interest at 3-month Term SOFR, a credit adjustment spread, plus a margin of 185 basis points and was repayable by the SPV with a balloon payment on maturity. As of September 30, 2024, $36.4 million in borrowings were outstanding under the Navigator Aurora Facility (December 31, 2023, $41.3 million).
Upon the occurrence of a "Change of Control Event" (as defined in the sale and leaseback agreement), the lessor has the option to require us to repurchase Navigator Aurora at 103% of the outstanding lease amount, plus costs and expenses directly attributable to the termination of the lessor's financing arrangements, such as break costs for swap arrangements.
On October 29, 2024, the Company terminated the sale and leaseback transaction provided by OCY Malta Limited, the parent of OCY Aurora Ltd., and paid $44.8 million to acquire full ownership of the Navigator Aurora. As of this date OCY Aurora Ltd will no longer be consolidated into our financial statements and the SPV is not deemed to be a VIE.
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make estimates in the application of our accounting policies based on our best assumptions, judgments and opinions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. For a description of our material accounting policies, please read Note 2—Summary of Significant Accounting Policies to the Company's 2023 Annual Report.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates and foreign currency fluctuations, as well as inflation. We use interest rate swaps to manage some of our interest rate risks. We do not use interest rate swaps or any other financial instruments for trading or speculative purposes.
Interest Rate Risk
We are exposed to the impact of interest rate changes through borrowings that require us to make interest payments based on SOFR. Our wholly-owned subsidiaries and certain of our vessel-owning subsidiaries are party to secured term loan and revolving credit facilities that bear interest at rates of SOFR plus margins of between 185 and 276 basis points. At September 30, 2024, $223.4 million of our outstanding debt was hedged using interest rate swaps and therefore is not exposed to changes in interest rate movements, whereas $493.7 million was not hedged and is therefore subject to variable interest rates. Based on this, a hypothetical increase in SOFR of 100 basis points would result in $4.9 million of additional annual interest expense on our indebtedness outstanding as of September 30, 2024.
We use interest rate swaps to reduce our exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with our floating-rate debt. The Company is exposed to the risk of credit loss in the event of non-performance by the counterparty to the interest rate swap agreements.
Foreign Currency Exchange Rate Risk
Our primary economic environment is the international shipping market. This market utilizes the U.S. Dollar as its functional currency. Consequently, most of our revenues are in U.S. Dollars although some charter hires are paid in Indonesian Rupiah. Our expenses are in the currency invoiced by each supplier, and we remit funds in various currencies. We incur some vessel operating expenses and general and administrative costs in foreign currencies, primarily Euros, Pound Sterling, Danish Kroner, and Polish Zloty, and therefore there is a transactional risk that currency fluctuations could have a negative effect on our cash flows and financial condition. We believe these adverse effects would not be material and we have not entered into any derivative contracts to mitigate our exposure to foreign currency exchange rate risk as of September 30, 2024.
Inflation
We are exposed to increases in operating costs arising from various vessel operations, including crewing, vessel repair costs, drydocking costs, insurance and fuel prices as well as from general inflation, ...
