This morning Navios Maritime Holdings (NM) announced new terms for its preferred exchange offer. The company didn't get the required two-thirds consent by last night's deadline for tendering to the original offer (not even close, actually) and this morning it sweetened the offer significantly.
Navios Maritime's Series G preferred is my Real Money Best Idea, and based on the cash value of the newly revised offer, that pick will have returned 101% from January until Halloween (the revised offer's expiration is Oct. 31 at 11:59 p.m. ET). As of this writing, both Navios preferred series are trading at a significant discount to the revised offer prices, but of course there is no guarantee the new offer will be accepted.
We have a lot of great stock pickers here at Real Money, and I'm glad to be able to hang NM-G on the wall next to some of the big wins from Jim "Rev Shark" DePorre, Chris Versace, Bob Lang, Doug Kass (mostly, but not always, short) and all our other esteemed authors.
New terms are (with original terms from the offer announced on Sept. 19 in parentheses):
Series G
Cash election: $7.18 ($5.85)
Stock election: 6.29 shares of NM (4.77)
Series H
Cash election: $7.06 ($5.77)
Stock election: 6.19 shares of NM (4.69)
So, Navios listened to the kvetching from large holders and increased the offer by about 22%. Navios' preferreds are my firm's single largest holding and I gather that feedback to management to Navios' original offer was in the vein of "you cannot be serious." My feedback to them was along those lines, to be sure.
So, we're getting a better deal, but the cash value of the offer is still below 28 cents on the dollar and Navios' core market -- dry bulk shipping -- has improved markedly in the past three months.
By tendering preferred stock for common shares (instead of cash), one could participate in the further recovery of Navios' shipping end markets and benefit from the improvement in Navios' balance sheet caused by the removal of the preferreds. It is certainly my inclination to do that for my clients.
Navios' book value of common equity was $8.73 as of June 30. With the common trading today at $1.17, I believe there is still deep value on Navios' massive cargo-hauling vessels. I want to own Navios' stock as the discount continues to narrow, and the preferred exchange offer gives my clients and me a conduit for doing so.
Some days are better than others, and this has been a great one for my firm. It is nice to be reminded occasionally of the rationale behind spending my entire adult life staring at stock screens (at least we don't use Quotrons anymore) and I look forward to the challenge of finding a new Real Money Best Idea if Navios' preferreds do indeed disappear.
Happy trading!
