UPDATE: Wells Fargo Cuts Navios Maritime Acquisition Corp. (NNA) Two Notches to Underperform as Loan Seen as 'Unfriendly'

(Updated - March 11, 2016 11:14 AM EST)

Wells Fargo downgraded Navios Maritime Acquisition Corp. (NYSE: NNA) from Outperform to Underperform with a price target of $1.50-$1.75 (from $2.50 -$ 3.00). On March 9, 2016, Navios Maritime Holdings (NYSE: NM) and Navios Maritime Acquisition Corporation entered into a loan agreement pursuant to which Navios Acquisition provided a revolving loan facility of up to $50.0 million to Navios Holdings.

Analyst Michael Webber expressed caution regarding the deal.

"Ultimately, the optics of the transaction, limited collateral (near 21%), and below-market return for NNA (4%) move us from buyers to sellers of NNA, despite its depressed valuation (0.6x our estimated NAV of $3.02)," said Webber.

The analyst added, "Obvious (and very relevant) optics aside, within a certain context the symbiotic relationship between NM, NNA, and NMM holds a degree of value (as evidenced by the previously mentioned loans from NM to NNA in 2011 and 2014 to support growth – see our 2/25 note for more details). We should also note that while it’s certainly an unfriendly related party transaction from NNA’s perspective, to our knowledge, there’s no direct mechanism for management/insider monetization (a la the related party transactional fees in place at SSW, DRYS, STNG and others, which we believe casts a shadow across the entire space). That said, we note that insiders own 23% of NM, vs 3% of NNA and 1% its MLP (NAP), which likely skews the economic benefit (at least on surface) of what’s become a more complicated mosaic of interests. Ultimately, we do not believe this is part of some nefarious plot to siphon off shareholder value (as some of the hyperbole would suggest), but we certainly view it as very unfriendly for NNA shareholders."

For an analyst ratings summary and ratings history on Navios Maritime Acquisition Corp. click here. For more ratings news on Navios Maritime Acquisition Corp. click here.

Shares of Navios Maritime Acquisition Corp. closed at $1.80 yesterday.

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