NAVIOS MARITIME ACQUISITION CORPORATION
UNAUDITED CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars except share and per share data)
Navios Term Loans I) and (ii) the assumption of a junior participating loan facility (the Junior Loan I). In addition to the Navios Term Loans I, Navios Holdings,
Navios Acquisition and Navios Partners will also make available to Navios Europe I revolving loans up to $24,100 to fund working capital requirements (collectively, the Navios Revolving Loans I). In December 2018, the availability under
the Revolving Loans I was increased by $30,000. Effective November 2014 and as of June 30, 2019, Navios Holdings, Navios Acquisition and Navios Partners had a voting interest of 50%, 50% and 0%, respectively.
On an ongoing basis, Navios Europe I is required to distribute cash flows (after payment of operating expenses, amounts due pursuant to the
terms of the Senior Loan I and repayments of the Navios Revolving Loans I) according to a defined waterfall calculation.
The Navios Term
Loans I will be repaid from the future sale of vessels owned by Navios Europe I and is deemed to be the initial investment by Navios Acquisition. Navios Acquisition evaluated its investment in Navios Europe I under ASC 810 and concluded that
Navios Europe I is a VIE and that the Company is not the party most closely associated with Navios Europe I and, accordingly, is not the primary beneficiary of Navios Europe I.
Navios Acquisition further evaluated its investment in the common stock of Navios Europe I under ASC 323 and concluded that it has the ability
to exercise significant influence over the operating and financial policies of Navios Europe I and, therefore, its investment in Navios Europe I is accounted for under the equity method.
As of June 30, 2019 and December 31, 2018, the estimated maximum potential loss by Navios Acquisition in Navios Europe I would have
been $31,284 and $27,409, respectively, which represented the Companys carrying value of its investment of $4,750 (December 31, 2018: $4,750) the Companys portion of the carrying balance of the Navios Revolving Loans I including accrued
interest on the Navios Term Loans I of $18,598 (December 31, 2018: $16,014), which is included under Due from related parties, long- term and the accrued interest income on the Navios Revolving Loans I in the amount of $7,936 (December
31, 2018: $6,645) which is included under Due from related parties, short-term. Refer to Note 12 for the terms of the Navios Revolving Loans I.
Income recognized in Equity/ (loss) in net earnings of affiliated companies for the three month period ended June 30, 2019
was $297 (June 30, 2018: $262). Income recognized in Equity/ (loss) in net earnings of affiliated companies for the six month period ended June 30, 2019 was $583 (June 30, 2018: $514).
Navios Europe II
On
February 18, 2015, Navios Holdings, Navios Acquisition and Navios Partners established Navios Europe II Inc. and had in such entity economic interests of 47.5%, 47.5% and 5.0%, respectively, and voting interests of 50.0%, 50.0 and 0%,
respectively. From June 8, 2015 through December 31, 2015, Navios Europe II acquired fourteen vessels for: (i) cash consideration of $145,550 (which was funded with the proceeds of $131,550 of senior loan facilities (the Senior
Loans II) and loans aggregating $14,000 from Navios Holdings, Navios Acquisition and Navios Partners (collectively, the Navios Term Loans II) and (ii) the assumption of a junior participating loan facility (the Junior
Loan II) with a face amount of $182,150 and fair value of $99,147. In addition to the Navios Term Loans II, Navios Holdings, Navios Acquisition and Navios Partners will also make available to Navios Europe II revolving loans up to $57,500 to
fund working capital requirements (collectively, the Navios Revolving Loans II).
On an ongoing basis, Navios Europe II
is required to distribute cash flows (after payment of operating expenses, amounts due pursuant to the terms of the Senior Loans and repayments of the Navios Revolving Loans II) according to a defined waterfall calculation.
The Navios Term Loans II will be repaid from the future sale of vessels owned by Navios Europe II and is deemed to be the initial investment
by Navios Acquisition. Navios Acquisition evaluated its investment in Navios Europe II under ASC 810 and concluded that Navios Europe II is a VIE and that the Company is not the party most closely associated with Navios Europe II and, accordingly,
is not the primary beneficiary of Navios Europe II.
Navios Acquisition further evaluated its investment in the common stock of Navios
Europe II under ASC 323 and concluded that it has the ability to exercise significant influence over the operating and financial policies of Navios Europe II and, therefore, its investment in Navios Europe II is accounted for under the equity
method.
As of June 30, 2019, the estimated maximum potential loss by Navios Acquisition in Navios Europe II would have been $49,290
(December 31, 2018: $45,115), which represented the Companys carrying value of the investment of $6,650 (December 31, 2018: $6,650), the Companys balance of the Navios Revolving Loans II including accrued interest on the Navios Term
Loans II of $27,595 (December 31, 2018: $26,445), which is included under Due from related parties, long-term, and the accrued interest
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