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Rating Action:

Moody's changes outlook on Navios Holdings' B2 rating to negative from stable

Global Credit Research - 03 May 2013

Milan, May 03, 2013 -- Moody's Investors Service has today changed the outlook on the corporate family rating (CFR) of Navios Maritime Holdings, Inc. (Navios Holdings) to negative from stable. Concurrently, Moody's has affirmed Navios Holdings' B2 CFR and B2-PD Probability of Default Rating as well as the B1 rating of its senior secured notes (due in 2017) and the Caa1 rating of its senior unsecured notes (due in 2019).

"Today's rating action reflects our view that freight rates will remain weak in 2013. As a result, Navios Holding may not perform according to our previous expectations and could fail to retain a consolidated financial profile commensurate with a B2 rating," says Marco Vetulli, a Moody's Vice President - Senior Credit Officer and lead analyst for the company.

RATINGS RATIONALE

Moody's had previously indicated that for Navios Holdings to retain its B2 rating, it would need to maintain its operating and credit profile by demonstrating a combination of debt/EBITDA below 7.0x and/or EBIT/interest coverage above 1.0x. However, these metrics are at risk from still challenging conditions in the dry-bulk shipping market and freight rates that are unlikely to recover in 2013 due to the inability of the market to absorb current oversupply.

To date, Navios Holdings has not been significantly affected by the aforementioned conditions thanks to its portfolio of long-term contracts agreed to at higher freight rates. However, this revenue protection has diminished over time and the company will likely come under pressure to offer low freight rates in order to contract-out a sizable amount of vessels in 2013 and 2014. Moreover, the challenging conditions in the dry bulk market add risks of some current charterers asking to renegotiate current contracts.

Moody's notes positively that Navios Holdings' CFR is supported by the company's relatively moderate business risk, stemming from a combination of the following: (1) the company's charter policy, based predominantly on long-term contracts; (2) a strong customer base; (3) operating costs that are among the lowest in the industry, as a result of both the low average age of Navios Holdings' fleet (6.1 years) and its efficient in-house fleet management strategy; (4) the company's strong asset base (albeit largely encumbered); and (5) its solid liquidity.

Whilst Moody's expects Navios' operating profile to weaken over the coming months in conjunction with the challenging trading environment, the rating agency notes that the company remains one of the most competitive player in the shipping markets with a relatively low cost base and an efficient fleet of vessels. The agency also expects the company to maintain its liquidity profile. A weakening in the company's liquidity and cash cushion on balance sheet as of the end of December could trigger a downgrade.

Moody's considers the recent announcement of a joint venture together with Navios Maritime Acquisition Corporation and the acquisition of 10 vessels as credit neutral for Navios Holdings insofar as the new entity will not be consolidated in the company, and has been structured to minimize the risks for Navios. However, should the accounting treatment for the joint venture differ from what was previously announced, the transaction could have an impact on the company's credit profile.

WHAT COULD CHANGE THE RATINGS DOWN/UP

Navios Holdings' ratings could come under downward pressure if the company were to record any of the following: (1) debt/EBITDA trending towards 7.0x; and/or (2) EBIT/interest coverage trending towards 1.0x. Furthermore, the ratings would face immediate downward pressure if Moody's identified any weaknesses in Navios Holdings' liquidity profile.

Conversely, Navios Holdings' CFR and PDR could be positively affected -- albeit only in the longer term -- if the company demonstrated its ability to achieve, on a sustainable basis, the following credit metrics: (1) adjusted EBIT/interest above 1.5x; and (2) debt/EBITDA below 6.0x.

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was the Global Shipping Industry published in December 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Navios Maritime Holdings, Inc. (Navios Holdings) is a vertically integrated global seaborne shipping company, specialising in the worldwide carriage, trade, storage and other related logistics of international dry-bulk cargo transportation. As of end of December 2012, the company controlled a fleet of 48 vessels with an aggregate carrying capacity of 4.7 million deadweight tonnes (dwt) and an average age of 6.1 years. The group's revenues totalled $616 million as of the end of December 2012.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Marco Vetulli
VP - Senior Credit Officer
Corporate Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100

Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100

Moody's changes outlook on Navios Holdings' B2 rating to negative from stable
No Related Data.

 

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