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Rating Action:

Moody's assigns (P)B2/(P)B3 to Navios South American Logistics; outlook stable.

01 Apr 2011

First-time ratings; approximately USD185 million worth of debt rated

Milan, April 01, 2011 -- Moody's Investors Service has today assigned a provisional (P)B2 corporate family rating (CFR) to Navios South American Logistics (NSAL), reflecting concerns over the company's limited size and geographic concentration. Concurrently, Moody's has also assigned a provisional (P)B3 senior unsecured rating to NSAL's proposed issuance of USD185 million worth of senior unsecured notes. The outlook on all ratings is stable.

The assigned ratings are provisionals because they are contingent on NSAL's successful conclusion of its proposed USD185 million bond issuance by the end of April 2011. Moody's issues provisional ratings in advance of the final sale of securities, and these ratings only represent Moody's preliminary opinion on the transaction. Upon a conclusive review of the transaction and associated documentation, Moody's will endeavour to assign a definitive rating to the securities. A definitive rating may differ from a provisional rating.

RATINGS RATIONALE

The (P)B2 CFR assigned to NSAL primarily reflects:(i) the company's limited size; (ii) its exposure both to cyclical markets and adverse weather conditions such as drought or floods, which impact agricultural production and affect the navigability of rivers; (iii) operating risk related to the implementation of its sizeable capital investment plan; (iv) risks related to doing business politically relatively instable countries, such as in Argentina; and (v) its geographical concentration," says Marco Vetulli, a Moody's Vice President-Senior Credit Officer and lead analyst for NSAL. "It should be noted, however, that the Hidrovia region is an area in which steady growth in activity is anticipated over the next few years," adds Mr Vetulli.

However, the above factors are partially offset by: (i) NSAL's relatively stable flow of revenues due to the large portion of contracted revenues generated by its business units; (ii) a reasonably diversified business, including terminal, barge and cabotage operations; (iii) a strong management team, with a successful track record of operation in the region; and (iv) the company's strong asset base.

The rating also takes into account the fact that the documentation of its debt instruments does not allow for cash leakage to its major shareholder Navios Maritime Holdings and is therefore ringfenced.

The proceeds of NSAL's proposed issuance of an eight-year senior unsecured USD185 million bond will be used both for (i) refinancing existing indebtedness; and (ii) financing the acquisition of new barges. The bond will be co-issued by NSAL and Navios Logistics Finance (US) Inc., a Delaware company, and will be jointly and severally guaranteed by all NSAL's direct and indirect subsidiaries, except for six subsidiaries that are not wholly owned. However, NSAL expects to acquire the minority interests in these companies and to add them to the unrestricted group. If NSAL does not do this, the margin on the notes will increase by 25 basis points if those subsidiaries that are not wholly owned, which do not guarantee the notes, represent more than 15% of NSAL's revenues. The terms will include standard bond incurrence covenants.

The (P)B3 assessment of the proposed USD185 million worth of senior unsecured notes is one notch lower than the CFR, in light of the limited amount of senior secured debt that ranks ahead of the bond in NSAL's capital structure (a USD 40 million Senior Secured RCF backstop facility that NSAL does not expect to utilise). However, Moody's warns that if NSAL should further increase the amount of debt ranking head of the bond, issuing a senior secured bond for example, its senior unsecured rating could be negatively affected and hence downgraded by one notch.

The stable outlook on the ratings anticipates that NSAL will maintain its market position and that the company's credit metrics will not deteriorate in 2011 compared with 2010 levels, but show moderate improvement over the next couple of years.

In Moody's view, there is unlikely to be much upward pressure on NSAL's ratings over the medium term given the period of high capital spending under way. However, longer term, the rating agency would consider upgrading NSAL's ratings if the company were to achieve a sustained debt/EBITDA ratio below 4.0x and an EBIT/interest ratio of more than 2.5x, combined with a significant liquidity cushion.

The ratings would be subject to downgrade, however, if NSAL were to sustain a debt/EBITDA ratio of 6x or higher, or an EBIT/interest ratio below 1.0x, or if there were to be uncertainty regarding the adequacy of the company's liquidity profile.

Ratings assigned today:

• Provisional CFR of (P)B2

• Provisional senior unsecured rating on the proposed USD185 million bondSenior unsecured notes issuance of (P) B3,

The principal methodology used in this rating was Global Shipping Industry published in December 2009.

Navios South American Logistics (NSAL) is one of principal logistic companies operating in the Hidrovia Region river system, which is a region of navigable water in South America on the Parana, Paraguay and Uruguay rivers and part of the River Plate, which flows though Brazil, Bolivia, Uruguay, Paraguay and Argentina, providing not only waterborne transportation services but also storage and related services. Along with these river operations, NSAL is one of the main players in the Argentine cabotage trade. In 2010, NSAL generated revenues of USD188 million, 41% of which was generated by port terminals, 39% by the barge business and 20% by cabotage activities. NSAL is majority-owned by Navios Maritime Holdings (B1 stable). As of March 2011, Navios controls a fleet of 44 active vessels (the group's core fleet), with an aggregate carrying capacity of 4.8 million deadweight tonnes (dwt) and an average age of 4.6 years. The group's revenues totalled USD680 million for the year ended December 31, 2010. Navios 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.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

The rating has been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the Credit Rating Action. Please see the ratings disclosure page www.moodys.com/disclosures on our website for further information.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Milan
Marco Vetulli
VP - Senior Credit Officer
Corporate Finance Group
Moody's Italia S.r.l
Telephone:+39-02-9148-1100

Paris
Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

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

Moody's assigns (P)B2/(P)B3 to Navios South American Logistics; outlook stable.
No Related Data.
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