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.
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
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
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.
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.
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VP - Senior Credit Officer
Corporate Finance Group
Moody's Italia S.r.l
Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
Moody's France SAS
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Moody's Italia S.r.l
Moody's assigns (P)B2/(P)B3 to Navios South American Logistics; outlook stable.
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