Milan, January 13, 2011 -- Moody's Investors Service has today assigned a provisional (P)B3
(LGD5, 87.9%) rating to the proposed USD325 million
worth of senior unsecured notes, due in 2019, to be co-issued
by Navios Maritime Holdings Inc. ("Navios") and Navios
Maritime Finance. Navios's corporate family rating (CFR)
is B1 and the outlook on the ratings is stable.
Moody's understands that Navios intends to use the proceeds from
the notes to repay outstanding amounts under its USD300 million worth
of unsecured bonds, due in 2014, and for general corporate
Moody's issues provisional ratings in advance of the final sale
of securities and these ratings reflect the rating agency's preliminary
credit opinion regarding the transaction only. Upon a conclusive
review of the final documentation, Moody's will endeavour
to assign a definitive rating to the notes. A definitive rating
may differ from a provisional rating.
"The (P)B3 rating on Navios's new notes, two notches
lower than its CFR, reflects that they will be contractually subordinated
to approximately USD1.6 billion worth of existing secured debt
of the group," says Marco Vetulli, a Moody's Vice
President and lead analyst for Navios.
The notes will be guaranteed by all existing and future subsidiaries of
Navios, with the exception of Navios Logistics and Navios Maritime
Acquisition Corporation (NNA). Terms and conditions of the proposed
issuance are expected to be in line with existing senior unsecured bond
Navios's B1 CFR is primarily based on three key factors.
Firstly, it reflects the group's highly leveraged capital
structure, with Moody's expecting the group's adjusted
debt/EBITDA ratio to be below 6.0x by 2010 (not factoring in NNA's
debt). This is because Navios's capital expenditure (capex)
for 2010 has been fully weighted in its credit ratios, whereas the
eight vessels that were scheduled to be delivered by the first quarter
of 2011(six of them already delivered, of which two were sold) will
operate for only a portion of 2010, creating a temporary mismatch
between investment outlays and the corresponding revenues. Secondly,
the B1 CFR is indicative of Navios's free cash flow (FCF),
which has been almost permanently negative since 2005, when the
group embarked on its current capital investment plan, although
this will soon reach completion. Thirdly, the CFR reflects
the negative impact on Navios of short-term leases due to the group's
non-core fleet, which produces limited margins, but
generates a great portion of adjusted debt.
However, Moody's notes that these negative factors are partially
offset by Navios's relatively low business risk. This stems
from a combination of: (i) Navios's charter policy,
which is based predominantly on long-term contracts, providing
good revenue visibility; (ii) its strong customer base and that all
its long-term revenues are covered by credit insurance issued by
an Aa1-rated governmental agency of a European Union member state;
(iii) low operating costs, which are among the lowest in the industry,
as a result of both the low average age of the group's fleet (4.7
years) and its efficient in-house management of vessels; and
(iv) the group's strong asset base, with a fleet market value
adjusted for charters as of September 30, 2010 of USD1.22
billion (according to independent third-party appraisals).
The stable outlook reflects Moody's view that Navios's financial
profile and credit metrics are well positioned in the B1 rating category.
Positive pressure on the ratings or outlook could develop if Navios were
to exhibit the following credit metrics on a sustainable basis:
(i) adjusted EBIT/interest coverage approaching 3.5x; (ii)
a debt/EBITDA ratio falling below 5x; and (iii) a retained cash flow
(RCF)/net adjusted debt ratio rising above the mid-teens in percentage
Negative pressure on the ratings or outlook could develop if Navios's
appetite for growth were to translate into new potential debt-funded
investments and/or an increasing commitment to provide shareholders with
an unexpectedly large dividend distribution or share buyback. This
would imply not only further leveraging of the group's capital structure,
but also a consequent lack of FCF generation, from 2011.
A downgrade could also follow if Navios were to exhibit the following
credit metrics: (i) an RCF/net debt ratio below 10%;
(ii) a debt/EBITDA ratio failing to decrease to below 6x; or (iii)
EBIT/interest coverage remaining below 1.5x. Furthermore,
immediate downward pressure on the ratings could result from concerns
Rating assigned today:
Navios Maritime Holdings Inc.
Provisional senior unsecured rating on the proposed USD325 million notes
issuance of (P)B3 (LGD5, 87.9%)
Moody's most recent rating action on Navios was implemented on 02 December
2010, when the rating agency changed the outlook on its ratings
from negative to stable.
The principal methodologies used in this rating were Global Shipping Industry
Rating Methodology published in December 2009, and Loss Given Default
Rating Methodology published in June 2009.
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.
As of January 2011, Navios controls a fleet of 42 active vessels
(the group's core fleet), with an aggregate carrying capacity
of 4.5 million deadweight tonnes (dwt) and an average age of 4.7
years. The group's revenues totalled USD639 million as of
the end of September 2010 on a last-12-months (LTM) basis.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
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.
VP - Senior Credit Officer
Corporate Finance Group
Moody's Italia S.r.l
Paloma San Valentin
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Italia S.r.l
Moody's assigns (P)B3 rating to Navios's USD325 million notes (Greece)
Corso di Porta Romana 68