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Rating Action:

Moody's changes outlook on Navios Maritime Partners's rating to Negative from Stable.

18 Oct 2013

Milan, October 18, 2013 -- Moody's Investors Service has today changed the outlook on Navios Maritime Partners L.P.'s ("NMP") ratings to negative from stable. At the same time, the rating agency has affirmed NMP's Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of Default Rating (PDR) and its Ba3 senior secured banking facility rating assigned to its Term Loan B, currently amounting $250 million.

This rating action was triggered by the $182.5 million add-on on its Term loan B, recently announced by NMP.

Moody's understanding is that the proceeds of this add-on will be utilised to partly finance the acquisition of five container vessels, whose acquisition price is USD 275 million (whereas the remaining USD 92.5 million will be covered with cash on hand deriving from a USD 82 million capital increase made by NMP in 3Q). All these vessels have a 10 year contract.

RATINGS RATIONALE

NMP's CFR is constrained by the company's small size; its refinancing risk (which will significantly increase after the completion of the proposed transaction) due to its statute; the high probability that it will not be able to redeploy some of its vessels at the same high rates; and its dependence on Navios Maritime Holdings, Inc. (Navios Holdings, B2 negative) for its operations.

Moody's notes Navios Holdings is not only NMP's sponsor and major shareholder with 19.6 % holding, but also fully controls NMP's general partner (Navios GP. L.L.C.).

More positively, the rating is supported by its relatively low financial leverage, relative to its peers, its charter policy (based largely on long-term contracts, ie 2 to 9 years currently), which provides good revenue visibility; its low operating costs(as a result of the low average age of its fleet, the fleet-management contract the company signed with Navios Holdings) and NMP's strong assets base.

"In addition, NMP benefits from a strong customer base, and the protection accorded to the majority of the company's long-term revenues by credit insurance granted by an Aa3-rated insurance company of a European Union member state; this mitigates the risk that some of the company's current charterers may ask to renegotiate their contracts," explains Marco Vetulli.

The Term Loan B will be secured with a first lien on part of its assets and its stock. The rating assigned to this financial instrument is in line with NMP's CFR and PDR of Ba3, because all of the company's debt is secured.

RATIONALE FOR THE CHANGE OF THE OUTLOOK

"Following the completion of the proposed $ 182.5 million add-on on its Term B loan, NMP's will improve the backlog of its contracted revenues, but it will also substantially increase its leverage," says Marco Vetulli, Moody's Vice President and NMP's lead analyst.

We previously said that to maintain the current rating NMP's debt EBITDA should remain lower than 3.5x, its FFO interest coverage should be higher than 7x and the debt asset coverage of the company(computed as market value of the vessels divided total financial debt) should remain above 175%.

After the completion of the transaction, NMP's credit metrics are anticipated - at least in part - not be in line for our previous expectation for almost the next two years. Consequently, the rating agency has changed the outlook on NMPs' ratings to negative from stable, in order to signal that NMP will be weakly positioned in its current rating category in the next 12-18 months, and that therefore any other increase of leverage and/or a deterioration of the current positive trend of the dry bulk market may translate in material pressure on the rating of the company.

WHAT CHANGE THE RATING DOWN/UP

The outlook on the ratings could be changed if NMP can demonstrate the ability to deleverage, to the extent that its (1) debt/EBITDA ratio is sustained below 2.5x; and (2) funds from operations (FFO) interest coverage (FFO + interest/interest) approaches 10x. Furthermore it could be stabilized if the redeployment of charters expiring in the next 12 months provide visibility into the regaining of metrics in line with the rating category.

The ratings could be downgraded if the company's (1) debt/EBITDA remains above 3.5x in the intermediate term; and (2) FFO interest coverage (FFO + interest/interest) is sustained below 7x.

In addition to that, Moody's outlines that refinancing risk is particularly high for NMP giving its nature of General Partnership that constrains its capability to produce positive Free Cash Flow as by its statute it must distribute most of the operating cash flow it generates. As a result of that, we will monitor carefully the capability of the company to repay its financial debt with its own assets and thus the rating could be downgraded if the debt asset coverage of the company (computed as market value of the vessels divided by total financial debt) decreases below 175%.

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 Partners L.P. ("NMP") is a limited partnership formed on August 2007 under the law of the Republic of Marshall Islands by Navios Maritime Holdings, Inc. Navios GP L.L.C., a wholly owned subsidiary of Navios Holdings, was also formed on that date to act as general partner of NMP and received a 2% general partner interest in the latter. Currently, Navios Holdings owns approximately 21.6% of NMP (including 2% GP interest), while the remaining 78.6% is spread among a number of institutional investors. NMP is listed on NYSE and its market capitalisation is approximately $1 billion. NMP operates on the dry bulk market with a fleet of 25 vessels (14 panamaxes, eight capezises and three ultra handymax vessels). The company's revenues totalled $208 million as of June 2013 on last-twelve-month basis.

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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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 Maritime Partners's rating to Negative from Stable.
No Related Data.
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