Moody's downgrades Navios Hold­ings

The Pak Banker - - Front Page -


Global rat­ing agency Moody's to­day down­graded the cor­po­rate fam­ily rat­ing (CFR) and prob­a­bil­ity of de­fault rat­ing (PDR) of Navios Maritime Hold­ings, Inc. (Navios Hold­ings) to B2 from B1. Con­cur­rently, Moody's has also down­graded the rat­ing on Navios Hold­ings' $488 mil­lion of se­nior se­cured notes (due in 2017) to B1 (LGD3, 33%) from Ba3, and the rat­ing on the com­pany's $350 mil­lion of se­nior un­se­cured notes (due in 2019) to Caa1 (LGD5, 87%) from B3. The out­look on the rat­ings is sta­ble.

"To­day's rat­ing ac­tion re­flects our view that, over the next 12-18 months, Navios Hold­ing is un­likely to achieve a con­sol­i­dated fi­nan­cial pro­file that would be com­men­su­rate with the guid­ance pre­vi­ously out­lined for main­tain­ing a B1 rat­ing," says Marco Ve­tulli, a Moody's Vice Pres­i­dent - Se­nior Credit Of­fi­cer and lead an­a­lyst for the com­pany.

Moody's had pre­vi­ously in­di­cated that for Navios Hold­ings to re­tain its B1 rat­ing, it would need to main­tain its oper­at­ing pro­file and im­prove its credit met­rics on a sus­tain­able ba­sis by demon­strat­ing a com­bi­na­tion of any of the fol­low­ing met­rics: (1) debt/EBITDA of less than 6.0x; and/or (2) EBIT/in­ter­est cov­er­age above 1.5x; and/or (3) im­proved free cash flow (FCF) gen­er­a­tion ap­proach­ing 3% of the com­pany's to­tal debt. How­ever, the dry-bulk ship­ping mar­ket is cur­rently un­der pres­sure, with freight rates fluc­tu­at­ing at lev­els ap­proach­ing his­tor­i­cal lows since the start of Q2 2012, and Moody's ex­pects that mar­ket con­di­tions will re­main chal­leng­ing well into 2013.

To date, Navios Hold­ings has not been sig­nif­i­cantly af­fected by the afore­men­tioned con­di­tions thanks to its port­fo­lio of long-term con­tracts that were con­cluded when freight rates were higher, and which cur­rently con­fer some pro­tec­tion from the low freight-rate en­vi­ron­ment.

How­ever, Moody's says that the de­gree of pro­tec­tion con­ferred to Navios Hold­ings is likely to di­min­ish over time as the ex­ist­ing freight con­tracts ex­pire, and the com­pany will come un­der pres­sure to of­fer lower freight rates.

More­over, giv­ing the chal­leng­ing con­di­tion of the dry bulk mar­ket, it has also in­creased the risk that some of cur­rent char­ter­ers may ask for a rene­go­ti­a­tion of the cur­rent con­tracts. Moody's there­fore ex­pects that Navios Hold­ings' credit met­rics will de­te­ri­o­rate at the end of the cur­rent year to a level com­men­su­rate with a B2 rat­ing.

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