Monday, May 29, 2017 9:46:51 AM
https://www.moodys.com/research/Moodys-revises-Navios-Logistics-outlook-to-stable--PR_367157?WT.mc_id=AM~WWFob29fRmluYW5jZV9TQl9SYXRpbmcgTmV3c19BbGxfRW5n~20170526_PR_367157&yptr=yahoo
Also, this morning (Monday,5/29) S&P has improved their rating on NM.
https://invest.ameritrade.com/grid/p/site#r=jPage/https://research.ameritrade.com/grid/wwws/research/stocks/news/article?c_name=invest_VENDOR&docKey=1-DN20170529001172-6CVS2OIG3NHILHRQQVURGTMP4V
Press Release: S&PGR Revises Navios Maritime Holdings Outlook To Stable
7:17 am ET May 29, 2017 (Dow Jones) Print
The following is a press release from Standard & Poor's:
-- The Marshall Islands-registered shipping company Navios Maritime
Holdings' liquidity position has improved, mainly thanks to the recovery of
drybulk shipping rates.
-- Furthermore, the arbitration tribunal ruling in favor of Navios
Logistics (a subsidiary of Navios Maritime Holdings) concerning its major
contract with Vale S.A. removed the cash flow uncertainty in the logistics
operations.
-- We are revising our outlook on Navios Maritime Holdings to stable from
negative, and affirming the rating on the company at 'B-'.
-- The stable outlook reflects our view that Navios Maritime Holdings'
free cash flow generation will at least break even this year and its liquidity
position will stabilize in the next 12 months, thanks to gradually improving
drybulk charter rates, EBITDA expansion of Navios Logistics, and the company's
competitive and predictable cost structure.
LONDON (S&P Global Ratings) May 29, 2017--S&P Global Ratings said today that
it had revised its outlook on Marshall Islands-registered shipping company
Navios Maritime Holdings Inc. (Navios Holdings) to stable from negative. At
the same time we affirmed the issuer credit rating at 'B-'.
We also affirmed our 'B-' issue rating on the company's senior secured debt.
The recovery rating is unchanged at '3', reflecting our expectation of
meaningful (50%-70%) recovery in the case of a payment default (rounded
estimate: 65%).
We also affirmed our 'CCC' issue rating on the company's senior unsecured
debt. The recovery rating is unchanged at '6', reflecting our expectation of
negligible recovery (0%-10%) in the event of a payment default (rounded
estimate: 0%).
The outlook revision reflects Navios Holdings' improved liquidity position,
mainly reflecting drybulk shipping rates that have rebounded from their
historical lows over the past few quarters. For example the one-year time
charter rate for a large Capesize vessel averaged $13,000 per day (/day) in
January-May 2017, up from $7,300/day in 2016, according to Clarkson Research.
This will bolster the company's cash flow generation in the next 12 months.
Furthermore, the arbitration tribunal ruling that the major contract with Vale
S.A. (BBB-/Positive/--) was in full force and effect, in the favor of Navios
South American Logistics Inc.'s ("Navios Logistics", Navios Holdings'
63.8%-owned subsidiary), removed the cash flow uncertainty in the logistics
operations. Under the take-or-pay contract, Navios Logistics will generate a
minimum of $35 million in annual EBITDA for handling 4 million tons of iron
ore via its port terminal in Uruguay for Vale for 20 years (starting in the
third quarter of this year).
Founded in 1954 as a subsidiary of U.S. Steel, Navios Holdings controls a
fleet of 66 drybulk vessels (of which 40 are owned and 26 chartered-in) and
provides transportation and logistics services in South America (Hydrovia
region).
We have revised upward our assessment of Navios Holdings' stand-alone credit
profile to 'b-' from 'ccc+'. This reflects the improved cash flow generation
prospects, mainly because of recovered charter rates in Navios Holdings' core
drybulk shipping business, supported by the narrowing industry
demand-and-supply imbalance, complemented by the company's proactively lowered
cost breakeven rates, working capital optimization and efficiency measures,
and limited capital spending requirements after Navios Logistics completed the
expansion of port terminal in South America. Furthermore, the agreement with
Vale to perform under the contract's terms adds to cash flow predictability.
We anticipate drybulk charter rates to recalibrate to more sustainable (above
their operating breakeven) levels in 2017, based on promising demand dynamics
so far this year for iron ore and coal from Asia (which is by far the largest
global importing region of iron ore and coal) and industry supply-side
adjustments. In our view, the recent notable improvement in charter rates from
the fourth quarter of 2016 (albeit following record lows seen in early 2016)
is vulnerable to uncertain sustainability of commodity imports from China, in
particular. Nevertheless, our expectations of slowing global fleet expansion
in 2017 and 2018, combined with sustained low-single-digit trade growth, will
likely result in an overall improvement in rates this year. We believe that
this trend will continue into 2018 when persistent vessel scrapping, deferral
or cancellation of ships on order, and limited contracting of new tonnage will
likely curtail supply pressure. Against this backdrop, we forecast that Navios
Holdings will achieve a free operating cash flow breakeven this year, which
incorporates the company's continued working capital optimization measures.
This compares with a cash balance of about $141 million on Dec. 31, 2016.
Navios Holdings' business risk profile mainly reflects the company's weak
profitability on the back of below-industry-average return on capital metrics
and relatively high volatility of profitability compared with the broader
transportation industry. We also factor in the shipping industry's high risk,
which stems from the industry's capital intensity, high fragmentation,
frequent imbalances between demand and supply, lack of meaningful supply
discipline, and volatility in charter rates and vessel values.
Positives are Navios Holdings' competitive position, which benefits from its
expanding and more predictable-than-traditional-shipping transportation and
logistics business in South America; its holdings in affiliates, which pay
dividends under normal operating conditions; and its solid reputation as a
quality operator of a relatively young and cost-efficient vessel fleet
underpinned by a good grip on cost efficiencies and control, as reflected in
below the industry-average daily vessel operating costs.
Our assessment of Navios Holdings' financial risk profile incorporates the
company's high adjusted debt, which reflects the underlying industry's high
capital intensity, the company's track record of large expansionary
investments, and a prolonged period of depressed charter rates, and which will
result in average credit measures commensurate with the lower end of our
highly leveraged category in 2017-2018.
We analyze Navios Holdings and the Marshall Islands-registered oil- and oil
product shipping company Navios Acquisition on an integrated basis because of
their linked business relationships. Navios Holdings owns 46.1% of Navios
Acquisitions. In September 2016, Navios Acquisition provided a two-year,
8.75%, $70 million secured revolving credit facility to Navios Holdings for
general corporate purposes. Crude tanker owner and operator Navios Maritime
Midstream Partners L.P. (Navios Midstream), 59%-owned unconsolidated affiliate
of Navios Acquisition, also falls under the group credit profile (GCP) because
of the entities' material business interactions, as signified by Navios
Acquisition's extension of a de facto rate guarantee for Navios Midstream's
vessels. We determine the GCP of 'b' as the weighted average of the
creditworthiness of the group members Navios Holdings, Navios Acquisition, and
Navios Midstream.
The stable outlook reflects our view that Navios Holdings' free cash flow
generation will be at least break even this year and its liquidity position
will stabilize for the next 12 months, thanks to gradually improving drybulk
charter rates, increased EBITDA at Navios Logistics, and Navios Holdings'
competitive and predictable cost structure. We furthermore incorporate our
view that the GCP will remain unchanged.
We could downgrade Navios Holdings if its efforts to stabilize its liquidity
are ineffective and if we consider its liquidity sources-to-uses ratio will
fall below 1.0x, constituting a likely default risk within the next 12 months.
In particular, we think this might happen due to an unexpected drop in drybulk
charter rates below our base-case forecast or inability to refinance the
unsecured bond due February 2019 in a timely manner.
Furthermore, an unlikely material deterioration of Navios Acquisition's cash
flow generation and liquidity, resulting in a downward revision of the GCP to
'ccc+', would squeeze Navios Holdings' creditworthiness.
An upgrade could follow if Navios Holdings' free cash flow generation turns
firmly positive, liquidity position stabilizes so that the sources to uses
shortfall is remote, and adjusted FFO to debt strengthens sustainably to above
6.0%. This would be possible in the medium term if drybulk charter rates
perform consistently with our base-case forecast and Navios Holdings gradually
reduces debt. However, we consider debt reduction as unlikely in the next 12
months, given Navios Holdings' confirmed appetite for opportunistic
debt-funded vessel acquisitions.
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