Moody’s Investors Service today upgraded the corporate family rating of Navios Maritime Holdings, Inc. (Navios Holdings) to B3 from Caa1 and the probability of default rating to B3-PD from Caa1-PD.
Moody’s simultaneously upgraded the rating of Navios Holdings’ USD 650 million senior secured ship mortgage notes due 2022 to B2 from B3. Further, Moody’s assigned a definitive rating of Caa2 (changed from provisional (P)Caa2) to the USD 305 million senior secured notes due 2022 recently issued by Navios Holdings and whose proceeds will be used to redeem the outstanding USD 291 million senior unsecured notes due 2019. The Caa3 rating of the 2019 notes is unchanged and it will be withdrawn upon repayment. This concludes Moody’s review for upgrade initiated on 6th November 2017. The rating outlook is stable.
“Navios Holdings successfully placed its senior secured bonds addressing its largest near-term maturity,” says Maria Maslovsky, Moody’s Vice President — Senior Analyst and the lead analyst for Navios Holdings. “This was a key consideration in our review,” adds Maslovsky.
Today’s rating action reflects Navios Holdings’ successful placement of a USD 305 million senior secured note due 2022 which will allow the company to tender for its outstanding USD 291 million senior unsecured notes due 2019. The USD 291 million senior unsecured notes due 2019 are Navios Holdings’ largest near-term maturity. As Moody’s previously indicated, the company’s ability to address this maturity would improve its liquidity such that the agency would likely conclude its review of Navios Holdings’ ratings with an upgrade.
Navios Holdings issued new senior secured notes with a five-year tenor and 11.25% coupon. The notes are secured by a first priority lien on the equity interests of Navios Holdings in each of Navios Maritime Partners, L.P. (B3 stable), Navios GP L.L.C., Navios Maritime Acquisition Corporation (B3 stable), Navios South American Logistics Inc. (B3 stable) and Navios Maritime Containers Inc. The notes are guaranteed by all of Navios Holdings’ direct and indirect subsidiaries, except for certain subsidiaries designated as unrestricted subsidiaries, including Navios South American Logistics Inc.
Moody’s recent upgrade of Navios Holdings reflected the improvements in the dry bulk market, where Navios Holdings’ fleet is deployed, underpinned by rising time charter rates. The upgrade further reflects Moody’s expectation that Navios Holdings’ performance in the coming quarters will strengthen as a result of market recovery and its credit metrics, particularly leverage, will improve commensurately. In specific, Moody’s anticipates that Navios Holdings’ leverage measured as debt/EBITDA will decline toward 10x by year-end 2017 and further reduce toward 6x by year-end 2018 from 12.6x for the twelve months ending 30 June 2017.
Navios Holdings’ B3 corporate family rating reflects (1) the company’s large and diverse dry bulk fleet that is slightly younger than the industry average; (2) some indirect diversification in a logistics business through Navios South American Logistics (NSAL) and stakes in various affiliated companies present in the tanker and container shipping segments; (3) efficient operations as a result of the economies of scale owing to the overall size of the Navios Group incorporating close to 200 vessels; (4) experienced management team; and 5) material, although improving leverage.
Navios Holdings’ liquidity is adequate with USD 114 million of unrestricted cash at 30 September 2017, expected positive free cash flow (after capex and dividends), no near-term debt maturities and minimal capex.
The stable rating outlook reflects Moody’s expectation that Navios Holdings will be able to maintain credit metrics in line with the B3 rating, as well as an adequate liquidity profile. The agency further anticipates that the company’s leverage will be sustained closer to 6x debt/EBITDA in the next 12-18 months and that the company will generate positive free cash flow.
Positive rating pressure would be likely if Navios Holdings charters the majority of its fleet on a longer term basis at fixed rates such that its leverage is sustained below 5x debt/EBITDA while maintaining positive free cash flow and adequate liquidity.
Negative rating pressure could result from a downturn in the dry bulk market or a deterioration in the financial performance or value of its investment holdings such that Navios Holdings’ leverage increases and is sustained beyond 7x debt/EBITDA. Any liquidity challenges would also be a concern.
Navios Holdings, which is listed on the New York Stock Exchange, is a global shipping and logistics company. In addition to its own operations in the transport of dry bulk commodities, Navios Holdings owns a 63.8% stake in the logistics company NSAL and various minority stakes, including (1) a 20.8% stake in the dry bulk and container shipping company Navios Maritime Partners L.C.; (2) a 46.2% economic interest in the tanker company Navios Acquisition and (3) an indirect economic interest of 27.2% in Navios Maritime Midstream Partners LP. In 2016, Navios Holdings generated revenues of USD 420 million as reported by the company.
The principal methodology used in these ratings was Global Shipping Industry published in February 2014. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.