Greek owner and operator of container and dry bulk vessels Navios Maritime Partners has seen its corporate family rating (CFR) downgraded to B3 from B2, its probability of default rating (PDR) to B3-PD from B2-PD and the rating on Navios Partners’ USD 408.3 million senior secured term loan to B3 from B2, Moody’s rating agency said.
Furthermore, Moody’s changed the outlook on all ratings of Navios Partners to negative.
“Our downgrade reflects the weakening of Navios Partners’ liquidity profile, as the company had to make certain debt prepayments recently, as well as the rising risk of contagion facing Navios Partners from challenges affecting Navios Holdings, its parent company,” Marie Fischer-Sabatie, a Moody’s Senior Vice President, said.
“It also reflects the difficulties faced by two of Navios Partners’ largest customers which could eventually affect its performance,” Fischer-Sabatie added.
Declining vessel values in dry bulk have increased the loan-to-value ratio of Navios Partners above the set limit. Navios Partners made a cash payment of USD 25 million under its term loan B and reimbursed USD 28.4 million of commercial bank debt in order to free up collateral and add one vessel to the term loan B collateral.
Navios Partners’ cash balance stood at USD 36 million as at 31 March 2016, and Moody’s projects that the company could generate around USD 80 million of free cash flow in the next 12 months.
However, the company will have to repay USD 38m of debt maturing within the next 12 months and USD 25 million of its term loan B in May. Navios Partners will then also have a USD 58 million bullet payment of a facility maturing in mid-2017, which may not be covered by existing liquidity sources, Moody’s said.
“The USD 60 million revolving credit facility provided by Navios Holdings matures in early January 2017, which we caution could not be renewed, as per the financial and liquidity issues that Navios Holdings is facing,” Moody’s added.
Finally, the downgrade also reflects the financial problems two of Navios Partners’ largest customers are having. If either Hyundai Merchant Marine and Hanjin Shipping decide to make any material changes to the existing charter terms with Navios Partners, the changes would negatively affect the company’s performance and financial profile.