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Rating Action: Moody's downgrades Navios Acquisition's CFR to Caa1; outlook negativeGlobal Credit Research - 08 Feb 2021London, 08 February 2021 -- Moody's Investors Service ("Moody's") has today downgraded the corporate family rating (CFR) of Navios Maritime Acquisition Corporation ("Navios Acquisition", "the company") to Caa1 from B3 and probability of default rating (PDR) to Caa2-PD from B3-PD. Concurrently, Moody's has also downgraded the senior secured first lien notes due 2021 co-issued with Navios Acquisition Finance (US) Inc. to Caa1 from B3. The outlook changed to negative from ratings under review.This action concludes the ratings review initiated on 21 May 2020.RATINGS RATIONALEThe rating action reflects the significant debt maturities in the next 12 months including the senior secured first lien notes due in November 2021 as well as the continued weak market environment and resulting high expected Moody's-adjusted debt EBITDA in 2021 if the market environment persists. The Caa2-PD also reflects the execution risk linked to the refinancing including the risk of a distressed exchange, for example in the form of debt buy-backs.Moody's views Navios Acquisition's liquidity as weak until the $603 million outstanding senior secured first lien notes maturity in November 2021 has been resolved. The company also has a number of smaller but still substantial ongoing debt amortization and balloon payments in 2021. As of September 2020, the company had $60 million of unrestricted cash and 7 container ships held for sale in the coming months, which should provide some net cash proceeds subject to prices achieved. Moody's also expects ongoing free cash flow to cover ongoing debt amortization payments other than larger balloon payments. The company's various financing arrangements also include a range of financial maintenance covenants, often loan-to-value ratios, under which the company has maintained compliance.Tanker charter rates have continued to weaken from the exceptional peaks in the second quarter of 2020. Navios Acquisition's last twelve months to September 2020 Moody's-adjusted debt/EBITDA was 5.7x and FFO interest cover 2.5x. Moody's currently expects metrics for 2021 to weaken meaningfully, because of currently low tanker charter rates, especially for large crude tankers (VLCCs), a supply-demand balance more at risk of oversupply than other shipping markets although dependent on the pace of oil demand recovery and VLCC scrapping rates, and because the exceptionally good Q2 2020 is unlikely to be repeated in 2021.Navios Acquisition's Caa1 CFR continues to reflect (1) a diverse and modern fleet with a mix of crude oil and product tankers; (2) low operating costs as a result of the low average age of its fleet and the fleet management contract signed with a related entity controlled by the company's CEO; (3) highly leveraged capital structure; and (4) volatile charter rates with some contracted revenue but also significant exposure to spot rates. Moody's also notes the close ties with Navios Holdings, a company with a currently weak credit profile, including its 29.7% equity ownership, management overlap and hence significant influence over Navios Acquisition.GOVERNANCE CONSIDERATIONSGovernance considerations include the aggressive financial policy with regard to the maturity, liquidity and leverage profile.OUTLOOKThe negative outlook reflects the uncertainty regarding the refinancing as well as the weak tanker market environment.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSA prerequisite for an outlook stabilization or upgrade would be to address the substantial near-term maturities and an adequate liquidity profile. In addition, positive pressure would require a (FFO + interest)/interest expense ratio visibly above 1.5x and debt/EBITDA sustained below 7.0x. Conversely, a failure to address the upcoming debt maturities, worsening tanker market conditions or a weakening liquidity profile could result in further pressure on the rating.PRINCIPAL METHODOLOGYThe principal methodology used in these ratings was Shipping Methodology published in December 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243200. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.COMPANY PROFILEListed Navios Maritime Acquisition Corporation ("Navios Acquisition", "the company") is an owner and operator of tanker vessels focusing on the transportation of petroleum products (clean and dirty) and bulk liquid chemicals. In 2019, the company reported revenues and adjusted EBITDA of $280 million and $132 million, respectively.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. 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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 credit rating action, and whose ratings may change as a result of this credit 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.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.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. Tobias Wagner, CFA VP - Senior Credit Officer Corporate Finance Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Peter Firth Associate Managing Director Corporate Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. 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