Navios Maritime Holdings Inc. (NM)’s Future: A Look

But Navios in particular is seeing some difficulties in its balance sheet. Earlier this month, Moody’s Corporation (NYSE:MCO) reduced its outlook on Navios’ bond rating to negative, further threatening what’s already a junk bond rating of B2. Even though Navios has ample cash on its balance sheet right now to handle anticipated losses, its already-hefty debt load will create real challenges going forward if prospects for the industry don’t improve soon. By contrast, Diana actually has very little net debt and has produced positive operational cash flow over the past year, and even struggling DryShips Inc. (NASDAQ:DRYS) has its Ocean Rig subsidiary to help provide much-needed capital as it slowly sells off its stake in the deepwater drilling company.

The big question that Navios will have to answer in its quarterly report is how it plans to move forward. Despite the glut of capacity, modernizing fleets can bring greater fuel efficiency, which is a key element to cutting costs in a low-shipping-rate environment. Yet with so much debt already on its books, Navios might not have the capacity to take on even more capital expenditures, suggesting that the company might need to make do with what it already has until industry conditions improve.

The article Navios Maritime Faces Stormy Seas Ahead originally appeared on Fool.com.

Motley Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned.

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