New York, November 20, 2012 -- Moody's Investors Service lowered Ultrapetrol (Bahamas) Limited ("Ultrapetrol")'s Speculative Grade Liquidity ("SGL") rating to SGL-4 from SGL-3 to reflect a weak near term liquidity profile. The ratings outlook was changed to negative from stable due to operating performance falling below Moody's expectations and uncertainty regarding the use of proceeds from the recently announced potential private equity infusion.

The following ratings were downgraded:

Speculative grade liquidity, to SGL-4 from SGL-3

RATINGS RATIONALE

The downgrade of Ultrapetrol's Speculative Grade Liquidity rating to SGL-4 was largely driven by continued negative free cash flow generation and lower than expected cash balances largely stemming from weak operating performance through 2012. Reported cash balances stand at the lowest level they have been in several quarters. The weaker operating performance was largely driven by the negative impact of the severe drought in Paraguay and Argentina as well as higher costs stemming from inflationary pressures in Argentina. These factors have negatively impacted margins by lowering the more profitable transportation of soybeans versus iron ore and increasing operating expenses. Moody's notes that the SGL rating does not incorporate the announced $220 million potential transaction resulting from the Investment Agreement between Ultrapetrol and Sparrow Capital Investments Ltd., a subsidiary of Southern Cross Latin America Private Equity Funds III and IV ("Southern Cross"). If the transaction is finalized, the SGL rating could likely be raised.

Ultrapetrol's weak liquidity profile, denoted by the SGL-4 liquidity rating, is characterized by anticipated continued negative to weak free cash flow generation expected over the next twelve months. The addition of new platform supply vessels (PSVs) to the company's fleet should add to EBITDA levels, however interest expense on the company's debt and the maturities of the company's senior secured notes due November 2014 have also been considered. The company possesses alternate sources of liquidity via unencumbered assets, primarily in its River business. The rating does incorporate the lack of a revolving credit facility and the longer-term maturity of the $180 million of senior notes that come due in November of 2014. The company reported $35.9 million of current debt maturities as of September 30, 2012. However, the majority of this figure has already or is soon to be refinanced.

The change in outlook to negative is primarily based on the company's weak liquidity profile and the evolving nature of the company's capital structure and uncertainty regarding the use of proceeds if the announced investment by Sparrow Capital were to be effectuated. If proceeds were to be used to repay a meaningful amount of debt at a significant discount, Moody's would likely consider the transaction a distressed exchange.

Ultrapetrol's Caa1 CFR reflects very high leverage of over 14 times, based on Moody's standard adjustments, at September 30, 2012 and continued negative free cash flow generation. Although metrics are anticipated to moderately improve in the 2013-2014 time period as PSVs in the offshore supply business are delivered contributing to earnings, credit metrics (absent a meaningful reduction in debt) in the intermediate term are expected to remain at the Caa rating level. Other ratings considerations include the highly cyclical nature of the River business due to its dependence on weather patterns in the Hidrovia region of South America as well as inflationary pressures in Argentina and currency revaluations in Brazil. Although the company's business could benefit in the longer-term from continued investment by Brazilian-based Petrobras, in oil exploration activities in South America (and thus demand for PSV services) as well as improved soybean production in 2013, the delays in delivery of Indian-built PSVs and the sensitivity of the company's River business to weather conditions also underscore the ratings.

The lack of an improvement in operating results and/or increased likelihood that the company would use proceeds from the announced $220 million potential equity infusion to reduce a meaningful amount of debt at meaningfully lower than face value could result in a lowering of the ratings.

The ratings could be upgraded if the company refinances the capital structure, improves the liquidity profile via sustained positive free cash flow generation and Moody's comes to expect an improvement in credit metrics. A refinancing of the $180 million notes due November 2014 would also be favorable.

The principal methodology used in rating Ultrapetrol (Bahamas) Limited was the Global Shipping Industry Methodology published in December 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Ultrapetrol (Bahamas) Limited, headquartered in Nassau, Bahamas, is a diverse international marine transportation company. The company operates in three segments: River, Offshore Supply, and Ocean. Last twelve months ended September 30, 2012 revenues totaled $320 million.

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Jadijhe (Gigi) Adamo Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Alexandra S. Parker MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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