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Tokyo, June 15, 2009 -- Moody's Investors Service has today changed to negative from stable the rating outlook for the long-term issuer ratings and senior unsecured ratings of Nippon Yusen Kabushiki Kaisha (NYK, A3) and its supported subsidiaries, NYK International plc (A3) and NYK Finance (Cayman) Ltd. (Baa1). The outlook change reflects Moody's concern that NYK's financial leverage is likely to remain high, given the current stagnant ocean shipping market and slack air cargo business. After a brisk period for ocean shipping industry in recent years, mainly due to the vital imports and exports by China and other emerging countries, NYK projects that its operating profit for FYE3/2010 will be JPY53 billion, a significant decline from JPY145 billion in the previous year. Moody's understands that this low level of operating profit is due to NYK's stagnant ocean shipping businesses and the continuous operating loss from the company's air cargo business, which was consolidated in October 2005. Since the consolidation, Nippon Cargo Airlines Co., Ltd. (NCA), NYK's subsidiary for air cargo transportation, has not contributed to the group's profitability. In addition, Moody's notes that the capital expenditure for restructuring NCA's fleet to become cost efficient has been a financial burden for NYK. Moody's recognizes that engaging in and growing an air cargo transportation business is one of the essential components for NYK's overall business strategy of becoming an integrated global logistic business, which includes ocean shipping, land transportation and air cargo. The rating agency believes that NYK's business strategy will help further strengthen NYK's stable relationships with its core customers in the long term. However, Moody's is concerned that NYK's intensive capital expenditures on its shipping and air cargo fleets have been pressuring the company's financial flexibility, given the stagnant market conditions in both sectors. Its total debt to total capitalization ratio at end-March 2009 was around 74% (based on preliminary adjustments), a significant increase from 69.5% a year earlier. Moody's will closely monitor NYK's policy to restore its financial profile. NYK's rating will face downward pressure if the company cannot take significant enough measures to recover its capital structure within the next six months or so. The last rating action with respect to NYK was implemented on May 11, 2006, when Moody's affirmed the company's A3 ratings.