ULTRF Ultrapetrol Bahamas Limited (CE)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: December 30, 2016

Exhibit 1

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

Our disclosure and analysis in this report concerning our operations, cash flows and financial position, including, in particular, the likelihood of our success in developing and expanding our business, include forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates," "projects," "forecasts," "will," "may," "should," and similar expressions are forward-looking statements. Although these statements are based upon assumptions we believe to be reasonable based upon available information, including projections of revenues, operating margins, earnings, cash flow, working capital and capital expenditures, they are subject to risks and uncertainties. These forward-looking statements represent our estimates and assumptions only as of the date of this report and are not intended to give any assurance as to future results. As a result, you should not place undue reliance on any forward-looking statements. We assume no obligation to update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors, except as required by applicable securities laws. Factors that might cause future results to differ include, but are not limited to, the following:

In this report, unless the context otherwise indicates, the terms "we", "us" and "our" (and similar terms) refer to Ultrapetrol (Bahamas) Limited and its subsidiaries and joint ventures.

ULTRAPETROL (BAHAMAS) LIMITED

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE

NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015 (UNAUDITED)

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements of Ultrapetrol (Bahamas) Limited (the "Company") and subsidiaries for the nine months ended September 30, 2016, and 2015 included elsewhere in this report. This discussion contains forward-looking statements. For a discussion of the accuracy of these statements please refer to the section of this report titled "Cautionary Statement Regarding Forward Looking Statements" that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements. The debt negotiations with our lenders discussed elsewhere herein raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements and the results of operations discussion of this section do not include any adjustments relating to the recoverability and classification of recorded asset amounts, the amounts and classification of liabilities, or any other adjustments that might result in the event the Company is unable to continue as a going concern.

Our Company

We are an industrial shipping company serving the marine transportation needs of clients in the geographic markets on which we focus. We serve the shipping markets for grain, forest products, minerals, crude oil, petroleum and refined petroleum products, the general cargo and container trade, as well as the offshore oil platform supply market through our operations in the following three segments of the marine transportation industry.

Our River Business , with 685 barges (of which 24 are under lease) and 35 pushboats as of September 30, 2016, is the largest owner and operator of river barges and pushboats that transport dry bulk and liquid cargos through the Hidrovia Region of South America, a large area with growing agricultural, forest and mineral related exports. This region is crossed by navigable rivers that flow through Argentina, Brazil, Bolivia, Paraguay and Uruguay to ports serviced by ocean export vessels. These countries are estimated to account for approximately 52% of world soybean production in 2017, as compared to 30% in 1995. We also own a barge building facility at Punta Alvear and we own an inland tank barge, Parana Iron , which has been converted into an iron ore transfer and storage unit currently employed with a non-related third party. Additionally, we own a transshipment unit to transfer cargo between barges.

Our Offshore Supply Business owns and operates vessels that provide critical logistical and transportation services for offshore petroleum exploration and production companies in the coastal waters of Brazil and the North Sea. As of September 30, 2016, our Offshore Supply Business fleet consisted of thirteen Platform Supply Vessels, or PSVs, and one ROV (Remotely Operated Vehicle) Support Vessel, or RSV, and three offshore barges. Out of the thirteen PSVs, seven were chartered in Brazil (although one of these vessels remains blocked), four were laid-up in Brazil and two remained laid up in the North Sea. We are currently seeking employment for these laid-up vessels in Brazil with Petrobras as well as in the North Sea. Our UP Jade finalized its contract with Petrobras on August 1, 2016, and is currently seeking employment. The current Petrobras contract of our RSV UP Coral was extended until August 2017.

Our Ocean Business , as of September 30, 2016, owned two ocean-going vessels and bareboat chartered two more that we regularly employ in the South American coastal trade where we have preferential rights and customer relationships. The fleet is comprised of two Product Tankers (both of which are under lease) and two container feeder vessels.

We are focused on operating an efficient and versatile fleet that will allow us to provide an array of transportation services to customers in several different industries. Our business strategy is to leverage our expertise and strong customer relationships to grow the volume, efficiency, and market share in a targeted manner.

Developments in the three months ended September 30, 2016

 

On August 1, 2016, our UP Jade completed its time charter contract with Petrobras.

 

On August 23, 2016, the Company received notice that its common stock will be delisted from the Capital Market as of September 1, 2016, as a result of the Company's inability to meet Nasdaq's $1 minimum bid price per share requirement, unless the Company appeals the determination to delist its common stock. The Company filed such an appeal on August 25, 2016.

On August 25, 2016, we were awarded an extension of the current contract of our RSV UP Coral until August 2017.

Recent developments

On October 12, 2016, the Company announced that Damián Scokin would resign from his role as Chief Executive Officer, effective November 1, 2016. He is expected to join the Company's Board of Directors shortly. Eduardo Ojea Quintana, Chairman of Ultrapetrol's Board of Directors, has been selected to serve as Chief Executive Officer of Ultrapetrol.

On October 17, 2016, we received notice from the Nasdaq Stock Exchange ("Nasdaq") indicating that the Nasdaq Hearings Panel had denied the Company's appeal for continued listing on the Nasdaq Capital Market. Trading of the Company's shares of common stock on the Nasdaq Capital Market was suspended effective at the open of business on October 19, 2016. The delisting of the Company's stock from Nasdaq became final on December 19, 2016.

On October 28, 2016, our common stock began trading on the OTCQB Venture Market under the ticker symbol "ULTR".

On November 18, 2016, we announced that we and certain of our subsidiaries entered into a Restructuring Support Agreement ("River RSA") with certain holders of our 8.875% First Preferred Ship Mortgage Notes due 2021 (the "2021 Notes"), International Finance Corporation ("IFC"), the OPEC Fund of International Development ("OFID"), Southern Cross Latin America Private Equity Fund III, L.P. and Southern Cross Latin America Private Equity Fund IV, L.P. (collectively "Southern Cross") and Sparrow Capital Investments Ltd. and Sparrow CI Sub Ltd. The River RSA sets forth the terms of the restructuring of the debt and capital structure of the Company's River Business and related financial obligations (the "River Restructuring"). The River RSA provides for the parties' agreement with respect to the transactions contemplated by a joint prepackaged plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code (the "Plan"), which provides for an implementation of the River Restructuring through a voluntary bankruptcy case under Chapter 11 of Title 11 of the United States Code and provides a timetable that includes substantial consummation of the Plan on or before February 28, 2017, subject to amendment upon consent of all parties. In addition, if our Ocean Business is sold before confirmation of the Plan, then the holders of the 2021 Notes, IFC and OFID will receive the full net sale proceeds. If the sale of the Ocean Business cannot be consummated by such date, the Ocean Business would be transferred to such holders. If the majority of such holders either do not request a transfer of, or elect not to receive, the equity of the Ocean Business, that equity will be transferred to the River Business subsidiaries by a payment of $3.0 million less certain capital expenditures, if any. In addition to the River Restructuring, we are in negotiations with lenders to our Offshore Supply Business and an affiliate of Sparrow with respect to the terms and conditions of an out-of-court restructuring of the loans to the Offshore Supply Business. The Company and the Offshore Lenders have reached an agreement in principle that would provide for, among other things, a 100% principal recovery by the Offshore Lenders, interest and amortization relief through lowered interest rates and a waterfall mechanism that provides for cash in the business to be used first to pay operating and capital expenses, a release of claims against non-Offshore Supply Business entities, and the grant of additional collateral to the Offshore Lenders in the form of a mortgage on the unencumbered Offshore Supply Business vessel, the UP Opal. We are currently negotiating a detailed term sheet with the Offshore Lenders that would reflect the parties' agreement in principle, and hope to reach a final resolution in the near future. Equity interest in the Company will be unaffected under the Plan, but under certain circumstances the Company may be liquidated after the emergence from Chapter 11 of the U.S. Bankruptcy Code.

On November 18, 2016, we announced that we received indications of interest for the River Business by $65.0 million and $70.0 million, and non-binding bids for its Ocean and Offshore Business.

On November 28, 2016, we announced that we and certain of our subsidiaries entered into an investment agreement (the "Investment Agreement") with Sparrow River Investments Ltd. ("Sparrow River"), Sparrow Offshore Investments Ltd. ("Sparrow Offshore"), both of which are affiliates of Sparrow Capital Investments Ltd. and Sparrow CI Sub Ltd. (collectively, "Sparrow"), and Southern Cross on November 23, 2016. The Investment Agreement sets forth the terms of the purchase of our River Business by Sparrow River and, under certain circumstances, the Company's Offshore Supply Business by Sparrow Offshore, in connection with the restructuring of the debt and capital structure of our River Business and related financial obligations and the anticipated restructuring of the debt structure of our Offshore Supply Business (the "Offshore Restructuring"). All of our disinterested directors, as required by the Company's Eighth Amended and Restated Articles of Association, and the full Board of Directors approved the sale transaction and the Offshore Restructuring. In accordance with the Company's Articles and Memorandum of Association, the Board received a fairness opinion in connection with the River Restructuring and Offshore Restructuring. Assuming that all of the terms and conditions of the Investment Agreement are met, the transactions set forth under the Investment Agreement would close upon consummation of the voluntary bankruptcy case under Chapter 11 of Title 11 of the United States Code, which would be substantially consummated on or before February 28, 2017.

Under the terms of the Investment Agreement, Sparrow River will purchase the River Business (the "River Business") for $73.0 million in cash, which cash would be used to retire the 2021 Notes and to purchase the outstanding credit facilities with IFC and OFID as set forth in the Support Agreement. In addition, if we complete our agreement with the lenders (the "Offshore Lenders") to our Offshore Supply Business (the "Offshore Supply Business") in connection with the Offshore Restructuring, Sparrow Offshore will purchase the equity of UP Offshore (Bahamas) Ltd., which is the direct owner of the Offshore Supply Business subsidiaries, for $2.5 million.

In addition to the Investment Agreement, certain of our affiliates entered into a loan purchase and assignment agreement (the "Loan Purchase Agreement") on November 23, 2016, pursuant to which IFC and OFID will assign certain existing loans between either of them and our affiliates, if the transactions described in the River RSA take place as provided therein. The full text of the River RSA, the Investment Agreement and the Loan Purchase Agreement has been filed by the Company with the Securities and Exchange Commission on its EDGAR system and can be found at www.sec.gov.

On November 30, 2016, we announced that we and certain o f our subsidiaries mailed a solicitation seeking consent from certain of our creditors for the Plan in connection with the River Restructuring. The Plan is supported by the Majority Supporting Noteholders representing 84.26% of our and our subsidiaries obligations under the 2021 Notes, and by IFC and OFID representing all our and our subsidiaries obligations under the IFC-OFID Loans.

On December 9, 2016, the Nasdaq Stock Market filed documentation with the SEC to finalize the removal of our common stock from listing on Nasdaq, effective at the opening trading session of December 19, 2016.

Factors Affecting Our Results of Operations

We organize our business and evaluate performance by the following business segments: the River Business, the Offshore Supply Business and the Ocean Business. The accounting policies of the reportable segments are the same as those for the unaudited condensed consolidated financial statements. We do not have significant inter-segment transactions.

Impairment of long-lived assets

We identified indicators of potential impairments affecting the three Company´s business segments, including the financial situation discussed above.

As mentioned above, the River and the Offshore Supply Business would be distributed to the controlling shareholders in a spinoff. Thus these assets groups are tested for recoverability while are classified as held and used. The estimates of future cash flows used in the test are based on the use of the assets for their remaining useful life, assuming that these disposal transactions will not occur.

Undiscounted projected net operating cash flows are determined for each vessel in the Ocean and Offshore Supply Business, and as a fleet in the River Business (except for the Parana Iron barge determined at vessel level) and are compared to their carrying value together with the carrying value of the dry dock costs related to each vessel. The cash flow period is based on the remaining lives of the vessels or the fleet. We determined the undiscounted projected net operating cash flows for each vessel and fleet by considering the historical and estimated vessels' performance and utilization. Expected outflows for scheduled vessels' maintenance and operating expenses, including laid up expenses and drydocking costs, have been estimated based on the Company's historical data for its own vessels.

Offshore Supply Business

Due to the uncertainties surrounding the current downturn conditions of the Brazilian offshore supply business, estimates of projected net operating cash flows of the Offshore Supply Business are highly subjective and there is a risk that these estimates could prove to be materially different from actual cash flows.

For this reason, we performed probability-weighted analysis of the cash flow assumptions considered in performing an impairment test. The Company has assigned operating scenarios based mainly on the experience, the present economic and financial situation of the Company, the current PSV´s market and the status quo of the conversations that are being held with Petrobras.

We determined the undiscounted projected net operating cash flows for each vessel by considering the historical and estimated vessels' performance and utilization, assuming:

(i)

Future revenues considering the fixed charter rate of each vessel over the remaining estimated life of each vessel. The rates used to estimate the future revenues are similar to the rates included in the latest in-progress tenders with Petrobras, which are below the most recent five-year average historical time charter rates with a sensitivity analysis ranging from 90% to 110%.

(ii)

Expected outflows for scheduled vessels' maintenance and operating expenses (running costs and lay up expenses). Cost estimates, like drydocking costs and repositioning expenses, are based on the Company's historical data for its own vessels.

(iii)

Effective fleet utilization takes into account the period each vessel is expected to remain off hire for scheduled maintenance (dry docking and special surveys). It was also considered laid up periods ranging from three to fifteen months for currently blocked or laid-up PSVs. Effective fleet utilization assumed is below the Company's historical performance rate and considering our expectations for future fleet utilization under our current understanding of the PSV´s Brazilian market.

(iv)

Duties for those PSVs which need to be converted to the special Brazilian regime flag.

Fair value was estimated primarily through the use of third-party valuation performed on individual vessel basis, which is generally the amount the Company would expect to receive if it were to sell the vessel in a second-hand market. There is a relatively lack of liquidity in the sale market for second-hand PSV´s, and the oil price drop accompanying with the reduction in exploration and production spending have made the estimate of fair values uncertain .

River Business

We determined undiscounted projected net operating cash flows as a fleet in the River Business and as barge level for the Parana Iron barge and compared them to their carrying value. We followed a single most-likely estimate approach of expected future operating cash flows.

We determined the undiscounted projected net operating cash flows for the fleet by considering the historical and estimated fleet performance and utilization, assuming:

(i)

Future revenues considering an average of annual transported tons over the remaining estimated life of the fleet in line with the average of annual transported tons over the most recent five-year average historical transported tons.

(ii)

Average rate per ton used to estimate future revenues is lower than the most recent five-year average historical rate per ton.

(iii)

Expected outflows for scheduled fleet maintenance and operating expenses have been based on the Company's historical data.

The estimated fair value for the River Business fleet was determined based on the present value of expected future net operating cash flows given that there are no comparable market values for this fleet. The estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. To such end, the Company uses the weighted average cost of capital.

Ocean Business

Given the renegotiation process of our debt, we performed a probability-weighted analysis as to the disposition assumption.

Fair value was estimated primarily through the use of third-party valuation performed on individual vessel basis, which is generally the amount the Company would expect to receive if it were to sell the vessel in a second-hand market.

The assessment concluded that the undiscounted projected net operating cash flows are not exceeding the carrying value at September 30, 2016 for the Ocean Business and certain vessels of the Offshore Business and River Business. Thus, the carrying value of certain vessels of these three businesses were written down, by recording an impairment charge to its respective fair value, as the estimated fair value was lower than the carrying value. The following impairment charges were recorded arising from the above mentioned tests:

Although the Company believes its assumptions and estimates are reasonable, deviations from the assumptions and estimates could produce materially different outcomes that could result in the inability to recover the current carrying values of the vessels or fleet, thereby possibly requiring further impairment charges in the future.

Before the spinoffs occur, we would not impair the River Business fleet and certain vessels of the Offshore Supply Business' carrying value under our accounting impairment policy, due to our belief that future undiscounted operating cash flows expected to be earned by such vessels over their operating lives would exceed such vessels' carrying amounts.

After the impairment charges recognized at September 30, 2016 above discussed, the aggregate carrying value of our fleet as of September 30, 2016 exceeded their aggregate fair value by approximately $221.4 million, as noted in the table below. This aggregate difference represents the approximate amount at September 30, 2016, by which we believe we would have to charge to the income statement if we sold all of such vessels in an orderly transaction between market participants, that is on industry standard terms, and to a willing buyer where we were not under any compulsion to sell, and where the buyer was not under any compulsion to buy.

Because vessel values are highly volatile, estimates of market values may not be indicative of either the current or future prices that the Company could achieve if it were to sell any of the vessels

As discussed before, under certain circumstances the Company may be liquidated after emergence from Chapter 11 of the U.S. Bankruptcy Code. Liquidation basis accounting is applied only when liquidation is imminent, that is when the plan for liquidation were to be approved under Chapter 11 of the U.S. Bankruptcy Code.

These differences could be increased if fair value for transactions in the normal course of business is modified to consider a price in a distressed sale. Such distressed sale price tends to be lower than fair value considering there may be insufficient time for adequate market exposure because the appropriate time needed for customary marketing and negotiating is not available.

Revenues

In our River Business, we currently contract for the carriage of cargoes, mostly under contracts of affreightment, or COAs. Most of these COAs currently provide for adjustments to the freight rate based on changes in the price of fuel. When transporting containers or vehicles, we charge our clients on a per-trip per unit basis. In addition, we derive revenues from the sale of new barges built at our Punta Alvear yard to third parties except for the sale of 24 barges to a third party which are then leased back to us. In that case, neither net revenues nor manufacturing expenses are recognized and the net result from the sale of those barges is deferred in time throughout the term of the lease. Finally, under our transshipment service agreement, we recognize revenues per ton loaded to the oceangoing vessel.

In our Offshore Supply Business, we contract a substantial portion of our capacity under time charters to charterers in Brazil. We may decide to employ our vessels in the North Sea spot and/or term market or in any other markets such as West Africa or anywhere in the world.

In our Ocean Business, we currently contract our tanker vessels on a time charter basis. We sell space on our container feeder vessels on a per Twenty Foot-Equivalent Unit ("TEU") basis which is very similar to a COA basis as far as recording of revenues and voyage expenses. Some of the differences between time charters and COAs are summarized below.

Time Charter

Contract of Affreightment (COA)

Our ships on time charters generate both lower revenues and lower expenses for us than those under COAs. At comparable price levels both time charters and COAs result in approximately the same operating income, although the operating margin as a percentage of revenues may differ significantly.

Time charter revenues accounted for 45% of the total revenues derived from transportation services in the first nine months of 2016 and COA revenues accounted for 55%. With respect to COA revenues derived from transportation service in the first nine months of 2016, 98% were in respect of repetitive voyages for our regular customers and 2% were in respect of single voyages for occasional customers.

Our container vessels are paid on a rate based on each container shipped and is expressed in dollars per TEU. By comparison, these vessels' results are expressed similar to those vessels operating under a COA.

In our River Business, demand for our cargo carrying services is driven by agricultural, mining and petroleum related activities in the Hidrovia Region. Droughts and other adverse weather conditions, such as floods, could result in a decline in production of the agricultural products we transport, which would likely result in a reduction in demand for our services. Further, most of the operations in our River Business occur on the Parana and Paraguay Rivers and any changes adversely affecting navigability of either of these rivers, such as low water levels, could reduce or limit our ability to effectively transport cargo on the rivers.

As of September 30, 2016, in our Offshore Supply Business we had one RSV and seven of our PSVs operating under long-term charters with Petrobras (one of which remains blocked). Four of our remaining vessels were laid-up in Brazil and two in the North Sea. Our UP Jade finalized its contract with Petrobras on August 1, 2016, and is currently seeking employment. We are exploring alternative courses of action for these vessels, including negotiations with Petrobras. Further early termination or blockage of our time charter contracts with Petrobras may result in our PSVs or RSV being laid up for an extended period of time, which would have a material adverse effect on our financial condition and results of operations. Petrobras' current situation may result in it having to cut back on its capital expenditure plans even further. Such reduction could adversely affect the amount of exploration and production, which in turn could negatively affect our PSV and RSV operations in Brazil and our results of operations. In that regard, Petrobras announced in September 2016 a 25% reduction of its investment plan from $98.4 billion for the five-year period between 2015 and 2019 to $74.1 billion between 2017 and 2021. However, Petrobras emphasized its continued interest in exploration and production projects (approximately 82% of the projected investments) with focus on deep water.

We believe that Petrobras' capital expenditure plans will nevertheless provide opportunities within the Brazilian PSV market, particularly for companies that own or are constructing Brazilian-built vessels, and we intend to identify opportunities to utilize the preferential rights provided by our current Brazilian-built PSVs and any future PSVs we may construct. We may decide to employ our vessels in the North Sea spot and/or term market or in any other markets such as West Africa or anywhere in the world.

In our Ocean Business, we employed a significant part of our ocean fleet on time charter to different customers during the first nine months of 2016.

Expenses

Our operating expenses generally include the cost of all vessel management, crewing, spares and stores, insurance, lubricants, repairs and maintenance. Generally, the most significant of these expenses are repairs and maintenance, wages paid to marine personnel and marine insurance costs.

In our River Business, our voyage expenses include port expenses and bunkers as well as charter hire paid to third parties.

In our Offshore Supply Business, voyage expenses include offshore and brokerage commissions paid by us to third parties, which provide brokerage services, and bunker costs incurred when our vessels are repositioned between the North Sea and Brazil, which are fully covered by us.

In our Ocean Business, through our container feeder operation, our operating expenses include bunker costs which are fully covered by us, port expenses, Terminal Handling Costs, or THC, incurred in the regular operation of our container feeder service, and agency fees paid by us to third parties. It also includes container leasing, storage and insurance expense.

Through our River Business, we own a repair facility for our river fleet at Pueblo Esther, Argentina, where we operate one floating dry dock, a shipyard for building barges and other vessels in Punta Alvear, Argentina, land for the construction of two terminals in Argentina, one grain loading terminal and 50% of a second terminal in Paraguay. UABL also rents offices in Asuncion, Paraguay and Buenos Aires, Argentina.

Through our Offshore Supply Business, we hold a lease for office and warehouse space in Rio de Janeiro, Brazil. In addition, through Ravenscroft, we own a building located at 3251 Ponce de Leon Boulevard, Coral Gables, Florida, United States. We also hold subleases to additional office space at Avenida Leandro N. Alem 986, Capital Federal, Buenos Aires, Argentina, and rent an office in Aberdeen, Scotland.

Foreign Currency Transactions

Our exchange rate risk arises in the ordinary course of our business primarily from our foreign currency expenses and revenues. We are also exposed to exchange rate risk on the portion of our balances denominated in currencies other than the U.S. dollar, such as tax credits in various tax jurisdictions in South America.

During the first nine months of 2016, 95% of our revenues were denominated in U.S. dollars and 5% of our revenues were denominated and collected in Brazilian reais. However, 43% of our total revenues were denominated in U.S. dollars but collected in Argentine pesos, Brazilian reais and Paraguayan guaranies. During the first nine months of 2016, significant amounts of our expenses were denominated in U.S. dollars and 47% of our total out of pocket operating expenses were paid in Argentine pesos, Brazilian reais and Paraguayan guaranies.

Our operating results, which we report in U.S. dollars, may be affected by fluctuations in the exchange rate between the U.S. dollar and other currencies. For accounting purposes, we use U.S. dollars as our functional currency. Therefore, revenue and expense accounts are translated into U.S. dollars at the average exchange rate prevailing during the month of each transaction. The Argentine peso devalued approximately 62% on average against to the U.S. dollar when comparing the average exchange rate in the three month period ended September 30, 2016, to the average exchange rate of the same period of 2015. The Brazilian real revalued approximately 8% against the U.S. dollar when comparing the average exchange rate in the three month period ended September 30, 2016, to the average exchange rate of the same period of 2015. However, when comparing the first nine months of 2016 against the same period of 2015, the Brazilian real devalued approximately 12%.

Foreign currency exchange gains (losses), net are included as a component of other income (expenses) in our unaudited condensed consolidated financial statements.

Inflation, Interest Rates and Fuel Price Increases

Inflationary pressures in the South American countries in which we operate may not be compensated by equivalent adjustments in the rate of exchange between the U.S. dollar and the local currencies. Additionally, revaluations of the local currencies against the U.S. dollar, even in the absence of inflation, have an incremental effect on the portion of our operating expenses incurred in those local currencies measured in U.S. dollars. Please see Foreign Currency Transactions.

If the London market for dollar loans between banks were to become volatile the spread between published LIBOR and the lending rates actually charged to banks in the London interbank market would widen. Interest in most loan agreements in our industry has been based on published LIBOR rates. After the financial crisis which began in 2008, however, lenders have insisted on provisions that entitle them, in their discretion, to replace published LIBOR as the base for the interest calculation with their own cost-of-funds rate. Since then, we have been required to include similar provisions in some of our financings. If our lenders were to use the interest rate on their costs of funds instead of LIBOR in connection with such provisions, our lending costs could increase significantly, which would have an adverse effect on our profitability, earnings and cash flow.

As of September 30, 2016, the Company had $13.7 million of LIBOR-based variable rate borrowings under its credit facility with DVB, NIBC and ABN Amro subject to interest rate swaps, as economic hedges, to fix the interest rate of these borrowings between October 2012 and October 2016 at a weighted average cost of debt of 0.9% per annum, excluding margin. Finally, the Company had $14.6 million of LIBOR-based variable rate borrowings under the same facility subject to interest rate swaps to fix the interest rate of these borrowings between October 2014 and October 2016 at a weighted average cost of debt of 1.22% per annum, excluding margin.

As of September 30, 2016, the Company had $6.0 million of LIBOR-based variable rate borrowings under its credit facility with DVB and Banco Security, subject to an interest rate swap to fix the interest rate of these borrowings at a weighted average interest rate of 3.39% per annum.

Additionally, as of September 30, 2016, the Company had variable rate debt (due 2016 through 2021) totaling $183.4 million. These debts call for the Company to pay interest based on LIBOR plus a 120-400 basis points margin range. Some of our existing financing agreements, within the terms and conditions contained in the relevant loan agreement, used a cost-of-funds rate in replacement of LIBOR. The interest rates generally reset either quarterly or semi-annually. As of September 30, 2016, the weighted average interest rate on these borrowings was 3.9%, including margin.

A 1% increase in LIBOR or a 1% increase in the cost-of-funds used as base rate by some of our lenders would translate to a $1.8 million increase in our interest expense per year, which would adversely affect our earnings and financing cash flow.

In order to preserve liquidity for the operation of its businesses, the Company determined not to make the interest payments due on December 15, 2015, and June 15, 2016, on the Company's 2021 Notes. Therefore, as of September 30, 2016, the Company had $20.0 million of overdue installments of interest which accrue interest at the rate borne by the 2021 Notes plus 1% per annum, totaling 9.875%.

In addition, the Company did not make its $6.5 million principal and interest payment due on June 15, 2016, under the IFC and OFID loan facilities. Such unpaid amount accrues interest at the rate which shall be the sum of (i) LIBOR, (ii) the applicable margin, and (iii) two per cent (2%), per annum.

Moreover, during the first nine months of 2016, the Company did not make scheduled principal repayments on its loan facilities related to the Company's Offshore Supply Business (except for the BNDES loan facility).

We have negotiated fuel price adjustment clauses in most of our contracts in the River Business. However, we may experience temporary misalignments between the adjustment of fuel in our freight contracts and our fuel purchase agreements (either positive or negative) because one may adjust prices on a monthly basis while the other adjusts prices weekly. Similarly, in some of our trades the adjustment formula may not be one hundred percent effective to protect us against fuel price fluctuations. Additionally, as our re-engining and repowering program progresses and more pushboats in our fleet start to consume heavy fuel (as opposed to diesel oil), the adjustment formulas in our transportation contracts will gradually cease to reflect the change in our fuel costs, resulting in gradually larger misalignments between such adjustments and our fuel purchases.

In the Offshore Supply Business, the risk of variation of fuel prices under the vessels' current employment is generally borne by the charterers, since they are generally responsible for the supply and cost of fuel. During their positioning voyage from their delivery shipyard up to their area of operation and if and when a vessel is off-hire for technical or commercial reasons, fuel consumption will be for owners' account.

In our Ocean Business, for those vessels that operate under time charters, increases on bunker (fuel oil) costs do not have a material effect on the results of those vessels which are time chartered to third parties, since it is the charterers' responsibility to pay for fuel. When our ocean vessels are employed under COAs, however, freight rates for voyage charters are fixed on a per ton basis including bunker fuel for our account, which is calculated for the voyage at an assumed bunker cost. A rise or fall in bunker prices may have a temporary negative or positive effect on results as the case may be as the actual cost of fuel purchased for the performance of a particular voyage or COA may be higher or lower than the price considered when calculating the freight for that particular voyage. Generally, in the long term, freight rates in the market should be sensitive to variations in the price of fuel. However, a sharp rise in bunker prices may have a temporary negative effect on results since freights generally adjust only after prices have settled at a higher level.

In our container feeder service, the operation of our two container feeder vessels, Asturiano and Argentino , involves some degree of fuel price fluctuation risk since we have to pay for the cost of bunkers and although we can adjust our rates per TEU in connection with these variations, we may not always be able to, or may even be unable to, pass these variations to our customers (either fully or partially) in the future, which could have an adverse effect on our results of operations.

Seasonality

Each of our businesses has seasonal aspects, which affect their revenues on a quarterly basis. The high season for our River Business is generally between the months of March and September, in connection with the South American harvest and higher river levels. However, growth in the soy pellet manufacturing, minerals and forest industries and liquid cargo volumes may help offset some of this seasonality. The Offshore Supply Business operates year-round, particularly off the coast of Brazil, although weather conditions in the North Sea may reduce activity from December to February. In the Ocean Business, we employ our Product Tankers on time charters so there is no seasonality effect, while our container feeder service experiences a somewhat slower season during the first quarter due to the congestion at the main discharge terminal in Patagonia in connection with the cruise tourist season.

Legal Proceedings

UABL – Ciudad del Este Customs Authority – Autonomous Action for Annulment

On September 21, 2005, the local Customs Authority of Ciudad del Este, Paraguay issued a finding concerning certain UABL entities referred to three matters in respect of certain operations of our River Business for the prior three-year period: (i) that UABL owed taxes to that authority in the amount of $2.2 million, (ii) a fine for non-payment of the taxes in the same amount, and (iii) that the tax base used by UABL entities to calculate the applicable withholding tax that UABL had used to calculate taxes paid in said period. The referred amounts exclude legal costs and interests which in Paraguay are substantial. The first two issues were disregarded by the Tax and Administrative Court on November 24, 2006. Nevertheless, the third issue continued. On September 22, 2010, the Paraguayan Supreme Court revoked the March 26, 2009 ruling of the Tax and Administrative Court -which had decided we were not liable- and confirmed the decision of the Paraguayan undersecretary for taxation which condemned UABL Paraguay S.A. to pay approximately $0.6 million non-withheld taxes, $0.7 million in fines and $1.3 million in accrued due interests. This matter was settled in a signed agreement with the Tax Authorities on October 14, 2010, and UABL paid the total amount of $1.3 million in full and final settlement of the claim and agreed to drop the appeal we had filed against to the Supreme Court. However, in parallel with this ruling the Office of the Treasury Attorney initiated an action in respect of the first two issues concerned in this litigation which had been terminated on November 24, 2006 to review certain formal aspects over which a decision of the Court is still pending. Aside from the mentioned procedures, the Customs Authorities of Paraguay have reopened the proceedings against UABL S.A., UABL Paraguay S.A. and Yataity S.A. in connection with the possible reopening of the case pending a decision of the reopening of the case in court, which is currently on hold waiting for the Court's resolution. We have been advised by UABL's counsel in the case that there is only a remote possibility that the Paraguayan Courts would find UABL liable for any of these taxes or fines still in dispute or that the final outcome of these proceedings could have a material adverse effect on the Company.

UABL Paraguay S.A. – Paraguayan Customs Asuncion – Bunker case

These administrative proceedings were commenced on April 7, 2009, by the Paraguayan Customs in Asuncion against UABL Paraguay S.A. alleging infringement of Customs regulations due to lack of submission of import clearance documents in Paraguay for bunkers purchased between January 9, 2007 and December 23, 2008, from YPF S.A. in Argentina, and between years 2003 and 2006. The total amount owed according to Customs in Asuncion is up to Gs. 12,056,635,704 (approximately $2.1 million), that is to say twice the value of the purchased bunkers (Gs. 6,028,317,852). The claim was rejected by the competent Court. This ruling was appealed and applied for annulment. The Supreme Court of Justice of Paraguay issued its ruling on September 8, 2016 against the Company's interests for the total claimed amount plus fees and costs of $0.5 million approximately. A motion for clarification has been filed.

Oceanpar S.A. and UABL Paraguay S.A. - Customs investigation in connection with re-importation of barges subject to conversion

Oceanpar S.A. was notified of this investigation on June 17, 2011. The matter under investigation is whether UABL Paraguay S.A. paid all import taxes and duties corresponding to the re-importation of barges subject to conversion in foreign yards. Customs imposed a fine of Gs. 2,791,514,822 (approximately $0.5 million) and judicial proceedings have been commenced where a final decision from the Supreme Court of Justice of Paraguay is still pending. Our local counsel has advised that, due to the conservative criteria of the courts in favor of the state, there are fifty percent chances that these proceedings will have a material adverse impact on the consolidated financial position or result of operations of the Company.

UABL Paraguay S.A. - Paraguayan Tax Authority

These are administrative proceedings commenced by the Paraguayan Tax Authorities on December 15, 2011 against UABL Paraguay S.A. due to an alleged improper use of some fiscal credit. The aforementioned tax authorities suggested some rectifications to be made and also informed that UABL Paraguay S.A. may owe taxes due to differences in the rate applied to certain fiscal remittance incomes related to the operation of some barges under leasing. The potential amount in dispute has not been calculated yet but it should not exceed approximately $3.0 million. Our local counsel has advised that there is only a remote chance that these proceedings, when ultimately resolved by a judicial court, will have a material adverse impact on the consolidated financial position or result of operations of the Company.

Ultrapetrol S.A. – Argentine Secretary of Industry and Argentine Customs Office

On June 24, 2009, Ultrapetrol S.A. (hereinafter "UPSA") requested to the Argentine Secretary of Industry, an authorization to re-export some unused steel plates that had been temporarily imported for industrialized conversion by means of vessels repairs that were not finally industrialized due to cancellations of the repairs that some shipping companies had ordered. The total weight of those steel plates was 473 tons and their import value was approximately $0.4 million. In the event that steel plates cannot be exported, payable import duties and Customs' charges would amount to approximately $0.9 million, however in case of payment UPSA would have offsetting-tax credits amounting to approximately $0.3 million. We have been advised by local counsel that there is a positive prospect of obtaining the requested authorization for re-exporting the steel plates and we do not expect the resolution of these administrative proceedings to have a material adverse impact on the consolidated financial position or result of operations of the Company.

On May 05, 2015, UPSA took notice of administrative proceedings commenced by Argentine Customs Authorities on November 04, 2014, due to an alleged infringement of Customs regulations on temporary import regime. The Customs' fine applicable in such a case could vary between $0.1 million and $2.5 million, with an additional amount of $0.1 million regarding additional VAT and income taxes, and the charges for import duties could reach $0.5 million. The chances of success will depend on the outcome of the proceedings before the Argentine Secretary of Industry, but even if UPSA is found liable, the fine will probably be imposed around the minimum amount.

UP Offshore Apoio Marítimo Ltda. - Rio de Janeiro State Treasury Office- UP Pearl Tax assessment

On May 9, 2014, the Rio de Janeiro State Treasury Office commenced administrative proceedings against UP Offshore Apoio Marítimo Ltda. alleging infringement of tax regulations due to lack of payment of ICMS tax related to the temporary import of the vessel UP Pearl . The said authorities determined the corresponding assessment in the amount of R$ 768,096.34 (approximately $0.2 million), plus interest. A decision is now pending over the non-application of the tax to the vessel's import. Our local counsel has advised that there is a remote chance that these proceedings, when ultimately resolved by a judicial court, will have a material adverse impact on the consolidated financial position or result of operations of the Company.

UABL Paraguay S.A., Yataity S.A. and UABL S.A. – Alleged Tax Evasion

These proceedings were commenced by the National Customs Authority of Paraguay on a supposed Income Tax evasion regarding some freight services rendered by UABL S.A., UABL Paraguay S.A. and Yataity S.A. from Tres Fronteras Terminal and other ports in Paraguay during 2000 and 2005. Those three entities were charged by said administrative authority for owing the alleged non-paid taxes plus same amount in fines. The total amount was, after some discussions, finally determined by the Customs National Authority in approximately $0.3 million plus a fine in the same amount. This resolution has been judicially argued by UABL entities and is now pending resolution by the Supreme Court of Justice of Paraguay. Our local counsel is of the opinion that, due to the court's state-favored conservative criteria, there are no chances of success in these proceedings.

Trafigura Beheer BV (and related companies) v Ultrapetrol S.A.

Claims have been made against Ultrapetrol by companies in the Trafigura Group under a series of contracts made in 2011-13 for construction of river barges. The claims are for alleged defects in the construction of the barges, which are (with some minor exceptions) denied by Ultrapetrol S.A.

Solicitors representing Trafigura have commenced arbitration proceedings against Ultrapetrol S.A. and arbitrators were appointed in September/October 2015. Defense Submissions and Reply Submissions have been already exchanged. Some of the Claimant's claims have been withdrawn but other claims have been added, thus the total claim now amounts to $17.0 million, excluding interests and costs. The opinion of our local counsel is reasonably optimistic that if the matter proceeds to arbitration the majority of the claims can be defeated, or at least shown to be considerably over-stated. The Company believes these proceedings will not have a material adverse financial impact on its consolidated financial position or results.

Touax Hydrovia Corp. v Corporación de Navegación Mundial S.A.

This case involves cross-claims under a long-term bareboat charter on 24 barges, dated April 25, 2012, between Touax Hydrovia Corp. ("Touax"), as Owner, Corporación de Navegación Mundial S.A. ("Cornamusa"), as Charterer, and Ultrapetrol (Bahamas) Limited ("Ultrapetrol"), as guarantor. Touax had the obligation to register the barges in a jurisdiction which would permit Cornamusa, through a Paraguayan subsidiary, to operate the barges on the Parana-Paraguay River System. Due to a change in Paraguayan legislation, Touax was no longer able to register the last 7 barges under its flag after the expiration of their provisional certificates and remain without any register. Therefore, these barges have been out of service and put off-hire by Cornamusa. Touax commenced an arbitration claim in New York against Cornamusa related to the payment of hire (roughly $2.0 million, as of the time of the filing of the briefs) which was suspended on December 2014. Likewise, as Cornamusa considers Touax to be in breach of the provision which obligated Touax to ensure that its registration of the barges would not impede Cornamusa's ability to trade them on the River system, it has therefore submitted a counterclaim in New York arbitration against Touax for breach. This counterclaim involves losses for insurance during the period of layup (following expiration of the provisional certificates) and transportation/mooring costs. Additionally, Touax executives admitted that they had recently abandoned their efforts to resolve the flagging issue. Consequently, Cornamusa terminated the contract with respect to the 7 barges in dispute. In addition, the parties submitted to the panel a fee's statement including all fees incurred during the proceedings (Cornamusa $0.3 million and Touax $0.8 million). The losing party will have to reimburse the winning party all fees declared therein. Currently, the case is awaiting for a decision from the panel as the main and reply briefs have been already submitted and exchanged in August and September 2016 respectively.

Our local counsel indicated that Cornamusa has the better argument supported by the contract terms and has classified the outcome of this contingency as uncertain.

UP Offshore Apoio Marítimo Ltda. - Rio de Janeiro Municipal State Treasury Office - Tax assessment

On March 6, 2015, the Rio de Janeiro State Treasury Office commenced administrative proceedings against UP Offshore Apoio Marítimo Ltda. aiming to collect Service Tax (ISS) supposedly due on values related to bareboat charter agreements for the period August 2010 to December 2014 which were determined in the amount of approximately $4.5 million. On April 1, 2015, the company presented its administrative defense. At the same time, the right of the company not to pay this tax has been discussed. All procedural remedies have now been exhausted by the Municipality of Rio de Janeiro before court, and a final decision granting the company's plea has been issued. A final analysis on the Tax Assessment before the Rio de Janeiro Municipal State Treasury Office regarding this matter is still pending. Our local counsel has advised that there are strong arguments to support our right and a remote chance to get an unfavorable decision.

UABL Paraguay S.A. – Administrative Dossier due to alleged lack of deletion certificates

On May 2016, an administrative dossier was initiated due to a Bolivian International Vessel Registry ( RIBB ) report. It investigates an alleged lack of presentation of Bolivian flag deletion certificates in the Paraguayan flagging process of 252 vessels. In case Paraguayan administrative court decides UABL Paraguay S.A. is liable for not complying with said submission, Paraguayan Registry could declare the decrees that granted Paraguayan flag null and void and those vessels could remain unflagged. In this case, these vessels would no longer be able to operate in Paraguay. On October 11, 2016 the General Directorate of National Merchant Marine of Paraguay rejected our motion for reconsideration but administrative proceedings are still in course before the Ministry of Public Works and Communications of Paraguay. Our local counsel is of the opinion that there are fifty percent chances of obtaining a favorable decision in these proceedings.

Revenues . Total revenues from our River Business decreased 7% from $48.4 million in the three months ended September 30, 2015, to $44.8 million in the same period of 2016. This $3.6 million decrease results mainly from a $2.7 million decrease in revenues from river operations mostly related to lower freight rates and an 8% decrease in tons transported; a $1.2 million decrease in revenues from our Parana Iron transfer and storage unit primarily attributable to a decrease in tons transshipped and a $0.4 million decrease in revenues from our time charter contract with Vale; partially offset by a $0.8 million increase in other revenues.

Total revenues from our River Business decreased 16% from $140.3 million in the nine months ended September 30, 2015, to $118.1 million in the same period of 2016. This $22.2 million decrease results mainly from a $11.0 million decrease in revenues from our river operations primarily attributable to lower freight rates, a $10.7 million decrease in revenues related to four barges constructed at our yard in Punta Alvear and sold to third parties in the first nine months of 2016 as compared to nine in the same period of 2015, a $1.3 million decrease in revenues from our Parana Iron related to a decrease in tons transshipped and a $0.9 million decrease in our terminals business; partially offset by a $1.6 million increase in other revenues.

Total revenues from our Offshore Supply Business decreased 34% from $29.2 million in the three months ended September 30, 2015, to $19.2 million in the same period of 2016. This $10.0 million decrease is primarily attributable to a combined $7.9 million decrease in revenues related to the contract cancellation by Petrobras of our UP Pearl , UP Amber and UP Esmeralda and the blocking of our UP Turquoise in September 2015, a $1.7 million decrease related to the lay-up of our UP Jade after the finalization of its contract with Petrobras in August 2016, a $0.2 million decrease of our UP Topazio related to its dry dock in the third quarter of 2016 and a $0.2 million decrease of our UP Diamante related to an increase in offhire days due to repairs and maintenance during the third quarter of 2016 as compared to the same period last year.

Total revenues from our Offshore Supply Business decreased 28% from $85.6 million in the nine months ended September 30, 2015, to $61.5 million in the same period of 2016. This $24.1 million decrease is primarily attributable to a combined $28.2 million decrease in revenues related to the contract cancellation by Petrobras of our UP Pearl , UP Amber and UP Esmeralda and the blocking of our UP Turquoise in September 2015, a $1.7 million decrease related to the lay-up of our UP Jade in August 2016 after the finalization of its contract with Petrobras, a combined $1.7 million decrease of our UP Safira and UP Opal related to an increase in offhire days due to repairs and maintenance during the first nine months of 2016 as compared to the same period last year, a combined $1.5 million decrease of our Brazilian-flagged PSVs mainly related to the devaluation of the Brazilian real during the first nine months of 2016 as compared to the same period last year, and a combined $1.1 million decrease of our UP Jasper and UP Agate related to their lay-up in the North Sea; partially offset by a $10.1 million increase of our RSV UP Coral , which entered into a long-term charter with Petrobras in August 2015 (subsequently extended until August 2017).

Total revenues from our Ocean Business decreased $3.3 million, or 18%, from $18.2 million in the three months ended September 30, 2015, to $14.9 million in the same period of 2016. This decrease is mainly attributable to a $2.5 million decrease of our Alejandrina , which was sold and delivered to buyers in March 2016, a $0.6 million decrease of our Argentino on account of its dry dock during the third quarter of 2016, and a $0.1 million decrease of our bareboat chartered vessel Mentor .

Total revenues from our Ocean Business decreased $10.5 million, or 21%, from $50.5 million in the nine months ended September 30, 2015, to $40.0 million in the same period of 2016. This decrease is mainly attributable to a combined $12.4 million decrease of our Amadeo, Miranda I and Alejandrina which were sold and delivered to buyers on May 29, 2015, July 16, 2015, and March 7, 2016, respectively; partially offset by a $1.9 million increase of our Asturiano mainly due to faster rotation times.

Voyage and manufacturing expenses . In the three months ended September 30, 2016, voyage and manufacturing expenses of our River Business were $20.3 million as compared to $18.5 million for the same period of 2015. This $1.8 million increase is mainly attributable to a $2.1 million increase in other voyage expenses mainly related to hire expenses and a $0.8 million increase in manufacturing expenses incurred in the construction of barges for third parties in our Punta Alvear yard; partially offset by a $1.1 million decrease in fuel expense mainly related to lower fuel prices.

In the nine months ended September 30, 2016, voyage and manufacturing expenses of our River Business were $44.2 million, as compared to $59.2 million for the same period of 2015, a decrease of $15.0 million, or 25%. This decrease is mainly attributable to a $8.9 million decrease in manufacturing expenses incurred in the construction of barges for third parties at our Punta Alvear yard during the first nine months of 2016 as compared to the same period last year, and a $6.3 million decrease in fuel expense mainly driven by lower fuel prices; partially offset by a $0.2 million increase related to our transshipment unit which commenced operations in August 2016.

In the three months ended September 30, 2016, voyage expenses of our Offshore Supply Business were $1.9 million, as compared to $1.6 million in the same period of 2015. This $0.3 million increase is primarily attributable to a $0.2 million increase related to the full quarter payment to our crane operator partner of our RSV UP Coral  which commenced operation with Petrobas on August 5, 2015, and by a $0.1 million increase in positioning costs of our UP Jade in August 2016 after the finalization of its charter.

In the nine months ended September 30, 2016, voyage expenses of our Offshore Supply Business were $5.5 million, as compared to $3.3 million in the same period of 2015. This $2.2 million increase is primarily attributable to the full quarter payment to our crane operator partner of our RSV UP Coral which commenced operation with Petrobas on August 5, 2015 .

In the three months ended September 30, 2016, voyage expenses of our Ocean Business were $5.1 million, as compared to $6.8 million for the same period of 2015, a decrease of $1.7 million, or 26%. This is primarily attributable to a $1.1 million decrease of our Argentino on account of its dry dock during the third quarter of 2016, to a $0.3 million decrease in fuel expenses and a $0.2 million decrease of our bareboat chartered vessel Mentor related to start-up costs incurred last year.

In the nine months ended September 30, 2016, voyage expenses of our Ocean Business were $16.4 million, as compared to $18.1 million for the same period of 2015, a decrease of $1.7 million, or 9%. This decrease is primarily attributable to a $1.6 million decrease of our Argentino related to its dry dock during the third quarter of 2016 and a $0.1 million decrease of our Miranda I , which was sold an delivered to vessels in July 2015.

Running costs . In the three months ended September 30, 2016, running costs of our River Business were $11.4 million, as compared to $13.9 million in the same period of 2015, a decrease of $2.5 million, or 18%. This decrease is mainly attributable to a $2.3 million decrease in crew costs on account of a reduced headcount and the devaluation of local currencies and a $0.6 million decrease in supplies and maintenance costs of our Parana Iron transshipment and storage station; partially offset by a combined $0.3 million increase in supplies, maintenance and other running costs related to our pushboat fleet.

In the nine months ended September 30, 2016, running costs of our River Business were $34.6 million, as compared to $44.7 million in the same period of 2015, a decrease of $10.1 million, or 23%. This difference is mainly attributable to an $8.3 million decrease crew costs on account of a reduced headcount and the devaluation of local currencies, a $1.1 million decrease in supplies and maintenance costs of our Parana Iron, a $0.5 million decrease in insurance costs of our barge fleet, and a $0.2 million decrease in other maintenance costs.

In the three months ended September 30, 2016, running costs of our Offshore Supply Business were $9.1 million, as compared to $11.3 million in the same period of 2015, a decrease of $2.2 million, or 19%. This decrease is mainly attributable to our UP Pearl , UP Amber and UP Esmeralda, which remain laid-up since their contract cancellations by Petrobras in September 2015 and the blocking of our UP Turquoise .

In the nine months ended September 30, 2016, running costs of our Offshore Supply Business were $23.7 million, as compared to $36.0 million in the same period of 2015, a decrease of $12.4 million, or 34%. This decrease is mainly attributable to a combined $7.8 million decrease related to the contract cancellation by Petrobras of our UP Pearl , UP Amber and UP Esmeralda and the blocking of our UP Turquoise in September 2015, a combined $2.4 million decrease of our UP Jasper and UP Agate related to their lay up in the North Sea as compared to their partial operation during the same period in 2015, a combined $1.4 million decrease of our UP Safira, UP Topazio, UP Diamante and UP Rubi mainly due to the devaluation of the Brazilian real during the first nine months of 2016 as compared to the same period of 2015 and a $0.7 million decrease related to the lay-up of our UP Jade .

In the three months ended September 30, 2016, running costs of our Ocean Business were $5.0 million, as compared to $10.9 million in the same period of 2015, a decrease of $5.9 million, or 54%. This decrease resulted mainly from a combined $2.9 million decrease of our Amadeo, Miranda I and Alejandrina, which were sold and delivered to buyers on May 29, 2015, July 16, 2015, and March 7, 2016, respectively, a $2.0 million decrease in crew costs primarily related to the devaluation of the Argentine peso, a $0.8 million decrease in supplies and maintenance costs of our fleet related to the devaluation of the Argentine peso and more strict cost controls, and a $0.1 million decrease in other running costs.

In the nine months ended September 30, 2016, running costs of our Ocean Business were $16.1 million, as compared to $27.6 million in the same period of 2015, a decrease of $11.5 million, or 42%. This decrease resulted mainly from a combined $10.1 million decrease of our Amadeo, Miranda I and Alejandrina which were sold and delivered to buyers on May 29, 2015, July 16, 2015, and March 7, 2016, respectively, and a combined $1.3 million decrease in crew costs of our Argentino and Austral mainly related to the devaluation of the Argentine peso during the first nine months of 2016 as compared to the same period in 2015.

Amortization of drydocking and intangible assets . Amortization of drydocks and intangible assets in the three months ended September 30, 2016, were $2.4 million as compared to $2.7 million for the same period of 2015, a decrease of $0.3 million, or 9%. This decrease is primarily attributable to a decreased level of amortization of drydock of our UP Safira, UP Esmeralda and UP Agua-Marinha .

Amortization of drydocks and intangible assets in the nine months ended September 30, 2016, were $7.5 million, as compared to $7.1 million for the same period of 2015, an increase of $0.4 million, or 5%. This increase is primarily attributable to a $0.8 million increased level of amortization of drydock of our bareboat chartered vessel Austral on account of its drydock during the second quarter of 2016; partially offset by a $0.4 million decreased level of amortization of drydock of some of our pushboats in our River Business.

Depreciation of vessels and equipment . Depreciation of vessels and equipment for the three months ended September 30, 2016, was $11.4 million as compared to $10.3 million in the same period of 2015. This $1.1 million increase is mainly attributable to a $1.2 million increase related to the offshore barges acquired during the second quarter of 2016; partially offset by a $0.1 million decrease related to the sale of our Alejandrina which was sold and delivered to buyers on March 7, 2016.

Depreciation of vessels and equipment for the nine months ended September 30, 2016, was $31.1 million as compared to $31.2 million in the same period of 2015. This $0.1 million decrease was mainly attributable to a $1.3 million decrease in depreciation of our barge fleet; partially offset by a $1.2 million increase related to the offshore barges acquired during the second quarter of 2016.

Loss on write-down of vessels and equipment. Loss of write-down of vessels and equipment was $31.4 million in the third quarter of 2016 and in the nine months ended September 30, 2016, as compared to nil in the same periods of 2015. This increase was attributable to a $16.4 million impairment charge of our UP Agate and UP Jade , a $11.9 million impairment charge of our Asturiano and Argentino , and a $3.1 million impairment charge of our Parana Iron transfer and storage unit.

Administrative and commercial expenses. Administrative and commercial expenses were $10.1 million in the three months ended September 30, 2016, as compared to $11.6 million in the same period of 2015, resulting in a decrease of $1.5 million or 13%. This variation corresponds to a $1.1 million decrease related to the termination of the employment agreements of two company officers during the third quarter 2015, a $0.2 million decrease in debt bank taxes and a $0.1 million decrease in other fees.

Administrative and commercial expenses were $35.5 million in the nine months ended September 30, 2016, as compared to $31.6 million in the same period of 2015, resulting in an increase of $3.9 million or 12%. This increase is mainly attributable to a $4.8 million non-cash increase related to revised labor contingencies and customs claims in Paraguay; partially offset by a $0.6 million decrease in debt bank taxes, a $0.2 million decrease in other expenses and a $0.1 million decrease in audit and tax fees.

Other operating income . Other operating income was $0.1 million in the three months ended September 30, 2016, as compared to $0.4 million in the same period of 2015. This $0.3 million decrease is mainly attributable to loss of hire compensations related to our Asturiano and Argentino during the third quarter of 2015.

Other operating income was $2.0 million in the nine months ended September 30, 2016, as compared to a loss of $0.6 million in the same period of 2015. This $2.6 million increase is mainly attributable to a $1.0 million loss of hire compensation of our UP Safira during the first quarter of 2016 in our Offshore Supply Business, a $0.8 million increase related to the net loss of from the sale of our Amadeo during the second quarter of 2015, a $0.4 million increase related to our Parana Iron on account of an insurance recovery and a $0.3 million increase related to loss of hire compensations of our Asturiano and Argentino .

Operating loss . Operating loss for the three months ended September 30, 2016, was $29.1 million, a decrease of $37.6 million from an operating income of $8.5 million for the same period of 2015. This decrease is mainly attributable to a $25.9 million decrease in operating profit of the Offshore Supply Business, from an operating profit of $7.9 million in the third quarter of 2015 to an operating loss of $18.1 million in the same period of 2016, mainly associated to the contract cancellation by Petrobras of our UP Amber, UP Pearl, UP Esmeralda and the blocking of our UP Turquoise in September 2015, the lay-up of our UP Jade after finalizing its contract in August 2016 and the impairment charge of our UP Agate and UP Jade ; a $7.9 million increase in operating loss of our Ocean Business from $1.9 million in the third quarter of 2015 to  $9.8 million in the same period of 2016 mainly related to the impairment charge of our Asturiano and Argentino recorded in the third quarter of 2016; and a $3.8 million decrease in operating profit from of the River Business, from an operating profit of $2.6 million in the third quarter of 2015 to an operating loss of $1.3 million in the third quarter of 2016 mainly associated to a decrease in revenues primarily due to lower freight rates and the impairment charge of our Parana Iron .

Operating loss for the nine months ended September 30, 2016, was $24.4 million, a decrease of $41.3 million from an operating profit of $16.9 million in the same period of 2015. This decrease is mainly attributable to a $34.2 million decrease in operating profit of our Offshore Supply Business from a $22.7 million operating profit in the nine months ended September 30, 2015 to an operating loss of $11.6 million in the nine months ended September 30, 2016, mainly associated to the contract cancellation by Petrobras of our UP Amber, UP Pearl, UP Esmeralda and the blocking of our UP Turquoise in September 2015 and the lay-up of our UP Jade  after finalizing its contract in August 2016 and the impairment charge of our UP Agate and UP Jade ; a $7.4 million increase in operating loss of our Ocean Business, from $4.5 million in the nine months ended September 30, 2015, to $12.0 million in the same period of 2016 mainly related to the impairment charge of our Asturiano and Argentino recorded in the third quarter of 2016; partially offset by a $0.3 million decrease in operating loss of our River Business from $1.2 million in the nine months ended in September 30, 2015, to $0.9 million in the same period of 2016 mainly associated to more stringent cost controls, a reduced headcount, and lower fuel prices.

Financial expense . Financial expense in the three months ended September 30, 2016, was $12.4 million, as compared to $8.4 million in the same period of 2015. This $4.0 million increase is mostly explained by debt renegotiation costs incurred during the third quarter of 2016, by accrued interests related to due and unpaid interest installments of our 2021 Notes and to accrued interests related to the due and unpaid interest and principal installment under our IFC and OFID loan facilities; partially offset by the partial prepayments of our DVB-NIBC and DVB-NIBC-ABN loan facilities in January 2016 and the full repayment of our Natixis loan facility in March 2016 .

Financial expense in the nine months ended September 30, 2016, was $41.0 million, an increase of $15.9 million as compared to $25.1 million in the same period of 2015. This variation is mostly explained by debt renegotiation costs incurred during the first nine months of 2016, by accrued interests related to due and unpaid interest installments of our 2021 Notes and to accrued interests related to the due and unpaid interest and principal installment under our IFC and OFID loan facilities; partially offset by the partial prepayments of our DVB-NIBC and DVB-NIBC-ABN loan facilities in January 2016 and the full repayment of our Natixis loan facility in March 2016 .

Foreign currency exchange loss, net . Foreign currency exchange loss for the three months ended September 30, 2016, was $0.9 million, compared to $3.4 million in the same period of 2015. This $2.5 million decrease is mainly attributable to lower cash foreign currency exchange losses in some of our subsidiaries and to the effect of our exposure to the fluctuation in the value of local currencies mostly related to the revaluation of the Brazilian real.

Foreign currency exchange loss for the nine months ended September 30, 2016, was $2.1 million, compared to a $3.6 million loss in the same period of 2015. This $1.5 million decrease is mainly attributable to lower cash foreign currency exchange losses in some of our subsidiaries and to the effect of our exposure to the fluctuation in the value of local currencies mostly related to the revaluation of the Brazilian real.

Income taxes (expenses) benefit. Income tax expense for the three months ended September 30, 2016, was $3.6 million, compared to a $0.5 million income tax benefit in the same period of 2015. This $4.1 million decrease is mainly attributable to a joint $2.7 million charge attributable to the accelerated depreciation scheme in Brazil and a decrease in the exchange variance provision in our Offshore Supply Business and a combined $1.5 million charge attributable to higher pretax income in our Argentinean subsidiaries operating in the River and Ocean Business; partially offset by a $0.1 million change attributable to a lower pretax income in Brazil in our Offshore Supply Business.

The income tax expense for the nine months ended September 30, 2016, was $8.3 million, compared to $2.2 million in the same period of 2015. This $6.1 million variation is mainly attributable to a joint $6.2 million charge attributable to the accelerated depreciation scheme in Brazil and a decrease in the exchange variance provision in our Offshore Supply Business and a combined $0.1 million charge attributable to higher pretax income in our Argentinean subsidiaries operating in the River and Ocean Business; partially offset by a $0.2 million change attributable to a lower pretax income in Brazil in our Offshore Supply Business.

Liquidity and Capital Resources

We are a holding company that operates in a capital-intensive industry requiring substantial ongoing investments in revenue producing assets. Our subsidiaries have historically funded their vessel acquisitions through a combination of debt, shareholder loans, cash flow from operations and equity contributions.

The ability of our subsidiaries to make distributions to us may be restricted by, among other things, restrictions under our credit facilities and applicable laws of the jurisdictions of their incorporation or organization.

Our internally generated cash flow is directly related to our business and the market sectors in which we operate. Should the markets in which we operate deteriorate or worsen, or should we experience poor results in our operations, cash flow from operations may be reduced. Due to current market conditions such as historically low commodity prices compounded with overcapacity in our River Business, as well as overcapacity in the Brazilian offshore supply marine market, which translated into contract cancellations in September 2015, blocking of vessels and requests for time charter rate reductions on our PSV and RSV fleet, our cash generating capacity has been, and could continue to be, significantly impaired. These impacts have not permitted the regular service of our interest payments on our debt obligations.

We do not expect that cash on hand and cash expected to be generated from operations will be sufficient to repay our debt, which could result in our debt being accelerated by our lenders. In such a scenario, we would have to seek to access the capital markets to fund the mandatory payments and, if we are not successful in accessing the capital markets at sufficient levels, our lenders could foreclose their liens, which could impair our ability to conduct our business and continue as a going concern. We currently do not believe that we would be successful in accessing the capital markets, or access the capital markets on terms that are commercially acceptable to us. Moreover, in connection with any additional amendments to our debt agreements that we could obtain, or if we enter into any future credit agreements or debt instruments, our lenders may impose additional operating and financial restrictions on us. These restrictions may further restrict our ability to, among other things, fund our operations or capital needs, make acquisitions or pursue available business opportunities, which in turn may adversely affect our financial condition. In addition, our lenders may require the payment of additional fees, require prepayment of a portion of our indebtedness to them, require the pledging of additional collateral, accelerate the amortization schedule for our indebtedness or increase the margin and lending rates they charge us on our outstanding indebtedness.

Alternatively to debt capital markets, we may seek to raise additional cash through capital increase from Southern Cross, our major shareholder, or its affiliates, or through the sale of certain of the Company's assets/segments. See "Recent Development" section.

Nevertheless, at September 30, 2016, we believe that cash on hand and internally generated cash flow will be sufficient to fund our operations (operating costs, working capital requirements and scheduled capital expenditures but not debt principal and service payments) for the next twelve months.

At September 30, 2016, we had aggregate indebtedness of $454.4 million, consisting of $225.0 million aggregate principal amount of our 2021 Notes, indebtedness of our subsidiary UP Offshore Apoio Maritimo Ltda. under a senior loan facility with DVB Bank AG, or DVB, of $4.2 million and $11.7 million under a loan facility with BNDES, indebtedness of our subsidiary UP Offshore (Bahamas) Ltd. of $55.6 million under three senior loan facilities with DVB and $24.2 million under an additional senior loan agreement with DVB and Banco Security as co-lenders, indebtedness of our subsidiary Ingatestone Holdings Inc. of $41.9 million under a senior loan facility with DVB, NIBC and ABN Amro as co-lenders, indebtedness of our subsidiary Linford Trading Inc. of $26.9 million under a senior loan facility with DVB and NIBC, indebtedness of our subsidiaries UABL Barges (Panama) Inc., Marine Financial Investment Corp., Eastham Barges Inc. and UABL Paraguay S.A. of $39.1 million in the aggregate under two senior loan facilities with IFC, indebtedness of our subsidiary UABL Paraguay S.A. of $9.8 million under a senior loan facility with OFID, and indebtedness of our subsidiaries UABL Paraguay S.A. and Riverpar S.A. of $16.2 million under a senior loan facility with IFC and OFID as co-lenders and accrued interest of $29.9 million.

At September 30, 2016, we had cash and cash equivalents on hand of $45.6 million plus $7.9 million in restricted cash (including non-current restricted cash), making a total of $53.5 million.

Operating Activities

In the nine months ended September 30, 2016, cash flow provided by operations decreased by $1.6 million to $22.5 million from $24.1 million during the same period of 2015. Net loss for the nine months ended September 30, 2016, was $75.9 million as compared to $14.4 million in the same period of 2015, a decrease of $61.5 million. To determine cash from operations, net loss is adjusted for the effect of certain non-cash items including depreciation and amortization, which are analyzed in detail as follows:

Net loss is also adjusted for changes in operating assets and liabilities and expenditure in drydock in order to determine net cash provided by operations:

The positive change in operating assets and liabilities of $13.9 million for the nine months ended September 30, 2016, resulted from a $30.3 million increase in other liabilities on account of due and unpaid interests and a $5.3 million increase in accounts payable; partially offset by a $11.5 million increase in accounts receivable, a $9.3 million increase operating supplies and prepaid expenses, a $0.6 million increase in other assets and a $0.5 million decrease in customer advances. In addition, cash flow from operating activities decreased by $1.7 million, $1.6 million and $0.3 million in the nine months ended September 30, 2016, due to expenditures in drydock for our Ocean, Offshore Supply and River businesses, respectively.

The negative change in operating assets and liabilities of $1.7 million for the nine months ended September 30, 2015, resulted from a $9.0 million decrease in operating supplies and prepaid expenses, a $0.1 million decrease in other assets, and a $2.0 million increase in other liabilities; partially offset by a $6.0 million increase in accounts receivable, a $5.9 million decrease in accounts payable and a $0.9 million decrease in customer advances. In addition, cash flow from operating activities decreased by $2.2 million, $2.1 million and $1.8 million in the nine months ended September 30, 2015, due to expenditures in drydock for our Offshore Supply, River and Ocean businesses, respectively.

Investing Activities

During the nine months ended September 30, 2016, we disbursed $0.9 million in our IT navigation system, $0.7 million in the construction of new line and port pushboats, $0.4 million in our Parana Iron and in $0.1 million in our midstream transshipment station for agricultural products, in our River Business; $13.9 million (of which $0.6 million were paid as of September 30, 2016) in the acquisition of offshore barges to be paid in 60 equal monthly installments and $2.4 million in the acquisition of UP Agate's crane, in our Offshore Supply Business.

We also invested approximately $7.4 million in the production of tank barges in our Punta Alvear Shipyard, which are shown within Operating Supplies and Inventories, during the first nine months of 2016.

On January 28, 2016, we entered into a MOA whereby we agreed to sell out Product Tanker Alejandrina . This vessel was subsequently delivered to buyers on March 7, 2016, and we received net proceeds of $1.8 million after totally prepaying the $2.9 million balance outstanding with Natixis (included in financing activities) and commissions

Financing Activities

Net cash used in financing activities in the nine months ended September 30, 2016, was $19.3 million, a decrease of $27.9 million from $8.6 million provided in the same period of 2015. This decrease is mainly attributable to $32.0 million proceeds from long-term financial debt during the first nine months of 2015, $15.1 million debt renegotiation costs paid during the first nine months of 2016 and a $6.7 million increase in early repayments of long-term, associated to the full repayment of our senior loan facility with Natixis and the partial repayments of our senior loan facilities with DVB and NIBC and DVB, NIBC and ABN Amro; partially offset by a $20.8 million decrease in scheduled repayments of long-term debt pursuant to the forbearance agreements signed with our secured creditors and a $5.0 million increase other financing activities, which include a $4.3 million decrease in restricted cash.

Future Capital Expenditure Requirements

Our near-term cash requirements are related primarily to funding operations, funding the construction of barges in our shipyard at Punta Alvear, funding scheduled and unscheduled drydocks and potentially funding the conversion of our PSVs into RSVs. The Company does not anticipate ordering additional vessels in 2016 or realizing any additional capital expenditures other than maintenance capital expenditures.

We estimate that for the remainder of 2016, we will invest approximately $4.3 million in our pushboat fleet (including critical spares parts such as engine spares), $1.1 million in upgrade works at our Punta Alvear Yard and fleetings, $0.8 million in the maintenance of our barge fleet, $0.4 million in our IT Navigation System, $0.1 million in our Parana Iron storage and transshipment station and $0.1 million in our transshipment unit, in our River Business. We also expect to disburse an aggregate amount of $1.7 million in drydock expenses.

We expect to fund these future capital requirements through existing cash and/or cash flow from operations.

We may order additional vessels and or incur other capital expenditures, which are not discussed above or contemplated at this time.

The following tables reconcile our Adjusted Consolidated EBITDA to our segment operating (loss) profit for the nine months ended September 30, 2016, and 2015, on a consolidated and a per segment basis:

 

 

 

The use of the term "Adjusted Consolidated EBITDA" in the current filing rather than EBITDA as has been used in previous filings, is responsive to the U.S. Securities and Exchange Commission Release No. 34-47226 where from if the measurement being used excludes "non-cash charges" or other similar concepts other than strictly interest, taxes, depreciation and amortization, or were otherwise to depart from the definition of EBITDA as included in the aforementioned release, it should be called "Adjusted Consolidated EBITDA" rather than EBITDA.

EBITDA as defined in the Notes due 2021 consists of net income (loss) prior to deductions for interest expense and other financial gains and losses related to the financing of the Company, income taxes, depreciation of vessels and equipment and amortization of drydock expense, intangible assets, financial gain (loss) on extinguishment of debt, premium paid for redemption of preferred shares and certain non-cash charges (including for instance losses on write-down of vessels). The calculation of EBITDA as defined in the Notes due 2021 excludes from all items those amounts corresponding to unrestricted subsidiaries under the indenture governing our 8⅞% First Preferred Ship Mortgage Notes due 2021, or the Indenture, from the time of designation as such. We have provided EBITDA as defined in the Notes due 2021 in this report because we use it to and believe it provides useful information to investors to evaluate our ability to incur and service indebtedness and it is a required disclosure to comply with a covenant contained in such Indenture. We do not intend for EBITDA as defined in the Notes due 2021 to represent cash flows from operations, as defined by GAAP (on the date of calculation) and it should not be considered as an alternative to measure our liquidity. The foregoing definitions of EBITDA as defined in the Notes due 2021 may differ from other definitions of EBITDA or Consolidated EBITDA used in the financial covenants of our other credit facilities. These definitions of EBITDA as defined in the Notes due 2021 may not be comparable to similarly titled measures disclosed by other companies. Generally, funds represented by EBITDA as defined in the Notes due 2021 are available for management's discretionary use. EBITDA as defined in the Notes due 2021 has limitations as an analytical tool and should not be considered in isolation, or as a substitute for analysis of our results as reported. These limitations include, among others, the following: