Moody’s cuts Odyssey rating amid weak freight market

Rating was in place for three years

B3 is deep into the list of non-investment grade ratings. It is six notches less than the cutoff for investment and non-investment grade debt at Moody’s. 

Odyssey’s B2 rating was affirmed by Moody’s in March 2024 and July 2023. The rating was increased to that level in August 2022.

S&P Global Ratings (NYSE: SPGI) reduced its rating on Odyssey in June, cutting it one notch to B-. That rating is considered equivalent to a B3 rating at Moody’s.

Moody’s has had a stable rating on its Odyssey rating since its move to that level three years ago. A downgrade of a debt rating is often preceded by a ratings agency moving to a negative outlook from stable, just as an upgrade is often preceded by a move to a positive outlook. 

Moody’s had Odyssey Logistics at an outlook of stable since the August 2022 move, going straight to a downgrade in its most recent change.  A downgrade without a downward move from a stable outlook is not rare, but it is not the norm. 

The new rating keeps the Stable outlook in place.

Odyssey’s Corporate Family Rating from Moody’s was cut to B3 from B2. Its probability of default rating was reduced to B3-PD from B2-PD, and its senior secured first lien bank credit was cut to B3 from B2.

B3 is deep into the list of non-investment grade ratings. It is six notches less than the cutoff for investment and non-investment grade debt at Moody’s, as it is for S&P Ratings. 

Odyssey’s B2 rating was affirmed by Moody’s in March 2024 and July 2023. The rating was increased to that level in August 2022.

Key debt ratio is elevated

Moody’s said it expects that the weaker market would result in Odyssey’s financial leverage remaining above a 7X debt/EBITDA level through the end of this year. That benchmark–debt to EBITDA–is one of the key numbers that ratings agencies look at in handing down their verdict on a company’s debt position.

In S&P Global’s June reduction of Odyssey’s ratings, it said it anticipated debt/EBITDA at the 3PL to be in the mid 6X range next year. 

“The company has undertaken several cost saving initiatives and maintains solid commercial opportunities, but we don’t anticipate a meaningful recovery in earnings until broader freight market conditions, particularly pricing, improve,” Moody’s said in its report.

The ratings agencies, in their reports, rarely disclose data about a company’s revenue or profitability. 

But Moody’s discussed the impact the current market is having on those financial measures at Odyssey. 

Earnings are down

The weak freight market, Moody’s said, “has significantly reduced Odyssey’s earnings compared to prior years.”

Moody’s said it expects the company’s net revenue–defined as gross revenue less transportation costs–to be down in the “low-single digit percentage range” this year compared to 2024. EBITDA also will be lower.

And in a refrain that the trucking and brokerage industry has been saying for two to three years, awaiting the turnaround in a market that has not occurred yet, Moody’s said of Odyssey: “We believe net revenue and earnings growth will return in 2026 from improved pricing and realized cost efficiencies.”

The June reduction in Odyssey’s debt rating at S&P Global Ratings came with a few more details about Odyssey’s financial performance. In its report, S&P Ratings said Odyssey’s adjusted EBITDA margins fell 380 basis points from 2023. Revenue was largely flat. 

“Weaker freight market conditions drove volume declines in its marine logistics and managed services segments, though they were offset by some volume gains in its intermodal segment,” S&P said in its recap of the 2024 Odyssey earnings.

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