Moody’s lifts ratings on more than $3B of XPO Logistics debt

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Rating agency Moody’s Investors Service said it upgraded its ratings on about $3.2 billion debt issued by XPO Logistics, Inc., (NYSE: XPO) citing a “positive operating environment” in 2019 for transport and logistics companies, as well as XPO’s strong performance.

In a note issued yesterday, Moody’s said Greenwich, Conn.-based XPOs growing scale and investments in technology and infrastructure will strengthen its market position across all its service lines, especially in the e-commerce market which is experiencing secular growth trends. That, combined with a healthy economy and tight transport capacity, should lead to an improved ratio of debt to earnings before interest, taxes, depreciation and amortization (EBITDA), Moody’s said in the note.

As headwinds, Moody’s noted XPO’s short operating life in its current form, an aggressive growth strategy that “reduces visibility into the company’s risk profile,” and the cyclical nature of the transport sector, which is closely tied to economic activity and depends on what is known as “derived demand.” Moody’s pointed out that the stable nature of XPO’s contract logistics business—which accounts for 37 percent of sales—helps to smooth out the cyclical volatility in the transport business

Moody’s predicted that XPO would return to the acquisition hunt sometime next year; it had been reported that the company was targeting 2018 for 1 and possibly 2 purchases. XPO, which grew into a $17 billion company in large part on the back of 17 acquisitions from 2011 to 2015, has not made an acquisition since it bought trucker and logistics firm Con-way Inc. for $3 billion in September 2015.

The Moody upgrades affect a $1.5 billion senior secured term loan due in 2025, $1.2 billion in senior unsecured notes due in 2022, and $535 million in senior unsecured notes due in 2023, Moody’s said.

XPO shares fell $5.62 a share today to close at $86.01 a share amid a sharp decline in U.S. equity markets.


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Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.