FedEx Freight will begin life as an investment-grade credit

FedEx Freight, the transportation company’s LTL spinoff, volition beryllium entering the satellite with a indebtedness standing 1 notch little than the genitor company.

S&P Global Ratings said Friday it had issued a standing of BBB- to FedEx Freight. The genitor institution has a standing of BBB. Both ratings are investment-grade, though BBB- is the lowest concern people connected the S&P Global Ratings scale.

Moody’s has a standing connected FedEx (NYSE: FDX) of Baa2, which is considered equivalent to the S&P BBB rating. As of Friday, Moody’s had not rated the indebtedness of FedEx Freight.

There aren’t galore different LTL carriers with publicly-traded indebtedness arsenic a constituent of comparison. But astatine Ba2 astatine Moody’s and BB astatine S&P Global, XPO has a little indebtedness standing than FedEx Freight volition transportation into its spinoff. Those XPO ratings are some non-investment grade.

Several different ample LTL carriers bash not person publicly-traded debt, specified arsenic Old Dominion Freight Lines (NASDAQ: ODFL) and ArcBest (NASDAQ: ARCB). LTL bearer Forward Air (NASDAQ: FWRD) is carrying a non-investment people standing of B, respective notches beneath some XPO and FedEx Freight.

FedEx Freight volition statesman beingness with a indebtedness load driven successful portion by an expected $4.3 cardinal dividend outgo to FedEx. Reviewing the indebtedness structure, S&P Global said FedEx Freight volition contented a $600 cardinal unsecured delayed gully word indebtedness to spell on with an estimated $3.7 cardinal successful different unsecured indebtedness to marque the dividend payment.

It besides has taken connected a $1.2 cardinal revolving recognition facility. However, S&P notes the enactment volition not beryllium tapped until the spinoff is closed.

The existent day for the spinoff is June 1.

The BBB- standing is being issued on with a unchangeable outlook. Stable means that neither an upgrade nor downgrade is apt successful the foreseeable future.

“The unchangeable outlook incorporates our presumption that the institution volition make and prolong funds from operations (FFO) to indebtedness supra 20%, reflecting an summation successful mean regular shipments, mean value per shipments and continued output enlargement successful gross per hundredweight,” S&P said successful its report. “We presume the company’s recognition measures gradually amended beyond calendar 2026, led by maturation successful its net and currency flow.”

The S&P Global (NYSE: SPGI) study recaps immoderate of FedEx Freight’s cardinal statistics, including gross that is good supra its competition. For example, Old Dominion had gross of astir $1.4 cardinal successful the 4th ended September 30. In the 4th ended November 30, FedEx Freight reported gross of astir $2.2 billion.

Its astir 26,000 doors, according to S&P, is the largest successful the LTL industry. FedEx Freight volition screen astir 98% of each U.S. zip codes, “which we judge provides it with a competitory vantage implicit determination operators,” S&P said.