RXO and C.H. Robinson Face Ratings Agency Cuts

RXO and C.H. Robinson are the latest logistics giants facing debt downgrades amid challenging market conditions. Here's a closer look at the situation:

RXO's Downgrade

• Downgrade Details: S&P Global Ratings cut RXO’s debt rating from BB+ to BB, two notches below investment-grade. Moody’s kept RXO at investment-grade (Baa3) but with a negative outlook.
• Financial Health: RXO’s key financial metric, which measures how easily they can pay off their debt, has worsened significantly. Their earnings and cash flow have dropped, making it harder to manage debt.
• Company Response: RXO highlighted its growing market share despite challenges, stating, “RXO is well-positioned to continue to outperform.” However, S&P noted, “It’s unclear when RXO’s volumes and pricing will materially improve.”
• Liquidity Measures: RXO increased its revolving credit facility to $600 million to maintain ample liquidity during these challenging times.

C.H. Robinson's Downgrade

• Downgrade Details: S&P Global Ratings downgraded C.H. Robinson (CHRW) from BBB+ to BBB, citing weak market conditions. The outlook remains stable.
• Financial Performance: C.H. Robinson’s ability to cover its debt with its current earnings has fallen below the safe threshold. Their profits dropped significantly last year due to several market challenges.
• Market Challenges: The freight industry faced several headwinds in 2023, including inventory destocking, high inflation, and excess trucking capacity. C.H. Robinson’s adjusted gross profit (AGP) declined 28% to $2.6 billion in 2023.
• Debt Management: C.H. Robinson is directing cash flow towards debt repayment and has suspended share repurchases since mid-2023 to help improve its financial metrics.

Forward Air

• Forward Air has also experienced a significant decline, with its debt rating cut by both Moody’s and S&P Global Ratings. The company's challenges stem from the prolonged freight recession and the aftermath of its acquisition of Omni Logistics.

Forward Air Stock: Two Major Downgrades, Loss Above 90%

Forward Air faces major setbacks with a 91% stock decline and debt downgrades from Moody’s and Fitch. Leadership changes and financial woes compound the turmoil.

FreightCaviarAdriana Pulley

Sources: FreightWaves, S&P Press Release