The issuer rating and senior unsecured rating of Danish shipping and oil giant A.P. Møller-Mærsk A/S have been downgraded to Baa2 from Baa1, according to Moody’s ratings agency.
Moody’s also downgraded Maersk’s medium-term note (MTN) program rating to (P)Baa2 from (P)Baa1. All ratings were placed on negative outlook.
“The downgrade reflects our expectation of reduced diversification following the results of the strategic review, as well as the deterioration in Maersk’s credit profile amidst weak market conditions particularly in container shipping and drilling, which we do not anticipate to be reversed shortly,” Maria Maslovsky, Moody’s Vice President — Senior Analyst and the lead analyst for Maersk, said.
“In addition, significant uncertainties associated with the execution of the strategy of separating the energy businesses, especially the final capital structure of the transportation and logistics business, are encapsulated in the negative outlook,” Maslovsky added.
Namely, the conglomerate expects to focus on its transportation and logistics division incorporating Maersk Line, the global leader in container shipping which will grow with the Hamburg Sud acquisition, APM Terminals, a top five terminal operator, Damco, a logistics provider with a growth potential, as well as Svitzer and Maersk Container Industry.
While Moody’s acknowledges the strong position and growth potential of the transportation and logistics business, the ratings agency also recognizes that with the separation of the energy division the company’s operations “will be less diverse and potentially less protected from a downturn in its end markets.”
“Given the negative outlook and the future focus on the cyclical shipping industry, an upgrade is unlikely at this stage,” Moody’s said, adding that it would consider stabilizing the rating outlook once the uncertainty associated with the separation of the energy businesses is reduced such that a standalone credit profile for the transportation and logistics division can be reasonably evaluated.