Moody’s cuts Odyssey rating amid weak freight market

Odyssey Logistics had its debt rating lowered by Moody’s Ratings Tuesday, following a similar move by S&P Global in June, with Moody’s seeing no signs of an improved freight market coming to boost the company’s economic fortunes.

3PL Odyssey is unique in that it is a rare logistics company that is privately-held but has publicly-traded debt rated by an agency such as Moody’s. Echo Global Logistics is another example of a 3PL that falls into that category, while C.H. Robinson (NASDAQ: CHRW)  and RXO (NYSE: RXO) are publicly-traded companies with publicly-traded debt.

Odyssey’s Corporate Family Rating from Moody’s (NYSE: MCO) 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.

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.

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.