Debt ratings agencies may recently have cast a negative view of brokerage houses, but Moody’s has increased the outlook on Odyssey Logistics & Technology from stable to positive.
The 3PL’s debt rating was affirmed at existing levels.
RXO (NYSE: RXO) last month held on to its debt rating of BB+ from S&P Global Ratings (NYSE: SPGI) but saw its outlook drop from positive to stable. C.H. Robinson (NASDAQ: CHRW) last month had a similar review with S&P Global Ratings in that its investment-grade rating held steady but its outlook was reduced to negative from stable.
The report from Moody’s (NYSE: MCO) on Odyssey earlier this month had few negatives. Its corporate family rating was held at B2 and its probability of default rating was kept steady at B2-PD. B2 is a non-investment grade rating and would need to be raised by five steps to move to Baa3, where it would be considered investment grade.
The action by Moody’s to raise the outlook to positive from stable does not impact the actual rating itself. But based on Moody’s definitions, the change means that there is a “higher outlook” for a positive change in the Odyssey rating over the medium term.
Ratings agencies are concerned not with net income per se but a company’s ability to service its debts. In its report on Odyssey, Moody’s said it forecast that the logistics company’s debt-to-EBITDA ratio will be 4.5x by the end of this year. In its 2022 action, it also said it foresaw a 4.5x ratio to be maintained by Odyssey “as freight activity normalizes,” a market development that did not occur.
That projection of a 4.5x debt-to-EBITDA ratio comes even as Moody’s said it expects Odyssey to suffer an earnings decline this year.
What brought Odyssey to the attention of Moody’s less than one year after its August 2022 action was a restructuring of its debt. According to the Moody’s report, Odyssey is seeking to extend the maturity of a $500 million term loan out three years, to October 2027. It also is looking to increase its first lien revolving credit line to $125 million from $60 million.
Odyssey also intends to use “available cash” to pay off a $106 million second lien term loan that matures in October 2025. Some of that available cash will come from the proceeds of the sale earlier this year of its Linden Bulk Transportation subsidiary.
“The rating affirmation … reflects Moody’s view that Odyssey’s diversified services and end markets, improved financial leverage and good liquidity will position the company to adequately manage through cyclicality and near-term softness in freight markets,” Moody’s said in its statement.
Odyssey released a prepared statement to FreightWaves on Monday that did not offer any comment on the financial aspects of the Moody’s action. “Odyssey is buoyed by how we have chosen to invest in our business, our strategic hiring decisions, and our focus on what sets Odyssey apart: our multimodal business, investment in technology, and our fresh approach to sustainability,” it said.
Odyssey’s website describes it as a company that “operates in high-barrier-to-entry markets with specialized transportation services that include bulk truck, ISO Tank, railcar and tanker, as well as food-grade product lines.” It is known to be a leader in chemical logistics. It is a portfolio company of TJC, the former Jordan Company, which took Echo Global Logistics private in 2021.
TJC also owns Capstone Logistics, which provides outsource services to distribution centers, and Transimpact, a software service provider to the parcel industry. It also had a brief ownership of GlobalTranz, which later merged with WorldWide Express.
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