SP Global: Maersk Ratings Lowered with Negative Outlook

Maersk Line The long-term counterparty credit rating of Danish conglomerate A.P. Moller Maersk has been lowered to BBB from BBB+, while the outlook is negative, according to Standard & Poors Global Ratings. Additionally, S&P Global Ratings lowered its issue ratings on Maersks senior unsecured debt to BBB from BBB+ and removed all ratings on Maersk from CreditWatch with negative implications, where they were placed on July 5, 2016. Todays rating actions reflect our expectations that Maersks operating performance will remain constrained over 2016-2017 because of significant market difficulties and industry pressures, S&P Global Ratings said. We also take into account the risk that the ongoing strategic re-focusing of the group may lead to reduced diversification benefits over time, the rating agency noted, adding that it is not ruled out that these factors, either combined or on a stand-alone basis, could lead to a further downgrade to BBB-, depending on the groups measures to counter the aforementioned risks. The ratings agency said that Maersks competitive position and consolidated performance has deteriorated over 2016, while industry prospects remain uncertain, notably in the container liner industry where fundamentals continue to be very challenging, including constrained freight rates owing to structural overcapacity and sluggish expansion of global trade. Persistent high cyclical industry pressures and low oil prices are likely to continue to weigh on Maersks earnings and cash flow well into 2017. Given that all Maersks segments continue to face significant market difficulties, S&P Global Ratings said it anticipates that the groups operating performance may falter in 2016-2017. Furthermore, S&P Global Ratings said that the negative outlook reflects the risk that Maersk would reap less diversification benefits if the ongoing evaluation of the ownership structure results in the disposal of a major part of or of all of its energy division. The negative outlook predominantly reflects the risk of a one-notch downgrade because of the groups ongoing strategic review, the ratings agency informed.