Deutsche Post loses its double-A credit rating
The international credit rating agency Fitch said Friday it was cutting its rating on the long-term debt of Deutsche Post in the light of the semi-privatised German postal authority’s acquisition of the US parcel delivery service Airborne.
Fitch said in a statement it was cutting Deutsche Post’s debt rating to “A+” from “AA-“, but the outlook was stable and Fitch was therefore removing the ratings from “Watch Negative.”
Deutsche Post acquired parts of Airborne’s business in March for 1.05 billion dollars (940 million euros) in cash.
Fitch noted the cost of the transaction and other factors such an EU order to repay state said, lower revenues resulting from a reduction in postage tariffs, and the cost of taking full control of its express unit DHL.
These factors “mark a step-change in Deutsche Post’s financial ratios and risk profile, which over the medium term are no longer consistent with the double-A category rating,” Fitch said.
Deutsche Post responded to the rating downgrade in a statement of its own in which it argued that the acquisition of Airborne would increase the German group’s profitability because it enabled it to expand its market share in the US, the most important express delivery market in the world.
“Even after the acquisition of Airborne, we have comparatively little debt and a solid capital structure,” Deutsche Post insisted.
Nevertheless, Fitch countered that the US overnight air and ground delivery markets were largely dominated by rivals Fedex and UPS and this third player would “find it a challenge to gain critical mass and to increase its current weak levels of profitability.”
