Research Update: XPO Logistics Inc. Affirmed At 'BB' On Share Repurchases; Outlook Stable; New Debt Rated 'BB'

We project that XPO Logistics' credit metrics will weaken slightly in 2019 due to additional debt-funded share repurchases but remain in line with the current rating. We now expect debt to EBITDA will increase to the low-3x area in 2019, up from 3x in 2018, and funds from operations (FFO) to debt will decline to the low-20% area in 2019, compared to 26.6% in 2018. Therefore, we are affirming our 'BB' issuer credit rating on XPO and maintaining a stable outlook because we expect XPO's credit metrics will remain in line with the rating. We are assigning our 'BB' issue rating and '4' recovery rating (rounded estimate: 30%) to the company's proposed $1 billion senior unsecured notes. Our 'BB' issue

...+ We project that XPO Logistics' credit metrics will weaken slightly in 2019 due to additional debt-funded share repurchases but remain in line with the current rating. We now expect debt to EBITDA will increase to the low-3x area in 2019, up from 3x in 2018, and funds from operations (FFO) to debt will decline to the low-20% area in 2019, compared to 26.6% in 2018. + Therefore, we are affirming our '##' issuer credit rating on XPO and maintaining a stable outlook because we expect XPO's credit metrics will remain in line with the rating. + We are assigning our '##' issue rating and '4' recovery rating (rounded estimate: 30%) to the company's proposed $1 billion senior unsecured notes. + Our '##' issue rating and '4' recovery rating on the company's existing senior unsecured notes are unchanged. + The '###-' issue rating on the company's senior secured term loan and 'B+' rating on its unsecured notes due 2034 are also unaffected....

Research Update