Kirby Corp. Downgraded To 'BBB-' On Expected Lower Demand And Earnings; Outlook StableWe no longer anticipate Kirby Corp.'s ratio of funds from operations (FFO) to debt will return above 30% this year, with a portion of the company's distribution and services segment impaired by low oil prices. Given our forecast for a U.S. recession, improvement in this ratio above 30% could be beyond our rating outlook time horizon. As such, we are lowering our issuer credit rating on Kirby to 'BBB-' from 'BBB'. We are also lowering our ratings on the company's unsecured debt to 'BBB-'. The stable outlook reflects that we expect the company will generate good free operating cash flow (FOCF), as the company's marine business benefits from long-term contracts and the relatively low capital expenditure (capex) needs for the company's distribution and services segment. NEW YORK (S&P Global Ratings) March 25, 2020—S&P Global Ratings today took the above rating actions. The downgrade reflects the challenging macroeconomic conditions we believe Kirby will face over the next 12 months, given a recent decline in oil prices that will hurt Kirby's distribution and services segment operating performance. We now anticipate the ratio of FFO to debt will remain below 30% this year. The stable outlook on Kirby reflects our expectation that, despite weaker than previously expected economic conditions, we assume Kirby will maintain an FFO-to-debt ratio of 20%-30% this year and next. We could lower our ratings on Kirby over the next 24 months if any weakness in the company's end markets causes its revenue and earnings to decline, or if substantial debt-financed acquisitions cause its debt-to-EBITDA metric to increase above 4x or its FFO-to-debt ratio to fall below 20%. Although unlikely, we could raise our ratings on Kirby over the next 24 months if the utilization rate in the company's marine transportation business remains strong and its diesel engine services business improves due to stability in the energy market, resulting in FFO to debt above 30% on a sustained basis, with debt to EBITDA below 3x.

  • We no longer anticipate Kirby Corp.'s ratio of funds from operations (FFO) to debt will return above 30% this year, with a portion of the company's distribution and services segment impaired by low oil prices.
  • Given our forecast for a U.S. recession, improvement in this ratio above 30% could be beyond our rating outlook time horizon.
  • As such, we are lowering our issuer credit rating on Kirby to 'BBB-' from 'BBB'. We are also lowering our ratings on the company's unsecured debt to 'BBB-'.
  • The stable outlook reflects that we expect the company will generate good free operating cash flow (FOCF), as the company's marine business benefits from long-term contracts and the relatively low capital expenditure (capex) needs for the company's distribution and services segment.
NEW YORK (S&P Global Ratings) March 25, 2020—S&P Global Ratings today took the above rating actions. The downgrade reflects the challenging macroeconomic conditions we believe Kirby will face over the next 12 months, given a recent decline in oil prices that will hurt Kirby's distribution and services segment operating performance. We now anticipate the ratio of FFO to debt will remain below 30% this year.
The stable outlook on Kirby reflects our expectation that, despite weaker than previously expected economic conditions, we assume Kirby will maintain an FFO-to-debt ratio of 20%-30% this year and next.
We could lower our ratings on Kirby over the next 24 months if any weakness in the company's end markets causes its revenue and earnings to decline, or if substantial debt-financed acquisitions cause its debt-to-EBITDA metric to increase above 4x or its FFO-to-debt ratio to fall below 20%.
Although unlikely, we could raise our ratings on Kirby over the next 24 months if the utilization rate in the company's marine transportation business remains strong and its diesel engine services business improves due to stability in the energy market, resulting in FFO to debt above 30% on a sustained basis, with debt to EBITDA below 3x.
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