S&P cuts outlook on Maersk Group debt

Agency affirms Danish giant’s credit rating but warns of potential future downgrade.

Standard & Poor’s (S&P) cut its outlook for the credit ratings of AP Moller Maersk (Maersk Group), warning that a downgrade could follow if market conditions do not improve.

The US credit ratings agency reduced the outlook to “negative” from “stable” as the Danish giant faces difficult market conditions across its business lines, but it affirmed its “BBB+” company-wide rating.

S&P analysts led by Per Karlsson wrote there is a one-in-three chance of a one-notch downgrade, which would still keep Maersk’s rating out of speculative-grade, or junk, range.

They said that all of Maersk’s main business lines are facing significant troubles, but some are expected to continue to perform at levels that will not affect Maersk’s credit ratings.


But the container liner business will need to see freight rate improvements this year to prevent a downgrade.

“The container shipping industry is up against very difficult industry conditions due to capacity oversupply, and  we see a risk that potentially weaker freight rate conditions than we  currently build into our forecast could strain Maersk's credit measures,” the S&P analysts said.

Maersk’s drilling business will see good cash flow this year, but weaker results could come after that.

S&P’s review, however, pointed to positive factors, including recent asset disposals and the Maersk’s dominant market position and attractive fleet profile.

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