Deutsche Bahn (DBHNGR; Aa1/AA- Pos/AA+) may need to stop covering DB Cargo segments losses

Background; EU Commission (Jan '22); "DB Cargo is a 100% subsidiary of the State-owned, vertically-integrated German rail operator Deutsche Bahn AG (‘DB AG'). DB Cargo has been persistently loss-making. Its losses have been fully and continuously covered by DB AG on the basis of an open-ended profit and loss transfer agreement concluded between DB AG and DB Cargo."

• Somewhat concerning article below but alleviated by lower capex into DB Cargo. It is a €5.6b in sales unit (12.4% of group sales) and falls under integrated rail segment. I.e. is separate to the logistics unit - DB Schenker - that is planned for sale.
• It has run ~half-a billion in operating losses the last two years - surprisingly not its worst unit. Capex under Cargo division is not large though - €300-400m/yr over last two FY's and compares to group capex that runs in €15-16b.
• We are starting to question if selling off Schenker - even for a reported €15b - will be a credit positive. Schenker was 42% of group's revenue, 66% of EBITDA and only unit to turn a operating profit (for 2nd year in a row) in FY23. It is riding strong margin boost from red-sea disruptions.
• Reminder DBHNGR receives a 5-notch upfit from baseline A3/BBB baseline for German government (Triple A) ownership and heavy capex funding contributions.