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TRANSPORTATION: FedEx (FDX: Baa2/BBB): Freight Separation

TRANSPORTATION
USBulletCredit BulletsNorth America

FedEx have announced its intention to separate Freight into a stand-alone public company

  • Freight accounts for 12% of revenue ($9.4bn) and around 32% of EBIT
  • Margins in Freight run at about 19% vs 5.2% for the rest of the business
  • The freight spin-off will take place "within the next 18 months"
  • We do not see anything in the bond docs that would be triggered by this
  • Freight has had a dramatic turnaround in the past few years with margins doubled over the past 5yrs and a decade ago margins were close to zero.
  • Each company will be "well capitalized, with flexibility to invest" would imply that bondholders will not be adversely affected
  • Bonds largely unchanged today

fdx

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FedEx have announced its intention to separate Freight into a stand-alone public company

  • Freight accounts for 12% of revenue ($9.4bn) and around 32% of EBIT
  • Margins in Freight run at about 19% vs 5.2% for the rest of the business
  • The freight spin-off will take place "within the next 18 months"
  • We do not see anything in the bond docs that would be triggered by this
  • Freight has had a dramatic turnaround in the past few years with margins doubled over the past 5yrs and a decade ago margins were close to zero.
  • Each company will be "well capitalized, with flexibility to invest" would imply that bondholders will not be adversely affected
  • Bonds largely unchanged today

fdx