Moody's downgrades Deutsche Post

Moody's Investors Service said it downgraded the long-term debt ratings of Deutsche Post AG and of Deutsche Post Finance BV guaranteed by Deutsche Post to A2 from A1 and assigned a stable outlook. This concludes the review for possible downgrade begun on Sept. 19 in response to the company's planned acquisition of UK-based Exel plc for £3.8 billion. The acquisition was completed on Dec. 13.

Moody's says the downgrade reflects the weakening financial profile of Deutsche Post as a result of the Exel acquisition and simultaneously weaker cash flow generation of Deutsche Post's express businesses, particularly in the United States and Europe.

The rating agency said it has concerns that the financial profile will not recover in the short- to medium-term to a level consistent with an A1 rating due to event risk associated with further acquisitions, reflecting Deutsche Post's ongoing acquisitive growth strategy in non-mail activities and uncertainties associated with the company's growth expectations in express and logistics.

Deutsche Post has said it does not plan any larger merger of acquisition transactions in 2006, but the agency predicted that the company will continue its growth strategy in order to digest the Exel acquisition.

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