S&P assigns UPS notes AA-

Standard & Poor's said it assigned its AA- rating to United Parcel Service Inc.'s (AA-/stable/A-1) $1 billion 3.875% notes due 2014 and $1 billion 5.125% notes due 2019.

"Our ratings on UPS reflect its very strong position in ground parcel-delivery and its substantial earnings and cash flow, offset to a limited extent by the adoption in early 2008 of a somewhat more aggressive [albeit still conservative] capital structure and participation in a competitive industry with some exposure to cyclical demand pressures," said S&P credit analyst Lisa Jenkins.

While operating results have declined somewhat because of the global economic downturn, credit metrics have deteriorated more, primarily as a result of an increase in underfunded postretirement benefit obligations, the agency noted.

S&P believes that UPS will be able to improve credit metrics over the coming two years through its focus on bolstering yields, cutting costs, and reducing capital expenditures, although benefits from these actions will likely be tempered by continuing challenging market conditions, especially over the near term.

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