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Published on 11/9/2017 in the Prospect News Investment Grade Daily.

Moody’s assigns A1 to UPS notes

Moody's Investors Service said it assigned an A1 rating to each of the seven tranches of new senior unsecured notes offered by United Parcel Service, Inc. (UPS).

The company plans to issue five dollar-denominated tranches: floating-rate notes due 2021 and 2023 and fixed-rate notes due 2024, 2027 and 2047.

The agency also assigned an A1 rating to the euro-denominated senior unsecured notes the company offered on Nov. 8: €700 million, 0.375% due 2023 and €500, 1.5% due 2032. The rating outlook is stable.

UPS will use the aggregate proceeds to make early contributions to certain of its primary domestic pension plans, to repay commercial paper and for general corporate purposes including the refinancing of other long-term debt, including the $750 million of 5.5% notes due Jan. 15, 2018. $4.1 billion of commercial paper was outstanding on Sept. 30, 2017.

“The A1 rating reflects Moody's view that UPS remains an important enabler of global trade and commerce because of its integrated global network, as well as the expectation that UPS will maintain credit metrics in line with other single-A rated companies,” the agency said in a news release.

“We now expect negative free cash flow in 2017 and about breakeven in 2018 because of higher investment across the franchise, including enhancing automation in the company's hubs and ongoing pension plan funding.

“However, Moody's expects lower share repurchases than in prior years, helping to contain pressure on funded debt balances.”


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