Feb. 2 (Bloomberg) -- Mitsui O.S.K. Lines Ltd. and Nippon Yusen KK, Japan’s two largest shipping lines, were downgraded by Moody’s Japan KK on concerns that slumping freight rates will hamper the companies’ ability to pare debt levels.
Mitsui O.S.K. was cut to Baa1 and Nippon Yusen was reduced to Baa2, Moody’s said in statements today. The Tokyo-based shipping lines, which were both lowered by one grade, still retain investment grade rankings. The outlook for both was ‘negative’.
The Japanese carriers both widened their full-year losses forecasts earlier this week as expansion in the global fleet outpaces demand for shipments, causing rates to fall. The Baltic Dry Index, the benchmark for commodity-carrying rates, yesterday tumbled to the lowest in more than 25 years.
“The weak operating environment and over-supply in ocean- going freight capacity” will hit the shipping lines’ cashflow, Moody’s said. “That poor cashflow performance will delay a reduction in leverage or, if the industry environment does not improve, could lead to higher leverage.”
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