Moody’s drops UPS rating

Moody's Investors Service said it cut its senior unsecured rating for United Parcel Service, Inc. to A2 from A1.

“The downgrade reflects our view that UPS will not generate sufficient cash to strengthen its balance sheet while it remains in the midst of a capital intensive period of heavy investment and requisite pension funding, and shareholder returns continue,” said Jonathan Root, Moody's senior vice president, in a press release.

The outlook is still negative.

“The negative outlook reflects what we believe will remain a challenging operating environment and the compounding effect of prospective material pension funding needs that will render the company reliant upon the debt capital markets, even if share repurchases are further tempered,” said Root.

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