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RXO Issues $400M Senior Notes Amid Moody’s Downgrade
•February 11, 2026
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Why It Matters
The downgrade raises borrowing costs and may limit RXO’s access to capital, affecting its growth strategy in a volatile trucking brokerage market. Investors and lenders will watch the company’s ability to improve earnings and leverage as freight rates fluctuate.
Key Takeaways
- •Moody's downgrades RXO to Ba1, below investment grade
- •S&P maintains BB rating, one notch lower than Moody's previous
- •Negative outlook persists, reflecting weak freight market and high leverage
- •RXO issues $400M senior notes, replacing $600M revolving facility
- •EBITDA margin projected to rise to 3.4% by 2026
Pulse Analysis
The shift from a Baa3 to a Ba1 rating moves RXO out of the investment‑grade universe, a status that many institutional investors use as a credit quality filter. Moody’s downgrade reflects lingering softness in freight volumes, excess truck capacity, and a leverage ratio that remains elevated at four times EBITDA. In the broader logistics sector, a sub‑investment‑grade rating can increase borrowing spreads and limit participation in certain bond funds, putting pressure on cash‑flow‑sensitive operators.
RXO’s recent $400 million senior unsecured note issuance, rated BB by S&P, is a strategic response to the rating downgrade. By retiring a higher‑cost $600 million revolving facility, the company expects to shave roughly $400,000 in annual unused‑commitment fees and lower overall interest expense. Management emphasizes that the new notes are “rightsized” for current market cycles, providing flexibility while preserving a strong balance sheet. The oversubscribed order book signals continued investor appetite despite the credit downgrade.
Looking ahead, RXO’s outlook hinges on the resolution of excess carrier capacity and a rebound in brokerage volumes. Moody’s remains cautiously optimistic, noting a modest improvement in EBITDA margins projected at 3.4% by 2026, up from a 1.2% margin in Q4 2023. Compared with peers such as C.H. Robinson, which enjoys a Baa2 rating and lower leverage, RXO must demonstrate sustainable earnings recovery to regain investment‑grade status. The company’s long‑term growth strategy, anchored by AI‑driven tools and a strong market position, will be tested as freight rates stabilize and capital markets react to its credit profile.
Deal Summary
RXO announced on Feb. 11, 2026 the issuance of $400 million of unsecured senior notes due 2031, aimed at redeeming its 7.5% notes due 2027 and supporting general corporate purposes. The offering was oversubscribed, strengthening the company's balance sheet despite a recent Moody’s downgrade to Ba1. The new notes replace a $600 million revolving asset‑backed facility.
Article
Source: FreightWaves
RXO has lost its investment-grade credit rating from Moody’s, knocked down one notch to a level below the cutoff below which corporate debt is considered non-investment grade.
However, the new Moody’s debt rating for the 3PL, announced Tuesday, is still above the equivalent at S&P Global (NYSE: SPGI). S&P Global’s rating for RXO (NYSE: RXO) is at BB, which is considered one notch less than Ba1, the new rating handed down by Moody’s.
The Moody’s (NYSE: MCO) rating had been Baa3, which means that before the reduction there was a two-notch gap between the ratings of the two agencies. That much of a difference is considered unusually wide.
The Ba1 rating will be for RXO’s senior unsecured notes, its corporate family rating and its probability of default rating. The Ba1 rating will also be put on the company’s new $400 million senior unsecured notes, a recently-announced financial step by the company.
Moody’s already held a negative outlook on RXO; that did not come off with the downgrade. That is a double whammy on RXO, as a negative or positive outlook is a sign that conditions are in place for either a downgrade or upgrade, respectively, in the near to medium term (though the negative outlook on Moody’s has been in place for almost two years.).
Once the change in debt rating is actually implemented, more times than not the outlook is changed to stable. That did not occur with the Moody’s RXO downgrade.
S&P Global also has a negative outlook on RXO. The BB rating has been in place since May 2024.
Freight market still an issue
The reasons given by Moody’s for the downgrade were not surprising: a lack of improvement in RXO’s financial outlook due to conditions in the freight market. While spot rates are climbing, a positive sign for carriers, it has been an extremely negative development for brokers who have contract commitments to shippers at lower rates, and they now are facing covering that need for capacity at higher prices than what prevailed when the business was booked. That was evident in RXO’s fourth quarter earnings report.
“The downgrade and negative outlook reflects RXO’s inability to meet operating performance expectations set when the outlook was revised to negative, primarily due to weak earnings driven by persistent softness in transportation freight volumes,” Moody’s said in its report on the move. “This has been prolonged by excess truck capacity, leading to lower freight spot rates and reduced profitability for its brokerage operations.”
The one positive statement by the ratings agency was that it “(recognizes) that RXO’s growth strategy remains positive over the long term, driven by a modestly improving outlook for the trucking and brokerage industry and RXO’s strong market position within the brokerage sector.”
RXO’s reaction
Asked for a comment on the Moody’s action, RXO issued a statement to FreightWaves.
“The ongoing soft freight market continues to impact the entire industry,” the company said. “RXO has a strong balance sheet, access to significant capital, and a low leverage ratio. We remain well positioned to drive significant long-term earnings and free cash flow growth.”
The Moody’s downgrade noted that leverage at RXO “remains high at 4.0x debt-to-EBITDA for fiscal 2025.”
By contrast, when Moody’s affirmed a Baa2 rating for C.H. Robinson (NASDAQ: CHRW) last year, it said its debt-to-EBITDA rating was expected to be 2X through 2026. C.H. Robinson’s debt rating from Moody’s is Baa2, now two notches more than Moody’s RXO rating and above the investment/non-investment grade cutoff.
But with conditions changing in the market, Moody’s expressed some optimism for RXO. “The reduction of excess carrier capacity and an increase in brokerage volume are essential for sustained growth,” Moody’s said.
Moody’s also was optimistic about the company’s EBITDA margin, which it said would “remain tight in 2026 at approximately 3.4%.” But that would be an improvement over the fourth quarter, when the EBITDA margin was 1.2%, down from 2.5% in the fourth quarter of 2024.
The negative outlook remained on the company, Moody’s said, as it “reflects RXO’s weaker credit metrics, breakeven free cash flow and the uncertain trajectory of its earnings recovery amid a volatile freight transport market.”
A new debt instrument
S&P Global coincidentally weighed in on RXO on the same day Moody’s issued its downgrade, assigning a BB rating to the unsecured $400 million debt offering, due in 2031. That BB rating is S&P’s prevailing rating on RXO, so the move would have been expected.
The $400 million offering is replacing a $600 million revolving asset backed lending revolving facility. S&P said the new debt offering at RXO is “credit neutral, with a modest reduction estimated in interest expense.”
On the company’s recent earnings call with analysts, CFO James Harris said the new line of credit would save about $400,000 in “annual unused commitment fees.”
CEO Drew Wilkerson said on the call that the new debt line “is rightsized for our needs, decreases our cost and provides us with increased flexibility across all market cycles.”
In its statement to FreightWaves after the Moody’s action, RXO also addressed the recent debt offering.
“On Feb. 11, RXO issued $400 million of unsecured Senior Notes due 2031 to finance the redemption of our 7.5% Notes due 2027, as well as for general corporate purposes,” the statement said. “The offering was well received with an orderbook multiple times oversubscribed, which highlights investor appetite. This issuance further strengthens RXO’s balance sheet.”
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The post New territory: RXO debt rating from Moody’s now below investment-grade cutoff appeared first on FreightWaves.
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