FedEx Freight Holding Company, Inc. has begun a private offering of senior notes, raising approximately $3.7 billion in unsecured debt and an additional $600 million in a delayed‑draw term loan. The proceeds will be distributed to FedEx Corp. as consideration for the assets transferred to the subsidiary in connection with the planned June 1, 2026 spin‑off.
The notes are unsecured senior debt, and the company has also secured a $1.2 billion revolving credit facility to support working‑capital needs. S&P Global Ratings has assigned a ‘BBB‑’ long‑term issuer rating to FedEx Freight and a ‘BBB‑’ issue‑level rating to the proposed senior unsecured debt, with a stable outlook, reflecting the company’s strong competitive position in the North American less‑than‑truckload market and its projected ability to generate sufficient funds from operations to service debt above 20%.
FedEx’s strategy is to separate its freight business from its express and logistics operations, allowing each entity to pursue focused growth and operational efficiencies. CEO Raj Subramaniam said the timing of the separation is “right” because the LTL market has unique dynamics that warrant a dedicated, agile company. The financing gives the new entity the capital base it needs to operate independently while preserving synergies with the parent.
Financial projections for the standalone freight company show free cash flow of roughly $490 million in 2026 and $555 million in 2027, with EBITDA margins expected to dip in 2026 due to temporary cost pressures but to rebound in 2027 and normalize by 2028. The outlook indicates that the company will maintain a debt‑to‑EBITDA ratio that supports the BBB‑ rating and provides a cushion for future capital needs.
FedEx Corp. will receive the net proceeds from the debt issuance as consideration for the assets transferred to the subsidiary. The transaction is part of a broader transformation plan that includes cost optimization and the deployment of AI and automation to improve efficiency across the organization.
The spin‑off is anticipated to unlock value for both companies by allowing each to focus on its core markets. Analysts view the move as a strategic pivot that could enhance shareholder value, while the financing structure demonstrates FedEx’s confidence in the freight business’s ability to generate sustainable cash flow and support its own growth initiatives.
The transaction underscores FedEx’s commitment to creating two focused, agile companies that can better respond to market dynamics and deliver long‑term value to shareholders.
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