Fitch Ratings has upgraded DP World’s long-term issuer default rating to BBB+ from BBB-, with a stable outlook, according to a statement.The ratings agency also upgraded DP World’s short-term rating to F2 from F3. The upgrade came as a result of the company successfully reducing its debt and improving its financial position, the agency said.

The rationale: The company’s reliable cashflow from various business operations, ports-related revenue, as well as the long-term maturity (82 years remaining) of its key assets — Jebel Ali Port and Jebel Ali Freezone — were cited as the main reasons behind the upgrade. DP World’s acquisition-focused strategy and “corporate-like, bullet and uncovenanted debt structure” also played a role in the upgrade. Most of DPW’s cashflow is not subject to major restrictions, Fitch said.

By the numbers: The company’s debt-to-EBITDA ratio fell to below 4 by the end of 2022, meeting its target, Fitch said. On the other hand, the company’s leverage reached 6.4x in 2020 as a result of its debt-financed privatization.

SOUND SMART- Debt-to-EBITDA ratios higher than 4 or 5 typically indicate that a company is less likely to pay off its debts in a timely manner, and thus is less likely to take on more debt, according to Investopedia. Leverage, on the other hand, measures the ratio of debt and equity when it comes to a company’s financing operations, with leverage ratios higher than 2 signaling significant amounts of debt.

Long-term predictions: Fitch expects the company’s leverage ratio to stay below 4.5x until 2027.

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