It’s happened again. A few weeks ago, after Maersk announced its big reorganization, Moody’s Investor Services placed the giant carrier under a negative credit rating review.

A couple of weeks ago Nippon Yusen Kaisha (NYK) announced it was merging its container business with MOL and K Line. Moody’s reaction: to downgrade the carrier from Baa3 from Baa2.

“The outlook is negative,” read Moody’s pithy summary.

“The downgrade to Baa3 from Baa2 reflects our view that low freight rates will keep NYK’s cash flow low and leverage high in the near to medium term,” said Mariko Semetko, a Moody’s vice president and senior analyst. “Consequently, the company’s earnings recovery has been and will likely remain much slower than Moody’s had previously anticipated.”

On October 31, 2016, NYK released its earnings for the first half of the fiscal year ending March 31, 2017. At the same time, the company lowered its full-year guidance. It now expects an ordinary loss of $250 million for the year, compared to its previous guidance of a $50 million profit.

The loss would result in its debt-to-earnings reaio exceeding nime times for the fiscal year, “a level that is not consistent with a higher rating,” said the Moody’s report. The company’s earnings margin has also decreased, and “Moody’s expects it will take time for any turnaround in profitability to materialize.”

Weakness in the bulk shipping business—which for NYK includes dry bulk, car carriers and tankers—is the primary driver of the lower earnings guidance. The company cited the continued weak demand in car carriers and low rates in tankers as the main drivers of the lower guidance. In addition, the company has lowered its freight rates estimates for its Capesize and Panamax dry bulk vessels, highlighting that the market recovery has been much slower than the company had previously anticipated.

The company continues to expect its container shipping business will report an ordinary loss of $160 million for the year. “Moody’s estimates there is high downside risk that this loss will widen given persistent oversupply in the sector,” said the report.

These challenges led NYK to merge its container shipping business with the other two Japanese carreris, with services starting on April 1, 2018.

“If the business integration leads to more discipline, the transaction could prove credit positive over time,” said Moody’s. “However, the potential cash flow synergies and balance sheet impact remain uncertain for now, including (1) how the companies will transfer their assets including vessels to a new joint venture and (2) the capital structure.”

NYK’s Baa3 rating reflects the company’s weak financial profile including its very high debt leverage and low earnings and cash flow expectations caused by continued industrywide overcapacity and depressed freight rates. These factors are offset by its limited refinancing risk, its position as one of the world’s largest shipping companies, and Moody’s expectations for on-going cost reductions.

Moody’s expects that earnings and cash flow will remain low and leverage will remain elevated over the coming 12 to 18 months. The outlook could change if operating conditions will not appreciably worsen, freight rates improve, and leverage starts to decrease.

An upgrade in rating is unlikely for foreseeable future, Moody’s concluded, “given the challenging market conditions” and adequate deleveraging and improvements in profitability and cash flow take place.