Royal Mail in a tight spot as it fights to avoid debt downgrade | Business

Royal Mail may have to cancel its dividend and sell off property if it is going to weather the storm of a falling parcels delivery market and worsening industrial relations this winter.

That is the warning from Standard & Poor’s, the credit rating agency, which has put the privatised postal group on negative watch with the possibility of a downgrade of its debt to a “speculative” for bond investors. Poorer ratings mean more expensive borrowing.

The warning came as S&P calculated that Royal Mail’s funds-from-operations-to-debt ratio — a key metric for calculating whether a company can service its borrowing from income alone — has fallen below 45 per cent, a red flag for the ratings agency.

Having posted record profits during the pandemic through the