(Alliance News) - Stagecoach Group PLC's issuer and senior unsecured ratings have been downgraded to Baa3 from Baa2, Moody's Investors Service announced on Tuesday.
Moody's has kept its outlook on the ratings as Stable, however.
The ratings agency explained Stagecoach's increased reliance on its UK regional bus business has contributed to the downgrade.
Moody's said: "Virtually all of the group's future revenue are expected to derive from its UK bus divisions; regional bus and London bus. Both divisions have faced challenging market conditions in recent years.
"Stagecoach's Baa3 rating continues to be supported by its strong position as the largest operator in the UK regional bus market, which has historically exhibited resilience in the face of challenging conditions, moderate historical financial leverage, and a Moody's expectation Stagecoach will continue to maintain a conservative financial policy and a good liquidity profile."
Moody's added declining bus passengers journeys in most UK markets will hurt the transport operator and a potential franchising in Manchester could further reduce profitability.
The FTSE 250 stock was trading 1.3% lower at 140.30 pence each in London on Tuesday morning.
By Eric Cunha; ericcunha@alliancenews.com
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