XPO, Inc.

XPO is a pure-play North American less-than-truckload carrier with a European transportation segment attached. Europe is roughly 40% of revenue but under 10% of EBITDA, and management has characterised it as non-core. The credit question is whether the operating improvement is structural, since the improvement rather than the freight cycle is what pays down the leverage.

The evidence is in the operating ratio. XPO ran mid-82% in 3Q25 against high-80s two years earlier, and reached it while LTL pounds per day fell 6.1% year over year. Purchased transportation down 48%, a claims ratio of 0.2% against 1.2%, and eleven consecutive quarters of sequential yield ex-fuel growth are consistent with linehaul insourcing and network density driving the gain rather than the cycle. The 28 service centers acquired out of the Yellow liquidation extended that density, and the capex behind it is largely complete.

The capital structure is clean for a BB credit: roughly 1.2x secured, 2.3x total, a fully undrawn revolver, and no maturity before 2028. That leaves the tranche choice as the decision that matters, covered in the November 2025 memo on the first-lien term loan.

Not refreshed since 30-Nov-2025. Monitoring rather than active. The work predates a nine-month gap covering a European segment sale process, the 2026–27 refinancing window, and whatever the freight cycle did in between. I would not act on the November levels without redoing the relative value.