Moody's Investors Service downgraded its debt ratings for Horizon Lines Inc., saying the Charlotte, N.C.-based company's results have trailed expectations and that there are few catalysts for an upturn in demand next year, particularly in the shipping lines' Hawai'i and Puerto Rico markets.

The debt rating was downgraded to B2 from B1 on the corporate family of debt and Moody's changed its outlook on the company to negative from stable.

It now rates Horizon's senior secured debt at Ba2, down from Ba1 and the senior unsecured to Caa1 from B3.

Moody's said the lack of something to spark a positive inflection in demand could sustain pressure on margins and operating cash flow and slow the pace of Horizon's planned delevering of its capital structure.

It said the negative outlook reflects potential payments related to the settlements of an ongoing Department of Justice investigation of price fixing in the Puerto Rio trade or related class action lawsuits that have been filed.

Horizon is the No. 2 carrier of cargo to Hawai'i from the Mainland behind Matson Navigation Co.

Horizon last month said it expects Hawai'i's economy to soften further in the fourth quarter because of fewer visitors from the Mainland and Japan.