TEXT-S&P Rates Ryder System Medium-Term Notes ‘BBB’
Standard & Poor’s Ratings Services said today that it has assigned its ‘BBB’ issue rating to Miami-based full-service truck leasing company Ryder System Inc.’s issuance of $350 million in medium-term notes due March 2018. The company will use the proceeds from the offering to fund general corporate purposes. Our ratings on Ryder reflect the company’s strong market position in its major business–fleet management solutions (FMS). The ratings also incorporate Ryder’s supply chain and logistics operation, which has lower margins (relative to FMS) and is exposed to the domestic automotive sector, as well as the cyclicality of its commercial-truck rental business. Over the next few quarters, we expect Ryder to generate funds from operations (FFO) to total debt in the high 20% area and debt to capital to remain above 75%. Ryder, like other providers of transportation equipment leases, operates at higher levels of financial leverage than comparably rated industrial companies. We categorize the business profile as “satisfactory,” financial profile as “intermediate,” and liquidity as “adequate” under our criteria. Fully adjusted FFO to debt was 29.2% and debt to capital was 77.0% as of June 30, 2012, compared with 31.9% and 73.1%, respectively, a year earlier. Over the next few quarters, we expect the continuing gradual economic recovery to result in modest improvement in demand for full-service lease and commercial truck rentals. We could lower the ratings if FFO to total debt falls below 20% and debt to capital rises into the low 80% area on a sustained basis. Given Ryder’s financial policy and debt-financed capital expenditure plans, an upgrade is unlikely. However, as the operating environment improves, we could raise the ratings if FFO to total debt exceeds 30% and debt to capital declines to the low 70% area on a sustained basis. RELATED CRITERIA AND RESEARCH
– Ryder System Inc. Long-Term Rating Lowered To ‘BBB’ On Increased Debt Leverage; Outlook Stable, Aug. 10, 2012
– Research Update: Ryder System Inc. Long-Term Ratings Placed On CreditWatch Negative On Increasing Leverage, June 26, 2012
– Summary: Ryder System Inc., Feb. 28, 2012
– Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
– 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
– 2008 Corporate Criteria: Rating Each Issue, April 15, 2008 RATINGS LIST Ryder System Inc. Corporate Credit Rating BBB/Stable/A-2 New Rating Ryder System Inc. Medium-term notes BBB Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor’s public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.