Fitch Expects to Rate Penske's Unsecured Debt 'BBB+'

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings expects to assign a rating of 'BBB+' to the 10-year, $500 million senior unsecured debt co-issued by Penske Truck Leasing Co., L.P. (Penske) and PTL Finance Corporation (PTL Finance). A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS

IDRS AND SENIOR DEBT

The expected rating reflects that debt is expected to rank pari passu with all other senior unsecured debt issued by Penske and/or PTL Finance. The equalization of the expected rating with Penske's Long-Term Issuer Default Rating (IDR) reflects the predominately unsecured funding profile and unencumbered asset coverage available to senior unsecured noteholders.

Fitch does not believe there will be a material impact to Penske's leverage resulting from the issuance, as proceeds will be used to repay existing outstanding debt and for general corporate purposes. Therefore, the expected issuance has no impact to Penske's IDR or Stable Outlook. Penske's leverage, as measured by managed debt to equity, was 3.6x as of June 30, 2016.

Penske's ratings were affirmed with a Stable Outlook following Fitch's fleet leasing peer review in October 2016. The ratings are supported by its established market position in the truck leasing and rental business, and growing market share in the logistics business, good asset quality, relatively consistent operating performance through various cycles, appropriate leverage, solid liquidity and a largely unsecured funding profile.

Rating constraints specific to Penske include a higher leverage appetite relative to more highly rated peers, lack of demonstrated access to the unsecured markets through a variety of market cycles, modest concentrations in the logistics segment and some pension obligation risk. Rating constraints applicable to the broader truck leasing sector include cyclicality inherent in used vehicle pricing and the commercial rental business, and potential regulatory impact on business trends.

The Stable Rating Outlook reflects Fitch's expectation for continued economic access to the capital markets through various market cycles, limited sensitivity to rising interest rates, strong liquidity, and appropriate leverage for the rating category. Fitch expects continued earnings growth over the outlook horizon, driven by growth in full service lease and contract revenue, as well as increased penetration in the logistics business.

PTL Finance's IDR reflects its status as a wholly-owned subsidiary of Penske and the nature of its operations, which is limited to serving as a pass-through issuing entity to access investors not otherwise permitted to invest in a limited partnership such as Penske. As such, the IDR is aligned with that of Penske.

RATING SENSITIVITIES

IDRS AND SENIOR DEBT

The expected rating assigned to the senior unsecured debt is equalized with Penske's IDR, and therefore, would be expected to change as a result of a change to Penske's IDR. In addition, a material increase in secured funding and/or a material reduction in unencumbered assets could result in notching between Penske's IDR and unsecured debt.

Fitch believes positive rating momentum for Penske is limited over the medium term. However, to the extent that the company is able to demonstrate access to the unsecured markets through a variety of market cycles while at the same time lowering its leverage target, this could lead to positive rating actions over a longer-term time horizon.

Conversely, negative rating actions for Penske could be driven by a material and sustained increase in leverage above 3.5x and/or reduction in free cash flow resulting from a decline in earnings. Additionally, deterioration in the firm's competitive positioning, weakening asset quality, an inability to realize residual values on used vehicles, a material increase in non-earning vehicles, and/or a decline in liquidity could also result in negative rating actions.

PTL Finance's ratings are sensitive to the same factors that might drive a change in Penske's IDR due to the aforementioned rating linkages between the subsidiary and Penske.

Established in 1988 and headquartered in Reading, PA, Penske is a leading provider of full-service truck leasing, truck rental, and contract maintenance and logistics services. Penske is a partnership between Penske Truck Leasing Corporation (41.08%), Penske Automotive (23.42%), Mitsui & Co., Ltd. (20.0%), and GE Capital (15.5%).

Fitch assigns the following expected ratings:

Penske Truck Leasing Co., L.P.

--Senior unsecured debt 'BBB+(EXP)'.

PTL Finance Corporation

--Senior unsecured debt 'BBB+(EXP)'.

Fitch currently rates the following:

Penske Truck Leasing Co., L.P.

--Long-Term IDR 'BBB+';

--Senior unsecured debt 'BBB+'.

PTL Finance Corporation

--Long-Term IDR 'BBB+';

--Senior unsecured debt 'BBB+'.

Penske Truck Leasing Canada Inc.

--Long-Term IDR 'BBB+';

--Senior unsecured debt 'BBB+'.

The Rating Outlooks are Stable.

Fitch reviewed the ratings of Penske Truck Leasing Co., L.P. and its subsidiaries on Oct. 11, 2016.

Date of Relevant Rating Committee: Oct. 10, 2016.

Summary of Financial Statement Adjustments: Fitch has made no adjustments that are not disclosed within the company's audited financials.

Additional information is available on www.fitchratings.com

Applicable Criteria

Global Non-Bank Financial Institutions Rating Criteria (pub. 15 Jul 2016)

https://www.fitchratings.com/site/re/884128

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1013765

Endorsement Policy

https://www.fitchratings.com/regulatory

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.

The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.

For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.

View source version on businesswire.com: http://www.businesswire.com/news/home/20161026006106/en/

Fitch Ratings
Primary Analyst
Johann Juan
Director
+1-312-368-3339
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Meghan Neenan, CFA
Senior Director
+1-212-908-9121
or
Committee Chairperson
Nathan Flanders
Managing Director
+1-212-908-0827
or
Media Relations:
Hannah James, New York, + 1 646-582-4947
Email: [email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Is the global equity rally broadening? UBS weighs in
• Investing.com’s stocks of the week
• Best Crypto to Buy Now Is Not ETH or SOL and Pepeto Proves Why Before