Moodys.com
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

Terms of One-Time Website Use

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

MOODY'S DOWNGRADES AMERCO -- SENIOR IMPLIED TO Ba2, OUTLOOK STABLE

25 Sep 2002
MOODY'S DOWNGRADES AMERCO -- SENIOR IMPLIED TO Ba2, OUTLOOK STABLE

New York, September 25, 2002 -- Moody's Investors Service downgraded the ratings of AMERCO, senior implied and senior unsecured, to Ba2 from Ba1. The downgrade is based on our expectation that adjusted debt will continue to be high while financial performance, which has recently been hurt by losses at its insurance operations, will continue to be weak. The downgrade also reflects weak cash flow from operations, which requires an ongoing sale of assets and access to financial markets for refunding, and a reduced liquidity position, which is aggravated by the high seasonality of its rental operations. Countering these negatives are the U-Haul brand's strong name recognition in the consumer rental market, a steady growth in the core rental operations we expect to continue, reasonable extension into storage markets, and a substantial, largely unencumbered asset base.

The outlook is stable, and assumes that the company can demonstrate ongoing efficient access to funding alternatives to meet near-term debt maturities, as well as manage with lower than historic levels of alternate liquidity as U-Haul enters its seasonal low period for operating cash flow. If the company is unable to address these concerns in the near term, the ratings could be pressured.

Ratings downgraded are:

AMERCO Senior implied and senior unsecured and medium term notes to Ba2, subordinated shelf to (P)Ba3, and preferred shelf to (P)B1

AMERCO's core moving and storage operation, U-Haul, is the clear leader in its market. However, margins are unlikely to grow significantly and the business employs a considerable amount of capital. U-Haul also sells various moving products through its stores and dealerships, as a natural extension of its rental operations. Storage operations have been the biggest growth area and U-Haul is now number two by number of rooms available. The storage industry is very fragmented and highly regionalized with numerous independent operators, although U-Haul's systems and name recognition suggests the company is positioned to have some price influence in certain markets.

Outside of moving and storage, Moody's believes that AMERCO has addressed a number of the operating problems at its Republic Western ('RepWest') insurance subsidiary. RepWest recorded statutory losses over the last two years, although firming conditions in the property casualty commercial lines sector should result in earnings improvement. However, the degree of improvement may be dampened by continued adverse development on prior year reserves. Nonetheless, RepWest is unlikely to generate any more than a very modest income without taking on more risk in its underwriting -- a strategy that is unlikely, in our view. Consequently, AMERCO's insurance operations are not expected to produce a return to justify the capital invested in them. The volatility inherent to the property & casualty insurance business, as well as RepWest's small capital base, could still result in AMERCO needing to post additional regulatory capital beyond the $57 million of real estate that was recently contributed. With little cash flow expected and the risk of loss remaining in its run-off operations, insurance is a modest drag on AMERCO's risk profile at best and could still produce downward pressure on the AMERCO rating.

AMERCO's cash flow from operations has been negative, with the company relying on ongoing sale of used equipment and access to various funding sources to meet investment needs and debt maturity obligations. For the last fiscal year, cash from operations less CAPEX was a negative $45 million, as the company funded operations through lease financing and the sale of property to Storage Acquisition Corporation (SAC), a company owned by a senior manager of U-Haul International. Should AMERCO be unable to sell its property on a regular basis (although it has done so thus far), or be unable to access new financing on reasonable terms, AMERCO could have difficulty making adequate investment in its business to support its competitive position. AMERCO has a relatively short debt maturity profile with several large maturities over the near term.

AMERCO's rental business has a high degree of seasonality in operations, with most of the cash flow generated in the spring and summer months. Cash is used during the rest of the year, depending on the timing of capital investment. The company recently extended its bank credit facility to mature in June, 2005, but at a smaller than anticipated amount of $205 million. All of the facility is now drawn, according to the company. The smaller committed amount, when combined with the beginning of its slow season, limits AMERCO's investment flexibility and creates additional challenges in managing its maturing debt over the next year. The company advises that it is working on funding strategies to relieve the cash flow pressure and more appropriately match its liability structure to its asset base and cash flow.

For the last five years, adjusted indebtedness has grown steadily, mostly through increases in off balance sheet lease financing for equipment. Lease expense nearly doubled over the last five years to $172 million for FY 2002. EBITDAR (earnings before interest and taxes, plus depreciation plus lease expense), at $408 million for the last fiscal year and flat over the last three years, is expected to improve only modestly over the near term. Adjusted debt to EBITDAR is relatively high at 5x (using the modified present value method).

The decline in adjusted debt for the last fiscal year is because capital spending was reduced to a level that is not likely to be sustainable, in Moody's view. While we do not anticipate that U-Haul will expand its fleet, normal replacement implies a moderately higher level of CAPEX going forward than is currently being expended. U-Haul does have some flexibility in that it can materially cut spending in any one year if need be as a somewhat older fleet is not likely to affect rental operations in the short run.

In considering AMERCO's financial flexibility and liquidity, Moody's takes into account a number of potentially significant contingencies including, support of a $125 million bank facility for Texas storage facilities, a residual value guaranty for $203 million on certain truck leases, and an IRS review of approximately $332 million of deductions taken in connection with payment to dissident shareholders that could be disallowed.

AMERCO completed several transactions with Storage Acquisition Corporation (SAC) whereby SAC purchased property from AMERCO (as well as other parties) and used the property as collateral for loans. Proceeds were used to develop certain storage locations, which U-Haul manages for a fee. U-Haul retains a subordinated note when selling the properties. SAC is owned by Mark Schoen, who also owns approximately 15.6% of AMERCO common stock. While AMERCO does not own SAC, it has begun to consolidate this entity in the reported financial results. AMERCO does not guaranty the SAC debt, nor does AMERCO's debt cross default to SAC notes. However, Moody's believes there is some residual liability. In Moody's view, AMERCO is likely to support the SAC debt as long as AMERCO itself remains solvent. This is because SAC has been a source of financing in the past, the ownership of SAC by a senior manager of U-Haul, and that default by SAC could severely diminish the value of AMERCO's holdings of SAC notes. Such support could be in the form of purchase of certain properties or sale of additional properties or deferral of payments under the management agreement, for example.

With the extension of the bank facility, the banks received guarantees from substantially all of AMERCO's domestic non-insurance operating subsidiaries. The bank facilities also contain restrictive covenants for minimum net worth and minimum fixed charge coverage, and maximum leverage --- AMERCO has some, but not substantial, cushion in these covenant tests.

Earlier this year, AMERCO issued notes through its real estate subsidiary (AMERCO Real Estate Corporation, or 'AREC') that are expected to be secured by certain of AMERCO's real properties. The amount of this transaction, together with the guarantees for the bank credit agreement, fall within the priority debt basket permitted by the indentures to the senior unsecured notes.

While AMERCO's senior unsecured obligations are now effectively subordinated to the bank lenders and real estate, Moody's did not notch the senior unsecured rating down from the senior implied rating. This is because of the relatively low portion of secured debt compared to total debt, and the large amount of still unencumbered assets available to all debt holders.

Approximately 60% of AMERCO's stock is controlled by officers, directors, family members and an ESOP Trust, and the two top officers control about one-third of the total shares. Consequently, this insider group remains in control of AMERCO operations and finances. AMERCO has made efforts to improve the quality of the Board, having added three new outside directors since 1998 and is expected to continue to work on improving the quality of its corporate governance, as well as improve the transparency of its operations and finances.

According to Moody's, AMERCO is current with all of its SEC filings and disclosure requirements, although the company did need to use the extension period for filing its Form 10-K in connection with consolidation of SAC. The company recently changed auditors. The previous auditors did not qualify their financial report nor issue an adverse opinion, although they did advise the Board certain areas of weakness in internal controls. According to the company, these matters are being addressed with the new auditors. Moody's also notes that the company recently decreased the salvage value and extended the life of certain trucks and treats interest income as revenue, which have a positive effect on reported operating income.

AMERCO has a significant, unencumbered asset base --- including substantial and diversified real estate spread across the continental U.S. and Canada. Gross property plant and equipment (PP&E) reported by AREC as of fiscal year 2002 was $917 million, and net PP&E was $609 million. The company advised that approximately 75% of the property was acquired during the period from 1975-1984, so the properties, in aggregate, could provide some hidden value

AMERCO also continues to benefit from the strength of U-Haul. The U-Haul brand has top-of-mind recognition among consumers, the company has long experience in managing a dealer network, has an asset base appropriately sized and aged for its needs, and has made system improvements to maximize equipment utilization. U-Haul has the broadest market coverage by far, and its nearest national competitor is operating under bankruptcy protection. The business has nearly doubled in size since 1992, growing steadily at about 5.5% annually with an operating margin (before lease expense) ranging from 8 to 10% in general. Revenues continued to grow over the last three years, although at a lower pace. Profits from the core business have also been fairly steady.

AMERCO is a holding company, based in Reno Nevada, with interests in consumer truck rental, storage, real estate and property & casualty and life insurance.

New York
Michael J. Mulvaney
Managing Director
Industrial
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Robert Jankowitz
Vice President - Senior Analyst
Industrial
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR  PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​
Moodys.com