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Announcement:

Moody's affirms GATX's Baa1 rating and revises the outlook to stable

17 Sep 2010

New York, September 17, 2010 -- Moody's Investors Service affirmed GATX Corporation's Baa1 senior unsecured and P-2 short-term ratings and revised its rating outlook to stable from negative.

The affirmation and revised outlook reflects Moody's expectation that GATX's credit profile, which was pressured during the recession, will withstand a prolonged tepid economic recovery.

GATX's ratings strengths include 1) its operating performance during the recession which was characterized by higher than expected railcar utilization and uninterrupted profitability, 2) its leading position in the full-service railcar leasing industry, particularly in tank cars, which have more stable usage patterns than many other railcar types and 3) its well-managed liquidity position, based upon solid portfolio cash flows, manageable debt maturities, and committed backup credit facilities. GATX's capital position is adequate for the assigned rating, but the firm's leverage is higher than some industry peers.

In regards to the company's operating performance, weak railcar demand during the recession led to lower lease renewals and lower lease rates on GATX's railcars, threatening the strength and stability of the firm's earnings and cash flow. However, GATX has maintained strong railcar utilization (96% or better), which compares favorably with the prior downturn (90% in 2001/2002). This higher than expected utilization is attributed to GATX selling higher risk railcars and being judicious in its railcar acquisition strategy in the years following the previous downturn. The resulting asset mix proved to be more resilient to down cycles. At the same time GATX extended its average lease maturities to lock in favorable lease rates. Thus, a lower than typical percentage of the firm's leases is subject to renewal during the current low demand environment.

Moody's acknowledges that GATX's lease portfolio average yield may yet deteriorate in future quarters, however we expect GATX's profitability measures will remain within a range that is compatible with the Baa1 rating. GATX has had to make concessions on lease rates to keep its railcars deployed during this cycle, and new lease rates are likely to remain below expiring lease rates for the next several quarters. However, to partially counter the pressure on lease revenues that results from this dynamic, GATX has been shortening the term of new and renewing leases, to provide it with an earlier opportunity to re-price the leases in what is hoped will be improved future market conditions. Recently improved rail industry indicators, including increased car loadings for commodities commonly transported via rail and lower idle car counts, suggest that demand for certain railcar types is strengthening. Correspondingly, lease rates for several railcar types have increased materially in 2010 from the lows reached in 2009.

A rating upgrade is unlikely, given GATX's business concentrations, reliance on wholesale funding, and capital position. However, a permanent reduction in leverage to less than 3x (Moody's adjusted effective leverage), combined with sustained improvements in profitability, could result in a higher rating. A downgrade could follow if GATX were to increase leverage to greater than 5x, such as by adding to debt levels to fund asset acquisitions, or were the firm's liquidity runway materially weaken or its profitability unexpectedly decline.

In its last GATX rating action, dated May 29, 2009, Moody's revised GATX's rating outlook to negative from stable.

The principal methodology used in rating GATX is Analyzing the Credit Risks of Finance Companies, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Rating Methodologies sub-directory.

GATX Corporation, based in Chicago, provides equipment leasing and associated services through its Rail and Specialty operating segments and also owns Great Lakes shipper American Steamship Company.

New York
Mark L. Wasden
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Craig A. Emrick
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's affirms GATX's Baa1 rating and revises the outlook to stable
No Related Data.
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