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Rating Action:

Moody's affirms United Rentals' ratings following proposed acquisition of National Pump

10 Mar 2014

Over $5 Billion of rated debt affected

New York, March 10, 2014 -- Moody's Investors Service affirmed United Rentals (North America), Inc.'s ("United Rentals") Corporate Family Rating (CFR) of B1 and its Probability of Default Rating (PDR) of B1-PD following the March 9, 2014 announcement of United Rentals' proposed $780 million acquisition of four related companies: National Pump & Compressor, Ltd., Canadian Pump & Compressor Ltd., GulfCo Industrial Equipment, LP and LD Services, LLC known collectively as National Pump & Compressor ("National Pump," unrated) which supplies rental pumping equipment to the energy industry and other end-markets. Moody's also affirmed all instrument ratings and the company's SGL-3 Speculative Grade Liquidity Rating which reflects the expectation that United Rentals will maintain an adequate liquidity profile over the next 12 to 18 months. The ratings outlook remains stable.

RATING RATIONALE

The affirmation of United Rentals' B1 CFR, reflects our expectation for continued revenue and EBITDA growth for both United Rentals existing business and from National Pump. The acquisition is anticipated to add over $200 million in annual revenues and approximately $100 million in adjusted EBITDA to United Rentals' $5 billion revenue base and over $2 billion in adjusted EBITDA. United Rentals' revenue and earnings growth has been driven by the improved demand environment and the successful integration of the operations of RSC Holdings Inc. acquired in April 2012. The B1 CFR also benefits from United Rentals' significant size relative to its competitors and related economies of scale, product breadth, diversified customer base, and market position.

National Pump is the second-largest specialty pump rental company in North America which is strongly benefiting from the shale boom in the U.S. United Rentals currently has little presence in the pump rental market serving the energy sector. About half of National Pump's revenue comes from upstream oil and gas customers. The other half comes from various sectors including petrochemicals, pipelines, and mining. Exposure to these end-markets should help reduce some of United Rentals' current end-market exposure to non-residential construction, which was 46% of United Rentals' 2013 rental revenue.

The proposed acquisition of National Pump will allow United Rentals, which is the largest construction equipment rental company in the US, to expand its product and service offerings in to one of the largest and highest growth specialty rental equipment markets. We view this diversification of United Rentals' rental equipment and services, which will allow United Rentals to more fully capitalize on business related to the robust shale exploration and production market, as credit positive for United Rentals. Although we anticipate that this acquisition will increase funded debt by about 10%, the high margin product line is expected to be accretive to earnings, and we do not anticipate that it will materially pressure the company's credit metrics.

National Pump will fall under United Rentals' smaller, growing specialty rental fleet business, as part of United Rentals' specialty division. Moody's does not anticipate meaningful challenges to be faced in the integration of National Pump as it initially will likely be managed as a standalone rental business. Over time we anticipate benefits from cross selling opportunities and equipment purchases. We expect National Pump to be a good long-term fit for United Rentals given its added product diversification and exposure to robust energy-related end-markets. In the near-term, we anticipate that the acquisition will increase funded debt by about 10%. In the short-term, leverage is likely to be just short of a trigger for negative rating consideration, but we do not expect leverage to surpass this level. Additionally, since we believe the acquisition will be accretive to earnings, the leverage and other metrics should quickly begin to again improve as National Pump is integrated. We would anticipate that the company will limit further sizeable acquisitions during this period, particularly since United Rentals remains committed to completing its $500 million share repurchase program (authorized in October 2013) by April 2015. If the company were to increase funded debt for shareholder friendly activities or additional sizeable acquisitions following the anticipated increase in debt related to this transaction, the ratings could face downward pressure.

..Issuer: United Rentals (North America), Inc.

.... Probability of Default Rating, Affirmed B1-PD

.... Speculative Grade Liquidity Rating, Affirmed SGL-3

.... Corporate Family Rating, Affirmed B1

....Senior Subordinated Regular Bond/Debenture, Affirmed B3 (LGD6-93%)

....Senior Unsecured Regular Bond/Debentures, Affirmed B2 (LGD4-64%)

Affirmations:

..Issuer: RSC Holdings III, LLC

....Senior Unsecured Regular Bond/Debenture, Affirmed B2 (LGD4-64%)

..Issuer: UR Financing Escrow Corporation

....Senior Secured Regular Bond/Debenture, Affirmed Ba2 (LGD2-24%)

....Senior Unsecured Regular Bond/Debentures , Affirmed B2 (LGD4-64%)

Outlook Actions:

..Issuer: RSC Holdings III, LLC

....Outlook, Changed To No Outlook From Rating Withdrawn

..Issuer: United Rentals (North America), Inc.

....Outlook, Remains Stable

United Rentals' stable ratings outlook reflects the expectation for modest improvement in its credit metrics balanced against the cyclical business risks and high leverage.

The ratings could be upgraded or outlook changed if the company were expected to experience positive free cash flow to debt after net capital expenditures and other uses so as to allow for continued deleveraging--specifically, debt to EBITDA trending towards 3.25 times and EBIT to interest above 1.75 times on a Moody's adjusted basis, all on a sustained basis. Positive traction could be limited by future return of cash to shareholders via stock repurchases depending on leverage. Reductions in leverage would be considered in light of the company's target leverage ratio, and its projected overall cash generating ability. The ratings outlook or rating could be adversely affected if debt to EBITDA were expected to increase above 4.0 times, EBIT to interest decreased below 1.25 times, or the company's liquidity profile weakened. Ratings could also be adversely impacted if sales and margins contracted thereby resulting in a lower return on its expanded fleet.

The principal methodology used in this rating was the Global Equipment and Automobile Rental Industry Methodology published in December 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

United Rentals, headquartered in Stamford, CT, is an equipment rental company with a fleet of approximately 400,000 units and over 800 rental locations across the US and Canada. The company operates in two business segments. Its General Rentals segment provides construction, industrial and homeowner equipment while its Trench Safety, Power & HVAC segment provides equipment for underground construction, temporary power, climate control and disaster recovery. While the primary source of revenue is from renting equipment, the company also sells equipment and related parts and services. LTM revenue for the period ending December 31, 2013 was approximately $5 billion.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Paul Aran
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Michael J Mulvaney
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms United Rentals' ratings following proposed acquisition of National Pump
No Related Data.
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