New York, May 25, 2022 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings -and other ratings that are associated with the same analytical units for the rated entity(entities) listed below.
The review was conducted through a portfolio review discussion held on 18 May 2022 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. A possible outcome from periodic reviews is a referral of a rating to a rating committee.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.
Key Rating Considerations
The principal methodology used for these rated entities was Business and Consumer Services published in November 2021. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Business and Consumer Services
Scale: Scale is considered because larger scale can be an indicator of a company's ability to influence business trends and pricing within its service segments and to support a stable or growing market position. Scale also can be an indicator of greater resilience to changes in demand, geographic diversity, cost absorption, R&D capabilities and of greater bargaining strength with customers, labor, and vendors. Revenue is an indicator of scale.
Business Profile: The business profile of a company is considered because it greatly influences its ability to generate sustainable earnings and operating cash flows. The business and consumer service industry comprises a vast array of business models encompassing a multitude of identifiable customer bases worldwide. We consider the underlying demand characteristics of a company's service offerings and their relative breadth, strength, and endurance of demand. Companies that have established a long history of strong demand for a diverse range of service offerings that are critical to customer needs generally entail lower risk compared to those that offer a single line of service which have less importance for customer needs or have a limited history of success.
Profitability: Profits matter because they are necessary to maintain a business's competitive position, including sufficient reinvestment in marketing, research, facilities, and human capital. Sustained high profitability is generally a strong indicator of substantial competitive advantages, particularly if combined with evidence of a stable or rising market share. EBITA Margin is an indicator of profitability.
Leverage and Coverage: Leverage and coverage measures are indicators of a company's financial flexibility and long-term viability, including its ability to adapt to changes in the economic and business environment within the segments in which it operates. Indicators of leverage and coverage include ratios such as: Debt / EBITDA, EBITA / Interest Expense, and Retained Cash Flow/ Net Debt.
Financial Policy: Management and board tolerance for financial risk is a consideration because it directly affects debt levels, credit quality, and the risk of adverse changes in financing and capital structure. Our assessment of financial policies includes the perceived tolerance of a company's governing board and management for financial risk and the future direction for the company's capital structure. Considerations include a company's public commitments in this area, its track record for adhering to commitments, and our views on the ability for the company to achieve its targets. Financial risk tolerance serves as a guidepost to investment and capital allocation.
Other Rating Considerations: Other considerations may include but are not limited to financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends also affect ratings.
• ENC Parent Corporation
The principal methodology used for these rated entities was Construction published in September 2021. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Construction
Scale: Scale is an indicator of a company's market strength, importance to markets served and ability to weather the vagaries of capital and economic cycles. Scale can also provide a broader platform for sustainable earnings and cash flow generation and typically enhances a construction company's operating and financial flexibility and its ability to bid, finance and profitably execute large, long-term, and complex projects. Large construction companies can accommodate a broad range of construction needs since they typically maintain a sizeable network of subcontractors and obtain various sources of financing, including bonding lines, which are key competitive advantages in the industry. In addition, scale in the construction industry often has a bearing on other key considerations such as geographic and segment diversity. Total revenue and EBITA are indicators of scale.
Business Profile: The business profile of a construction company influences its ability to generate sustainable earnings and operating cash flows. Diversification across several continents or economic regions and exposure to a number of uncorrelated segments can mitigate earnings volatility, which can be affected by cyclical swings, changing levels of competition and project performance. Consideration is given to operational and geographic diversity, technical capabilities, track record of project execution, and stability of revenues and margins.
Leverage and Coverage: Leverage and coverage measures are indicators of a company's financial flexibility and long-term viability. These measures can serve as an indicator of a greater ability to make new investments, weather the vagaries of the business cycle and respond to unexpected challenges, which often occur in the construction industry given the periodic performance issues that arise. Some measures of leverage and coverage include: EBITA / Interest Expense, Debt / EBITDA, and Funds from Operations / Debt.
Financial Policy: Management and board tolerance for financial risk is considered because it directly affects debt levels, credit quality, and the risk of adverse changes in financing and capital structure. Our assessment of financial policies includes the perceived tolerance of a company's governing board and management for financial risk and the future direction for the company's capital structure. Considerations can include a company's public commitments in this area, its track record for adhering to commitments, and our views on the ability for the company to achieve its targets.
Other Considerations: Some other considerations may include: financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends can also be considered.
• Railworks Holdings, LP
The principal methodology used for these rated entities was Enhanced Equipment Trust And Equipment Trust Certificates published in July 2018. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Enhanced Equipment Trust And Equipment Trust Certificates
Corporate Family or Senior Unsecured Rating of the Obligor of the Underlying Financing: The analysis begins with an assessment of the credit quality of the underlying airline and is a critical difference relative to structured finance transactions (not covered by this rating methodology), which typically involve pools of aircraft leased to multiple airlines. We believe the concentration of risk with a single underlying obligor is a key credit consideration in relation to default probability, and less so to expected loss. Cash flows from the underlying obligor are the sole source of funding to the pass-through trusts that fund distributions on the Certificates while the underlying obligor is not in default. Furthermore, the aircraft that comprise the collateral do not change over time and are the sole source of security under an EETC default scenario.
Legal Framework: We consider the legal framework that will apply to the financing. For Certificates whose underlying financings are subject to the Cape Town Convention or other non-U.S. insolvency regimes, we form an opinion of the extent to which the applicable legal regime contributes to lower expected probability of default and lower expected loss relative to that under Section 1110. A country's historical compliance with international treaties and its domestic laws, including regarding owner's rights to repossess their assets following a lessee default, will be a key consideration in our assessment of Certificate transactions subject to laws other than Section 1110. We also consider the institutional strength of the country of domicile of non-US EETC issuers according to our sovereign ratings teams when assessing the legal jurisdiction.
Liquidity Facilities: Liquidity facilities for EETCs are typically sized to fund three semi-annual (or six quarterly) interest payments due on the underlying equipment notes that fund an EETC's pass-through trust following a payment default on one or more underlying financing instruments. Contractual terms of Certificates define a default as the non-payment by the Pass-Through Trustee of a scheduled interest payment or non-payment of the pool balance ("principal") then outstanding at the legal final maturity date. The liquidity facility is a key feature that sets EETCs apart from ETCs or PTCs. These facilities defer, if not prevent, a default of an EETC whose underlying financing(s) have been disaffirmed by the carrier that has filed for bankruptcy protection.
Collateral Attributes and Valuation: We evaluate the nature of the collateral and the amount of over-collateralization in each tranche of a transaction and consider qualitative features of the collateral and quantitative measures of loan-to-value (LTV) to determine the number of notches above the airline's underlying rating that we believe is appropriate for the instrument rating. We use the peak LTV over the life of a transaction when applying our LTV grids. We consider recent third-party appraisals, valuation guides prepared by ISTAT-certified appraisers and other market intelligence when estimating market values of aircraft when assigning and monitoring our Certificate ratings.
Loan-to-Value Assessment: Our loan-to-value notching grids for EETCs suggest the standard maximum number of notches a rating committee might consider when assigning EETC ratings. The models, vintages, and exposure to technological replacement of aircraft that comprise the collateral of two distinct Certificates with similar LTVs can meaningfully differ as can our estimates of future market values.
Terms of Equipment Note Indenture and Other Underlying Financing Instruments: The terms of related EETC trust documents, indentures of underlying equipment notes and intercreditor agreements have become mostly uniform. The additions of leases or conditional sale agreements (CSAs) to the structure of a particular EETC transaction have not in and of themselves resulted in notching differentials, relative to our practice for rating traditional mortgage financing EETCs, all else equal. To support ratings assignments and to minimize notching discounts relative to our ratings practice for EETCs, we look for the leases or CSAs to also be cross-defaulted.
• CSX Corporation
• Federal Express Corporation
• Union Pacific Corporation
The principal methodology used for these rated entities was Manufacturing published in September 2021. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Manufacturing
Scale: Scale is a consideration because it is an indicator of the overall depth of a company's business and its success in attracting a variety of customers, as well as its resilience to shocks, such as sudden shifts in demand or rapid cost increases. Larger manufacturing companies typically attract a greater breadth of customers and can better withstand cyclicality resulting from economic conditions and product cycles. A larger revenue base also generally leads to important economies of scale in raw material purchases and corporate functions, particularly important given the need for global supply chain management to control costs for most manufacturing companies. Larger manufacturers also tend to generate higher cash flow for capital reinvestment and debt reduction. In addition, they generally have greater access to the capital markets, which can reduce the cost of capital. Revenue is an indicator of scale.
Business Profile: The business profile of a manufacturing company is important because it greatly influences its ability to generate sustainable earnings and operating cash flows. Core aspects of a manufacturing company's business profile are its market position, the breadth and stability of the end-markets it serves, the diversity of its product offerings, as well as the effectiveness of the company's cost structure.
Profitability and Efficiency: Profits are considered because they are needed to generate sustainable cash flow and maintain a competitive position, which includes an ability to invest in marketing, research, factories, and personnel. High profitability sustained over time is generally an indicator of operating efficiency and competitive advantage. EBITA Margin is an indicator of profitability and efficiency.
Leverage and Coverage: Leverage and cash flow coverage measures provide indications of a company's financial flexibility and ability to sustain its competitive position, as well as how much financial risk a manufacturer is willing to undertake. A manufacturer with strong financial flexibility is better able to invest in product innovation and adapt to changing customer preferences and competitive challenges than a manufacturer with a constrained capital structure. The capital intensity of the manufacturing sector also makes financial flexibility critical to absorbing unexpected costs and withstanding industry cyclicality. Indicators of leverage and coverage include ratios such as: Debt/ EBITDA, EBITA/ Interest Expense, Free Cash Flow/ Debt, and Retained Cash Flow/ Net Debt.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile. It is an important rating determinant because it directly affects debt levels, credit quality, the future direction for the company and the risk of adverse changes in financing and capital structure. Financial risk tolerance serves as a guidepost to investment and capital allocation. Liquidity management is an important aspect of overall risk management and can provide insight into risk tolerance.
Other Rating Considerations: Other considerations may include but are not limited to: financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance, as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk, as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends, are also considered.
• Amsted Industries Incorporated
• Westinghouse Air Brake Technologies Corp.
The principal methodology used for these rated entities was Passenger Railways and Bus Companies published in December 2021. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Passenger Railways and Bus Companies
Scale: Scale is considered because it is an indicator of the overall depth of a company's business and its success in attracting customers, as well as its resilience to shocks, such as sudden shifts in demand or rapid cost increases. The scale of a passenger railway or bus company is also a key indicator of its economic and political importance. Greater market share is also key for continued political support. Revenue is an indicator of scale.
Business Profile: The business profile of a passenger railway company or a bus company is considered because it greatly influences its ability to generate sustainable earnings and maintain stable operating cash flow. Core aspects of a passenger railway company's or bus company's business model are the stability of its operating environment, market characteristics and competitive environment.
Profitability and Efficiency: Profits are considered because they are needed to generate sustainable cash flow and maintain a competitive position, which includes making investments in assets, upgrading technology, and improving service offerings. Profitability may also provide insights into a company's ability to manage its key costs, including fuel, labor and the cost of equipment and infrastructure. EBIT margin is an indicator of profitability and efficiency.
Leverage and Coverage: Leverage and cash flow coverage measures provide important indications of a company's financial flexibility and long-term viability, as well as its ability to sustain its competitive position, invest in growth and meet debt service obligations. Leverage and coverage metrics include Debt/ EBITDA, Retained Cash Flow/ Net Debt, and Funds from Operations Plus Interest Expense/ Interest Expense.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile. It is an important rating determinant, because it directly affects debt levels, credit quality, the future direction for the company and the risk of adverse changes in financing and capital structure. Financial risk tolerance serves as a guidepost to investment and capital allocation. Liquidity management is an important aspect of overall risk management and can provide insight into risk tolerance.
Other Rating Considerations: Other considerations may include but are not limited to: financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends are also considered.
• First Student Bidco Inc.
The principal methodology used for these rated entities was Surface Transportation and Logistics published in December 2021. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Surface Transportation and Logistics
Scale: Scale is considered because it is an indicator of the overall depth of a company's business and its success in attracting a variety of customers, as well as its resilience to shocks, such as sudden shifts in demand or rapid cost increases. A large revenue base can lead to economies of scale, for example in terms of equipment costs, as well as a stronger pricing position with customers. Large-scale companies within the industry generally have more flexibility to manage their businesses under different demand and cost scenarios, an important consideration for the surface transportation and logistics industry, which is exposed to economic cycles. Larger companies also generally have greater access to the capital markets, critical for asset-intensive companies such as railroad and trucking companies, which need frequent access to capital markets in order to make sizable investments in their businesses. Scale is measured using total reported revenue.
Business Profile: The business profile of a surface transportation and logistics company greatly influences its ability to generate sustainable earnings and operating cash flows. We break out the scorecard definitions by railroad companies and by trucking and logistics companies based on the different characteristics of the two subsectors. Core aspects of a railroad operator's business profile are its control of the railroad system it operates and its geographic presence. Core aspects of a trucking and logistics company's business profile include its market position; barriers to enter the market in which it operates; diversification by geography and service offering; the quality and diversity of its customer base; and its degree of control over its assets.
Profitability and Efficiency: Profits are considered because they are needed to generate sustainable cash flow and maintain a competitive position. Key metrics for profitability and efficiency include Operating Margin and EBITA/ Average Assets.
Leverage and Coverage: Leverage and cash flow coverage measures provide important indications of a surface transportation and logistics company's financial flexibility, which is critical to its ability to adapt to changes in market conditions in this highly cyclical sector. Companies need financial resources to invest in infrastructure, equipment, and facilities as well as to make strategic investments to acquire new businesses, diversify product lines or expand into developing geographic regions. Leverage and coverage metrics include Debt/ EBITDA, Funds from Operations/ Debt and EBIT/ Interest Expense.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile. It is an important rating determinant, because it directly affects debt levels, credit quality, the future direction for the company and the risk of adverse changes in financing and capital structure. Financial risk tolerance serves as a guidepost to investment and capital allocation. Liquidity management is an important aspect of overall risk management and can provide insight into risk tolerance.
Other Rating Considerations: Other considerations include but are not limited to: financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends are also considered.
• AIT Worldwide Logistics Holdings, Inc.
• Burlington Northern Santa Fe, LLC
• C.H. Robinson Worldwide, Inc.
• Canadian National Railway Company
• Canadian Pacific Railway Company
• Carriage Purchaser, Inc.
• Consolidated Rail Corporation
• CSX Corporation
• Daseke Companies, Inc.
• Drive Chassis Holdco, LLC
• Echo Global Logistics, Inc.
• FedEx Corporation
• GXO Logistics, Inc.
• J.B. Hunt Transport Services, Inc.
• Kenan Advantage Group, Inc.
• LaserShip, Inc.
• Liquid Tech Solutions Holdings, LLC
• Magnate Worldwide, LLC
• Norfolk Southern Corporation
• Penske Truck Leasing Co., L.P.
• Ryder System, Inc.
• Savage Enterprises, LLC
• Stonepeak Taurus Lower Holdings LLC
• Union Pacific Corporation
• United Parcel Service, Inc.
• URS Holdco, Inc.
• WWEX UNI TopCo Holdings, LLC
• XPO Logistics, Inc.
• Yellow Corporation
This announcement applies only to Rated Entities with EU rated, UK rated, EU endorsed and UK endorsed ratings. Rated Entities, with Non EU rated, non UK rated, non EU endorsed and non UK endorsed ratings may be referenced herein to the extent necessary, if they are part of the same analytical unit.
Please see the Issuer page on https://ratings.moodys.com for each of the ratings covered, most updated credit rating action, rating history, and Credit Rating action Press Release including the rating rationale and factors that could lead to a rating upgrade or downgrade.
This publication does not announce a credit rating action.
For any credit ratings referenced in this publication, please see the issuer/deal page on https://ratings.moodys.com
for the most updated credit rating action information and rating history.
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