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13 Jan 2011
Approximately $ 2.1 billion of debt securities affected
New York, January 13, 2011 -- Moody's Investors Service affirmed certain ratings of RSC Equipment Rental
Inc., raised the ratings on the company's unsecured notes
to Caa1 from Caa2 and assigned a Ba2 rating to the company's new $1.1
billion asset based Revolving Credit Facility (ABL). Moody's assigned
a Caa1 to the company's new senior unsecured notes. The new bank
facility and unsecured notes are co-issued by RSC Holdings III,
LLC and RSC Equipment Rental, Inc.
The company's B3 CFR and PDR reflect its high leverage and incorporates
the expectation for improved operating performance as a result of increasing
demand. The ratings on the notes reflect their senior unsecured
position in the company's capital structure and their junior position
to its $1.1 billion ABL. The notes and ABL proceeds
will go towards paying down the company's second lien term loan
and pay for other related fees and expenses. The notes have RSC
Equipment Rental Inc. as a co borrower while the ABL also has RSC
Equipment Rental of Canada Ltd. The new ABL will refinance the
company's existing ABL. The notes will be guaranteed by certain
of the company's domestic subsidiaries, if any.
RSC's speculative grade liquidity rating, now rated at RSC
Holdings III, LLC, still reflects adequate liquidity with
a SGL-3 rating. Moody's believes that the company
will maintain an adequate liquidity profile over the next twelve months.
Moody's expects that the company's operating cash flow generation
should be sufficient to fund the majority of its capital expenditures,
the company also has significant availability in its revolver.
As demand strengthens, Moody's expects the company to be free cash
flow negative as it will need to add to its rental equipment fleet to
meet higher rental demand. This revolver is expected to be sufficient
to fund any increase in demand that may occur over the intermediate term.
The stable ratings outlook reflects the expectation that the while the
company's fleet utilization should improve over the next twelve
months, the company remains highly leveraged. Even with improving
rental demand, the company's financial metrics are expected
to continue to be consistent with the B3 CFR through 2011.
..Issuer: RSC Holdings III, LLC
....Senior Secured $1.1 billion
ABL Facility, Assigned a Ba2 (LGD2; 17%)
....Senior Unsecured notes, Assigned
a Caa1 (LGD5; 78%)
..Issuer: RSC Equipment Rental, Inc.
....Senior Unsecured $200 million notes
due 2019 Upgraded to Caa1 from Caa2
....Senior Unsecured $620 million notes
due 2014 Upgraded to Caa1 from Caa2
....Senior Secured $400 million notes
due 2017, affirmed at B1 (LGD3; 33%)
..Issuer: RSC Equipment Rental, Inc.
.... B3 Probability of Default Rating,
previously assigned at RSC Equipment Rental, Inc.; now
assigned at RSC Holdings III, LLC
.... SGL-3 Speculative Grade Liquidity
Rating, previously assigned at RSC Equipment Rental, Inc.;
now assigned at RSC Holdings III, LLC
.... B3 Corporate Family Rating, previously
assigned at RSC Equipment Rental, Inc.; now assigned
at RSC Holdings III, LLC
The upgrade in the company's senior unsecured instrument ratings
to Caa1 from Caa2 reflect the anticipated paydown in the company's
second lien notes that were senior to the unsecured instruments.
The company's new ABL rating is one notch higher than the LGD implied
rating as a result of the anticipated recovery in the event of bankruptcy
that flow from its characteristics including its perfected liens,
asset reporting process, and the recovery track record of ABLs in
The last rating action was on November 02, 2009 when Moody's assigned
a Caa2 rating to RSC Equipment Rental, Inc's ("RSC") proposed issuance
of $200 million of unsecured debt and affirmed the B3 Corporate
Family Rating. The CFR and PDR have been moved to RSC Holdings,
The Methodology grid based outcome of the Global Equipment and Automobile
Rental Industry (published: December 2010) indicates a rating of
B3, in line with the assigned rating.
The ratings could be upgraded if the company reduces its debt leverage
to under 5 times, has positive net income on a current year and
on a projected basis and enjoys improved coverage metrics including fixed
charge coverage over 1.5 times as defined in their bank credit
agreement. Improving credit metrics including higher asset turnover,
improved return on assets, greater sales, and improved margins
would also support positive ratings traction. The ratings or outlook
may decline if debt to EBITDA increases to over 6 times, or if free
cash flow from operations before capital expenditures turned negative.
The principal methodologies used in this rating were Global Equipment
and Automobile Rental Industry published in December 2010, and Loss
Given Default for Speculative-Grade Non-Financial Companies
in the U.S., Canada and EMEA published in June 2009.
RSC holdings III, is an intermediate holding company that is the
direct parent to RSC Equipment Rental, Inc. RSC is one of
the largest equipment rental companies in North America operating 457
locations throughout the United States and Canada. The company
maintains over 900 categories of equipment having an original equipment
cost of $2.4 billion. Total revenues for the LTM
period ended in September 30, 2010 totaled $1.1 billion.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's rates new debt issues of RSC; ABL at Ba2, unsecured notes at Caa1
250 Greenwich Street
New York, NY 10007
No Related Data.
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