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31 Mar 2011
Approximately $335 million in debt securities affected
New York, March 31, 2011 -- Moody's Investors Service has upgraded the ratings for The Greenbrier
Companies Inc. ("Greenbrier"), Corporate Family Rating to
B3 from Caa1, and changed its outlook from negative to stable.
At the same time, Moody's has upgraded the ratings of Greenbrier's
senior unsecure debt, to Caa1 from Caa2 and affirmed its Speculative
Grade Liquidity Rating at SGL-3.
The upgrade of the CFR and PDR to B3 from Caa1 reflect Moody's expectations
that Greenbrier's earnings, revenues and financial performance
will improve over the next 12 to 18 months as a result of growing demand
for rail cars. Greenbrier is well position to benefit from improving
industry conditions in the rail car manufacturing and leasing businesses,
where continued growth in overall railroad freight volume will likely
result in robust demand growth for new railcars. Although Greenbrier's
current credit metrics of Debt to EBITDA of 6.7 times and EBIT
to Interest of 0.9 time are somewhat weak for a B3 rating,
Moody's believes that, with a recovery in business activity,
the company is likely to reach credit metrics that are more in line with
a B3 rating in the near-term.
Greenbrier's senior unsecured notes due 2015 and its convertible
senior notes due 2026 are rated Caa1, one notch below the Corporate
Family Rating. This reflects the significant amount of senior secured
debt in the form of the senior secured credit facilities and secured notes
related to railcar leasing assets. The level of senior secured
debt in the company's debt structure implies a lower estimated recovery
that the senior unsecured notes would receive in the event of default,
per Moody's Loss Given Default Methodology.
On March 30, 2011, Greenbrier announced plans to redeem its
senior unsecured notes due 2015 by way of a tender offer, to be
funded primarily by a proposed $215 million senior convertible
notes offering (not rated by Moody's). As this refinancing
has little impact on the company's overall debt structure,
and since the new notes are expected to have the equivalent priority in
claim as the senior notes they are replacing, this transaction does
not currently impact Greenbrier's ratings. However,
to the extent that any of the senior notes due 2015 remain untendered
at the expiry of the tender offer, they will be stripped of certain
financial covenants, and will likely be downgraded to reflect their
junior claim at that point. If all of the notes due 2015 are redeemed,
ratings on that instrument will be withdrawn.
The stable outlook reflects expected continued improvement in freight
volume that will help drive higher utilization rates and stronger railcar
demand. This in turn should result in a growing backlog for Greenbrier,
as well as increasing railcar delivery levels over the near term.
The outlook could be changed to positive if Greenbrier demonstrates an
ability to sustain EBIT to Interest above 1.5 times and Debt to
EBITDA of less than 5.5 times, while generating positive
free cash flow generation throughout the industry cycle. A positive
outlook would also require evidence of a recovery in demand and improvement
in backlog through FY 2011, suggesting a full recovery in revenue
levels and profitability in the near term.
The ratings could be downgraded if a deterioration in operating performance
results in the reduced access to liquidity due to tightness to financial
covenants under the bank credit facility. Ratings could also be
lowered if Greenbrier undertakes a change in strategic focus that negatively
impacts the company's risk profile. Leverage (Debt/EBITDA) sustained
above 7.0 times or EBIT/Interest coverage below 0.5 times
for a prolonged period may also prompt a ratings downgrade.
..Issuer: Greenbrier Companies, Inc.
.... Probability of Default Rating,
Upgraded to B3 from Caa1
.... Corporate Family Rating, Upgraded
to B3 from Caa1
....Senior Unsecured Conv./Exch.
Bond/Debenture, Upgraded to Caa1 (LGD5, 74%) from Caa2
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Caa1 (LGD5, 74%) from Caa2
..Issuer: Greenbrier Companies, Inc.
....Outlook, Changed To Stable From
The principal methodologies used in this rating were Global Manufacturing
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.
The Greenbrier Companies Inc. manufactures railroad freight cars,
is a the leading producer of intermodal flat cars, and also repairs
railroad freight cars and provide wheels and various car parts.
Greenbrier owns a portfolio of 9,000 railcars, which it leases
to third parties, and provides a range of management services for
approximately 224,000 other railcars.
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 assigning
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
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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.
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
J. Bruce Clark
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's upgrades Greenbrier's CFR/PDR to B3; outlook stable
250 Greenwich Street
New York, NY 10007
No Related Data.
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