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Rating Action:

Moody's upgrades ratings of Swift Transportation, CFR to B2

Global Credit Research - 16 Dec 2010

$1.96 billion of debt securities affected

New York, December 16, 2010 -- Moody's Investors Service raised its ratings for Swift Transportation Co, LLC ("Swift"), corporate family and Probability of Default ratings to B2 from B3. At the same time, Moody's has assigned a B1 rating to Swift's new senior secured credit facility and a Caa1 rating to the company's new second lien notes. The ratings on Swift's existing second lien notes (amounts remaining that have not been redeemed via tender) have also been raised to Caa1. Swift has a Speculative Grade Liquidity Rating of SGL-3. The ratings outlook is stable.

RATINGS RATIONALE

The ratings were raised primarily in recognition of the substantial debt reduction that will ensue from the company's recently-launched initial public offering of equity. As announced in recent public filings, Swift intends to use all proceeds from the IPO (estimated to be above $750 million), along with $1.06 billion in proceeds from the first lien term loan and $500 million from the second lien notes, to repay existing debt. Once completed, the application of a substantial majority of the IPO proceeds (less payment of transaction fees and to settle interest rate swaps relating to existing debt) towards debt repayment is estimated to result in a substantial amount of deleveraging at Swift. Moody's will withdraw the B2 rating on Swift's existing first lien bank credit facility when those instruments are repaid and terminated on completion of the proposed refinancing. The new debt raised in the refinancing will also lengthen Swift's debt maturity profile. With the total debt to be reduced by nearly one-third from the IPO-related refinancing, credit metrics are expected to improve materially. Pro forma Debt to EBITDA (based on LTM September 2010 operating results) is estimated at approximately 4.4 times while EBIT to Interest is approximately 1.3 times. These metrics map closely to B2-rated companies.

Swift's ratings also considers the company's strengthening financial performance, which can be attributed to improvements in its trucking operations as well as to an improving trend in industry freight volumes and yields that are now taking traction. As industry conditions improve, Swift should be able to expand operating margins, while generating cash to support fleet investments and debt service. However, the B2 rating also takes into account the sizeable (albeit reduced) debt levels resident in the company's current capital structure. Pro forma total debt (including Moody's standard adjustments, primarily relating to operating expenses) of approximately $2.4 billion represents over 80% of the company's annual revenues.

The stable ratings outlook reflects Moody's expectations that revenue, yields, and operating margins will improve modestly over the next year as conditions slowly improve in the trucking industry. This should result in substantial growth in cash generated from operations, which will be important to allow the company to undertake substantial fleet investments over the near term, and possibly repay modest amounts of debt. However, Moody's does not expect credit metrics to improve materially beyond levels commensurate with the B2 rating for some time.

Ratings or their outlook could be revised upward if the company can demonstrate the ability to generate strong positive free cash flow and maintaining fleet investment at over 7% of total revenue, while repaying substantial amounts of debt. Debt to EBITDA of less than 4 times and interest coverage of over 2 times would also support a positive rating action. Ratings could be downgraded if operating conditions were to deteriorate unexpectedly, such that operating ratios were to rise above 98% for a prolonged period or if the company were to become heavily reliant on use of its revolving credit facility to cover operating or investing requirements. Debt to EBITDA of over 5 times or EBIT to Interest of less than 1.3 times could result in a downgrade.

Upgrades:

..Issuer: Swift Transportation Co., LLC

.... Probability of Default Rating, Upgraded to B2 from B3

.... Corporate Family Rating, Upgraded to B2 from B3

.... Existing Senior Secured Regular Bond/Debentures, due 2015 and 2017, Upgraded to Caa1 (LGD6-94) from Caa2

Assignments:

..Issuer: Swift Transportation Co., LLC

....Senior Secured Bank Credit Facility, Assigned B1 (LGD3-33)

....Senior Secured Regular Bond/Debenture, Assigned Caa1 (LGD5-83)

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

The principal methodology used in this rating was Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

Swift Transportation Co, LLC ("Swift"), headquartered in Phoenix, Arizona, is one of the largest providers of truckload transportation services in the United States, with line-haul, dedicated and inter-modal freight services.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

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.

New York
Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
David Berge
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's upgrades ratings of Swift Transportation, CFR to B2
No Related Data.
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