(The following statement was released by the rating agency)
Oct 10 - Standard & Poor's Ratings Services said today that it has assigned its 'BBB+' issue rating to ERAC USA Finance LLC's notes, rule 144A offerings without registration rights. ERAC's parent, Enterprise Holdings Inc., guarantees the notes. The company will use proceeds for general corporate purposes, including repayment of debt.
The ratings on St. Louis-based Enterprise and ERAC, Enterprise's wholly owned finance subsidiary, reflect Enterprise's leading market position in the relatively stable off-airport (replacement and local) segment of the car rental industry, good earnings, and cash flow generation. Enterprise (parent of Enterprise Rent-A-Car, Alamo Rent-A-Car, and National Car Rental) is the largest global car rental company, although most of its operations are based in the U.S., with $14.1 billion of revenues in fiscal 2011 (ended July 31).
Despite expected pressure on earnings and cash flow because of higher vehicle prices, we expect Enterprise's financial profile to remain relatively consistent through 2013, with funds from operation (FFO) to debt averaging in the mid- to high-40% area over that period. We could raise ratings if demand is stronger or prices on new vehicles are lower than we currently expect, resulting in FFO to debt of more than 50% on a sustained basis. We are unlikely to lower ratings. However, we could if FFO to debt declined to the mid-30% area for a sustained period, for example because of significantly weaker demand associated with reduced airline travel, or if the used car market declined to the depressed levels of late 2008 to early 2009, resulting in losses on sales of vehicles.
RELATED CRITERIA AND RESEARCH
-- Summary: Enterprise Holdings Inc., Sept. 25, 2012
-- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
RATINGS LIST Enterprise Holdings Inc. Corporate credit rating BBB+/Stable/A-2 Ratings Assigned ERAC USA Finance LLC Senior unsecured notes BBB+
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