GATX CORPORATION
Fitch Ratings expects to assign a 'BBB+(EXP)' rating to
The interest rate and maturity date will be determined at the time of issuance.
Proceeds from the issuance are expected to be used to repay the
Key Rating Drivers
The unsecured debt is expected to rank pari passu with GATX's existing senior unsecured debt, and therefore, the expected rating is equalized with its existing senior unsecured debt rating. The unsecured debt rating is equalized with GATX's Long-Term Issuer Default Rating (IDR) of 'BBB+', which reflects sufficient unencumbered assets to support unsecured noteholders and suggests average recovery prospects under a stress scenario.
GATX's leverage, measured by gross debt (including recourse debt and lease obligations) to tangible equity, amounted to 3.4x at
GATX's ratings reflect its established market position within the railcar leasing industry, a diversified fleet portfolio across customers, industries and car types, strong asset quality, manageable exposure to residual value risk given conservative depreciation policies, appropriate leverage, solid liquidity, a predominantly unsecured funding profile and an experienced management team.
Rating constraints specific to GATX include the largely monoline nature of the business and its reliance on wholesale funding sources. Rating constraints applicable to the broader railcar leasing industry include the competitive operating environment, the cyclicality of the railcar market, utilization rates and lease rates, particularly in light of current macroeconomic uncertainties, and the potential impacts from federal, state, local, and foreign environmental regulations on railcars, particularly tank cars.
The Stable Rating Outlook reflects Fitch's expectation for the maintenance of strong asset quality performance, appropriate leverage, solid liquidity, consistent access to the capital markets and a largely unsecured funding profile. The Outlook also reflects the expectation for operating performance to remain in line with the four-year average of 2.8% pretax ROAA.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
The expected rating on the unsecured debt is sensitive to changes in GATX's Long-Term IDR and to changes in GATX's funding profile, including the mix of unsecured debt and the level of unencumbered asset coverage. A material increase in the use of secured debt combined with a decline in the level of unencumbered asset coverage could result in the unsecured debt being rated below the IDR.
A sustained increase in leverage above 4.0x, a reduction in the diversity and/or credit quality of its customers, a material and persistent reduction in fleet utilization and/or an increase in impairments either of which negatively impacts operating performance, a material decline in the proportion of unsecured debt in the funding structure, and/or weakening of the liquidity profile.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Sustained railcar usage/demand, enhanced operating consistency, a continuation of strong asset quality metrics, a sustained reduction in leverage below 2.5x, and maintenance of a solid liquidity profile.
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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