The auto rental and commercial truck and fleet leasing sectors continue to exhibit strong asset quality and sufficient liquidity, reducing the potential for credit and economic risks to materially impact ratings, according to a Fitch Ratings report.
Fitch recently affirmed the Long-Term Issuer Default Ratings (IDRs) on five publicly rated auto rental companies and commercial truck and fleet lessors, including LeasePlan Corporation N.V. (‘A-‘), Wheels, Inc. (‘A’), Avis Budget Group, Inc. (‘BB-‘), Penske Truck Leasing Co. L.P (‘BBB+’), and Ryder System, Inc. (‘A-‘).
The Rating Outlook for all of the issuers is Stable. Fitch’s actions reflect the sectors’ generally stable operating profiles, well-managed credit risks, limited sensitivity to rising interest rates, sufficient liquidity and appropriate leverage.
The ratings are constrained by the inherent cyclicality and monoline nature of the auto rental and truck and fleet leasing businesses and their reliance on wholesale funding sources.
• Industry performance is supported by stable core operating cash flow generation, continued customer demand, recovery in rental and lease rates and improved operating leverage.
• Recent portfolio growth for commercial fleet and truck lessors reflects a shift toward fleet management outsourcing due to rising costs of fleet ownership.
• Used vehicle prices continue to exhibit strength in 2014, which helps mitigate residual value exposure on closed-end leases.
• Fitch expects vehicle prices to normalize into 2015.
The full report ‘Auto Rental and Commercial Fleet Lessors: Industry Snapshot’ is available at ‘www.fitchratings.com‘.
