S&P: Triton International Ltd. Assigned 'BB+' Corporate Credit Rating, Outlook Stable; Other Rating Actions Taken
We also affirmed our 'BB+' corporate credit rating on its subsidiary Triton Container International Ltd. (TCIL) and subsequently withdrew the rating because we will now be assessing the consolidated credit quality of TIL. At the same time, we affirmed our 'BBB' issue-level rating on TCIL's secured debt. In addition, we assigned our 'BBB-' issue-level rating to TIL subsidiary TAL International Group Inc.'s (TAL) $153 million 5.41% notes due 2024. The recovery rating on TCIL's debt is '1', reflecting our expectation of very high (90%-100%) recovery in the event of a default. The recovery rating on TAL's debt is '2', reflecting our expectation of substantial (70%-90%; lower end of the range) in the event of default.
"The stable outlook on Triton International Ltd. reflects our expectation that, pro forma for the merger of Triton Container International Ltd. and TAL International Group Inc., the combined entity will maintain a similar credit profile to that of TCIL, despite weaker earnings due to pressure on its lease rates, lower gains on equipment sales, and expected share repurchases," said S&P Global Ratings credit analyst Betsy Snyder.
While we do not expect to lower our ratings on TIL over the next year, we could do so if there is a substantial change in its financial profile due to weaker-than-expected earnings or incremental debt leverage, caused by greater-than-expected share repurchases. These events would have to cause TIL's FFO-to-debt ratio to decline to 10% or its debt-to-capital ratio to increase to over 80% for a sustained period for us to lower the rating.
Although also unlikely, we could raise our rating on TIL over the next year if its revenues and earnings growth exceeded our expectations, or if the company used free cash for debt reduction, leading its FFO-to-debt ratio to approach the mid-teens percent area and its debt-to-capital ratio to decline below 75%.
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