OREANDA-NEWS. Fitch Ratings expects to rate TTX Company's (TTX) proposed issuance of $300 million of three-year, senior unsecured medium-term notes (MTN) 'A-'. Proceeds from the issuance are expected to be used for general corporate purposes. The final maturity date in 2019 and a fixed-rate of interest will be determined at the time of issuance. The notes will rank equally with existing and future senior unsecured notes issued by TTX. As of Sept. 30, 2015, TTX had unused authorization to issue up to $525 million in unsecured MTNs for terms up to 50 years under its current program, which was approved by the Board of Directors in June 2015.

KEY RATING DRIVERS

SENIOR DEBT
The proposed issuance is not expected to materially impact balance sheet leverage, which is expected to increase incrementally from 1.85x to 2.02x on a pro forma basis, as of Sept. 30, 2015. Balance sheet leverage, defined as total debt to tangible equity, has averaged 1.77x over the last five years and remains consistent with its current ratings. Tangible equity is calculated by subtracting from shareholder's equity, TTX's debt issuance costs and deferred tax assets, net of allowance.

The expected rating of the MTNs is equalized with the long-term Issuer Default Rating (IDR), reflecting that the notes are expected to rank pari passu with other senior unsecured indebtedness of TTX, and the company's pool of unencumbered assets available to unsecured noteholders, which provides some financial flexibility in times of stress.

TTX is currently rated 'A-' with a Stable Rating Outlook. Fitch affirmed TTX's ratings in March 2015, reflecting the company's unique competitive advantages associated with its ownership structure and regulatory exemption status, as well as its consistent operating performance through various cycles, strong liquidity given stable operating cash flow generation, and solid capitalization and balance sheet leverage. These strengths are counterbalanced by the cyclicality of the rail industry, the reliance on the regulatory exemption to maximize the business model, and modest profitability relative to peers.

RATING SENSITIVITIES
SENIOR DEBT
The expected rating of the MTNs is sensitive to changes in TTX's long-term IDR as well as the company's funding profile, including the mix of unsecured versus secured 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 notching between the IDR and the MTNs.

Formed in 1955, TTX is a privately-held corporation based in Chicago, Illinois. The company is a leading provider of railcars in North America, with a fleet of approximately 226,474 railcars as of Sept. 30, 2015.

Fitch expects to assign the following:

TTX Company
--Senior unsecured medium-term notes 'A-'.

Fitch currently rates TTX as follows:

TTX Company
--Long-term IDR at 'A-';
--Senior unsecured revolving credit facility at 'A-';
--Senior unsecured medium-term note program at 'A-';
--Senior unsecured medium-term notes at 'A-'.