DBRS Downgrades Ryder System, Inc.’s Commercial Paper Rating to R-2 (high) and Confirms BBB (high) Long-Term Ratings with Stable Trends

DBRS has today downgraded the Commercial Paper (CP) ratings of Ryder System, Inc. and Ryder Truck Rental Canada Ltd. (collectively, Ryder or the Company) to R-2 (high) from R-1 (low) and has changed the trends to Stable from Negative. At the same time, DBRS has confirmed all of the Company’s other ratings with Stable trends.

In the press release issued on November 14, 2013, DBRS noted Ryder’s weakening financial metrics in recent years as the Company has increased its debt to finance its growth and fleet renewal program. Although Ryder’s business risk profile (underpinned by strong market position and revenue stability provided by contracted revenue) and credit metrics still support its BBB (high) Issuer Rating, DBRS revised the trend on Ryder’s CP ratings to Negative from Stable as the Company was at risk of no longer satisfying the stringent criteria DBRS currently has to merit the exceptional assignment of an R-1 (low) CP rating, which typically corresponds to a long-term rating of A (low) (see the “Short-Term and Long-Term Rating Relationships” policy at www.dbrs.com for further detail).

DBRS notes that the Company’s debt coverage metrics for the full-year 2013 were virtually unchanged compared to those in 2012, with adjusted cash flow-to-debt at 30% and adjusted debt-to-EBITDA of 2.9 times (x). Going forward, with the expectation of elevated capital expenditure in the next two years to support Ryder’s new full service lease (FSL) contracts, DBRS no longer expects these financial metrics to return to their previously strong levels before 2009 (i.e., adjusted cash flow-to-debt of more than 40% and adjusted debt-to-EBITDA of less than 2.5x), even as the Company remains in compliance with its internal debt-to-equity target of 225% to 275%. This expectation leads DBRS to conclude that the Company is unlikely to improve its financial metrics and liquidity to levels that warrant the exception and to downgrade the CP ratings to R-2 (high), which corresponds to Ryder’s long-term issuer rating of BBB (high). Please refer to the rating report dated November 26, 2013, for detailed rating analysis on Ryder.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Companies in the Trucking Industry (August 2013), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

Ryder Truck Rental Canada Ltd.’s Commercial Paper and Senior Unsecured Debt are guaranteed by Ryder System, Inc.