DBRS Places Enterprise Holdings, Inc.’s Long-Term Issuer Rating of A (low) Under Review Positive

DBRS, Inc. (DBRS) placed the Long-Term Ratings of Enterprise Holdings, Inc. (Enterprise or the Company), and the Senior Notes Rating of ERAC Canada Finance Company, Under Review with Positive Implications. Additionally, DBRS has confirmed Enterprise’s Short-Term Ratings and ERAC Canada Finance Company’s Commercial Paper Rating at R-1 (low) with a Stable trend. Furthermore, DBRS confirmed the Company’s Support Assessment of SA3. As such, the Company’s Intrinsic Assessment is equalized with the Long-Term Issuer Rating. ERAC Canada Finance Company ratings reflect the guarantee from Enterprise.

The Under Review with Positive Implications reflects the Company’s long history of strong operating and financial performance, as well as DBRS’s expectations that Enterprise will continue to perform at a level consistent with a higher rating level. Over the past several years, Enterprise has consistently generated operating margins and return on assets that are aligned with an ‘A’ rating per DBRS’s rating methodology. This performance has been achieved while maintaining sound fleet management discipline in the face of, until recently, below average economic growth, various periods of industry over-fleeting, and shifting customer preferences in vehicle types. Moreover, Enterprise has continued to demonstrate sound balance sheet management by maintaining leverage at a very low level that is also consistent with a higher rating.

DBRS expects that any upgrade of Enterprise would be limited to one notch. This is reflected in the confirmation of the Short-Term Ratings, which would remain at R-1 (low) if the long-term ratings were upgraded by a notch, per DBRS’s standard mapping between short-term and long-term ratings.

During the review period, DBRS will consider the Company’s financial performance, outlook, as well as actions planned to navigate the expected shifts in the used vehicle market, customer demand for rental needs, and balance sheet management. Additionally, with the upcoming release of FY18 results, DBRS will review the Company’s full year credit fundamentals, assessing whether these results continue to support DBRS’s positive view on Enterprise. DBRS’s review will also focus on Enterprise’s ability to maintain its strong, above-peer earnings generation capacity and sound credit fundamentals over the longer-term. DBRS expects to conclude the review within the next 120 days.

RATING DRIVERS
The ratings would likely be upgraded if Enterprise were to sustain solid earnings and sound fleet management over the near term, while balance sheet leverage is consistent with historical levels. Conversely, deterioration in the Company’s market position, especially in the home-city business, or missteps in fleet management leading to sustained pressure on earnings generation capacity, or a sizable increase in leverage, could result in the positive rating momentum to stall.

Notes:
The applicable methodology is the Global Methodology for Rating Finance Companies (November 2017), and DBRS Criteria: Guarantees and Other Forms of Support (January 2018), and DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers (April 2018).

The primary sources of information used for this rating include company documents. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Lead Analyst: Mark Nolan, CFA, Vice President, US Non-Bank FIG – Global FIG
Rating Committee Chair: Lisa Kwasnowski, Senior Vice President – Global FIG
Initial Rating Date: May 16, 2001
Most Recent Rating Update: November 15, 2017

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

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