Shortline operator Patriot Rail, the business-facing identify of NA Rail, goes to the debt markets for refinancing, prompting all three scores businesses to weigh in on its problem.
Three scores on the identical problem and firm on the identical problem is uncommon. Firms typically are happy with one or possibly two. However all three have been printed this week.
The debt problem in query is a $440 million providing to pay down present debt, pay a dividend to shareholders and canopy transaction charges. The scores businesses additionally took into consideration Patriot’s plan to substitute a $40 million senior secured revolving credit score facility with a five-year, $50 million senior secured RCF.
Scores analyses printed by Moody’s (NYSE: MCO), Fitch Scores and S&P World Scores (NYSE: SPGI) usually don’t embody info resembling income or revenue for privately owned corporations. However the Moody’s report pegged Patriot Rail’s income at $198 million in 2024. S&P S&P mentioned it expects Patriot Rail’s income to develop 4% to six% this 12 months.
The businesses’ scores of NA Rail stretched out over three notches. What S&P calls its Lengthy Time period Issuer ranking was set at B-, affirming its present ranking. Moody’s was the equal of 1 notch increased at B2 on its Company Household Score – additionally an affirmation.
Fitch was the best at B+ for its Issuer Default Score. That was a first-time ranking on Patriot Rail from Fitch.
There was an uncommon divergence on the ranking of the particular debt problem. Fitch gave a notably increased ranking of BB, three notches above the B2 ranking from Moody’s and 4 above the B- from S&P. When a borrower is rated by a number of scores businesses, the scores are typically equal or at most one notch aside.
All of the scores are deep in non-investment-grade territory.
Patriot Rail’s web site lists 31 particular person shortline railroads owned by the corporate. The majority of them are within the Midwest. A map of the corporate’s operations might be discovered right here.
Moody’s described Patriot Rail’s income “scale” as “modest,” that includes some stage of focus in shifting packaging and paper. It additionally mentioned Patriot has much less competitors with intermodal railroads, so it’s much less uncovered to truckload competitors.
In a disclosure about its funds, Moody’s mentioned Patriot has a “robust” working margin that it expects to stay above 25%.
Fitch mentioned it expects that free money move will likely be within the high-single-digit to low-double-digit vary, which equates to about $15 million to $30 million.
Fitch described Patriot’s community as “established” and “geographically numerous.” In addition to noting its “restricted publicity” to intermodal competitors, and by extension trucking, Fitch mentioned Patriot’s visitors is “domestic-focused” and has “average buyer and finish market focus relative to different operators.” Fitch mentioned Patriot had “operational and money move danger profiles to be extra according to the BB class,” a doable purpose why its ranking was the best among the many three businesses for the precise debt problem.
