TEXT - S&P rates TTX Co notes
Nov 19 - Standard & Poor's Ratings Services said today that it has assigned its 'A+' rating to TTX Co.'s $250 million 3.05% unsecured notes due 2022. The ratings on Chicago-based TTX Co. reflect the company's dominant market position in the leasing of intermodal railcars in North America, a business that provides a critical service to its major customers, who depend on TTX to provide them with most of their intermodal cars. This has resulted in strong and consistent credit measures, even during periods of economic weakness, such as the recession that ended in mid-2009, as well as periods of heavy capital spending, which began to increase in mid-2011. The ratings also incorporate the company's ownership by its customers, the same North American freight railroads, which can result in pressure for rate reductions or special dividends. Intermodal traffic began to recover in late 2009 and has since returned to close to the prerecession levels in 2007. Standard & Poor's characterizes TTX's business risk profile as "strong," its financial risk profile as "modest," and its liquidity as "adequate" under our criteria. The outlook is stable. We expect higher levels of capital spending through 2013 as a result of continuing strong demand for domestic intermodal equipment, relative to the unsustainable low levels in 2009 and 2010. As a result, we expect debt levels to rise. However, with increased earnings and cash flow from higher utilization rates and a larger fleet, we anticipate TTX's credit metrics will deteriorate only modestly and remain appropriate for the ratings. We expect EBITDA interest coverage of at least 3x, funds from operations (FFO) to total debt in the midteens percent area, and debt to capital in the mid-60% area over this period. If revenues, earnings, and cash flow came under pressure for an extended period, resulting in FFO to debt declining to the low-teens percent area for a sustained period, we could lower the ratings. We don't foresee an upgrade for TTX. We primarily rate the company's owners, the major North American railroads, in the 'BBB' category. In addition, if earnings and cash flow strengthen significantly, this would likely lead to a rate reduction for the railroads, as has occurred in the past, bringing earnings and cash flow back into line with our expectations. Both of these factors effectively cap the current rating level. RELATED CRITERIA AND RESEARCH -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 RATINGS LIST TTX Co. Corporate Credit Rating A+/Stable/-- New Rating TTX Co. $250 mil 3.05% unsecd notes due 2022 A+
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