Research: Rating Action: Moody’s assigns a Prime-2 rating to Penske Truck Leasing Co., LP’s new commercial paper program

New York, August 19, 2022 — Moody’s Investors Service (“Moody’s”) has assigned a Prime-2 rating to the new commercial paper program of Penske Truck Leasing Co., LP (“Penske”) and PTL Finance Corporation. The rating agency also affirmed Baa2 senior unsecured ratings for Penske and Penske Truck Leasing Canada Inc. The outlook for each of these entities is stable.

The rating assignments and affirmations demonstrate strong operating performance and strong credit fundamentals that Moody’s expects will remain intact over the coming quarters.

Duties:

..Issuers: Penske Truck Leasing Co., LP and PTL Finance Corporation

….Senior unsecured commercial paper, assigned P-2

Statement:

..Issuer: Penske Truck Leasing Canada Inc.

….Gtd Senior Unsecured Regular Bond/Debenture, Affirmed Baa2

..Issuer: Penske Truck Leasing Co., LP

….Senior Regular Unsecured Bond/Debenture, Confirmed Baa2

….Gtd Senior Unsecured Regular Bond/Debenture, Affirmed Baa2

Outlook Actions:

..Issuer: Penske Truck Leasing Canada Inc.

….Outlook remains stable

..Issuer: Penske Truck Leasing Co., LP

….Outlook remains stable

RATINGS RATIONALE

Penske’s senior unsecured Baa2 rating reflects the company’s good business diversity and position as a leading provider of full-service truck rental, truck leasing, contract maintenance and supply chain services. The full-service truck leasing segment benefits from generally predictable cash flows, as lease expirations in any given year are manageable. Penske’s free cash flow tends to be countercyclical as the company reduces fleet additions when customer demand declines, while investing more heavily during expansion. The rating reflects Penske’s moderate leverage and relatively consistent operating margin. The rating is limited by the sensitivity of Penske’s commercial rental and short-term consumer businesses to underutilization during periods of weak demand and by the significant funding needs of its business.

The stable outlook reflects Moody’s expectation of good revenue growth, consistent operating margin and modest increase in financial leverage due to fleet investment funding needs.

Penske operates one of the largest fleets of diesel-powered tractors and trucks in North America and is therefore affected by increasingly stringent emissions regulations. Although previous emissions regulations have significantly increased the cost of new vehicles, Penske has incorporated higher vehicle purchase prices into its rental rates. Additionally, the value proposition of Penske’s rental and contract maintenance business model has been enhanced as new regulations have made engine maintenance more complex. In addition, Moody’s considers the business model to be technology independent in that Penske will be able to offer its customers low-emission vehicles such as battery electric vehicles as this technology evolves and the demand for commercial electric trucks is increasing. The company also faces some exposure to demographic and societal trends related to end-consumer attitudes towards greenhouse gas emissions and moderate nature-related health and safety risks. physical work performed by its employees. Penske pursues a consistent financial policy that includes distributions to its partners of 50% of net earnings and limited use of secured debt. In limited circumstances, Penske is permitted to make annual distributions that may exceed 50% of net income. Penske is majority owned directly and indirectly by Penske Corporation and Penske Automotive Group, Inc. In fact, Penske Corporation controls the business and affairs of the company through its indirect ownership of Penske’s sole general partner.

FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS

Ratings could be improved if the company maintains a consistent track record of good rental fleet utilization levels while keeping debt / EBITDA below 3.0x and maintaining available cash beyond maturities debt and other obligations. Ratings could also be improved if (FFO + interest)/interest is held above 10x.

The ratings could be downgraded if Moody’s expects recurring underutilization of Penske’s rental fleets or development constraints in its vehicle sales program. A downgrade could also occur if Debt/EBITDA is held above 4.0x or FFO/Debt is held below 20%. Reduced cash availability and committed credit facilities relative to funding requirements arising from negative free cash flow and debt maturities, or a material increase in partnership distributions, could also result in a downgrade.

Penske Truck Leasing Company Co., LP is a provider of truck leasing, truck rental and logistics services. Total revenue for the 12 months ended June 30, 2022 was $12.3 billion. Penske is a partnership owned directly and indirectly by Penske Corporation, Penske Automotive Group, Inc. and Mitsui & Co., Ltd.

The main methodology used in these ratings is Surface Transportation and Logistics published in December 2021 and available on https://ratings.moodys.com/api/rmc-documents/360641. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following information, if applicable to the jurisdiction: Ancillary services, Information to be provided to the rated entity, Information to be provided by the rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued without modification as a result of such disclosure.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Jonathan Kanarek, CFA
Senior Vice President
Corporate Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Dean Diaz
Associate General Manager
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Release Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

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