Fitch Expects to Rate Ryder System Inc.'s Senior Unsecured Notes 'A-'

NEW YORK--()--Fitch Ratings expects to rate Ryder System Inc.'s (Ryder) five-year, $300 million senior unsecured notes 'A-'. A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS

The expected rating reflects Fitch's expectation that there will not be a material impact on Ryder's leverage as a result of the issuance, as proceeds are expected to be used to repay commercial paper borrowings and/or for general corporate purposes. Furthermore, the expected rating is equalized with the ratings assigned to Ryder's existing senior unsecured debt as the new notes will rank equally in the capital structure. The equalization of Ryder's unsecured debt with its long-term Issuer Default Rating (IDR) reflects the company's 100% unsecured funding profile.

Ryder's ratings reflect its established market position in the truck leasing business, growing market share in the supply chain solutions (SCS) business, operating consistency, strong liquidity and funding profile, relatively low leverage, and solid capitalization. Rating constraints include customer concentration in the SCS segment, cyclicality inherent in used vehicle pricing and the commercial rental business, potential regulatory impacts on business trends and the company's pension burden.

Ryder currently has a Stable Rating Outlook, which reflects Fitch's expectation for continued economically favorable access to the capital markets through market cycles, limited sensitivity to rising interest rates, strong liquidity, and operating consistency in 2015 driven by an increase in full service lease, and growth in the SCS business.

RATING SENSITIVITIES

While Fitch believes positive rating action is likely limited over the medium term, positive rating momentum over the longer term could result from less balance sheet intensive activities such as SCS, lower leverage and a reduced pension burden.

Negative rating action could be driven by a decline in earnings and/or free cash flow beyond Fitch's expectations which yields an increase in leverage beyond the targeted range of 2.25x-2.75x, and/or indicates a weakened competitive position in the industry. Additionally, deterioration in the firms' competitive positioning, weakening asset quality, recognition of material losses on residual values of used vehicles, a material increase in non-earning vehicles, and/or a decline in liquidity could result in negative rating action.

A material shift to secured funding could affect the notching between the long-term Issuer Default Rating (IDR) and the unsecured debt rating.

Established in 1933 and headquartered in Miami, Florida, Ryder is one of the world's largest providers of highway transportation services. As of Dec. 31, 2014, the company had 165,400 active units in its fleet. Ryder generated $6.6 billion of revenue during 2014. Ryder's stock is listed on the NYSE under the ticker 'R'.

Fitch expects to assign the following rating:

Ryder System's Inc.:

--$300 million senior unsecured notes due 2020 'A-(EXP)'.

Fitch currently has the following ratings for Ryder System's Inc.:

--Long-term IDR 'A-';

--Short-term IDR 'F2';

--Commercial paper rating 'F2';

--Senior unsecured notes 'A-'.

The Rating Outlook is Stable.

Date of Relevant Rating Committee: Sept. 18, 2014.

Additional information is available on www.fitchratings.com.

Applicable Criteria and Related Research:

--'Global Non-Bank Financial Institutions Rating Criteria' (April 28, 2014);

Applicable Criteria and Related Research:

Global Non-Bank Financial Institutions Rating Criteria - Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865351

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=984085

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Contacts

Fitch Ratings
Primary Analyst
Meghan Neenan, CFA
Senior Director
+1 212-908-9121
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Tyra Junaid
Director
+1 212-908-0291
or
Committee Chairperson
Christopher Wolfe
Managing Director
+1 212-908-0771
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com
or
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Meghan Neenan, CFA
Senior Director
+1 212-908-9121
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Tyra Junaid
Director
+1 212-908-0291
or
Committee Chairperson
Christopher Wolfe
Managing Director
+1 212-908-0771
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com
or
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com