CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed XTRA Corporation's (XTRA) and XTRA Finance Corporation's (XFC) long-term Issuer Default Rating (IDR) at 'A+'. The Rating Outlook is Stable. A full list of rating actions follows at the end of this press release.
KEY RATING DRIVERS - IDR and SENIOR DEBT
The affirmations reflect the 100% ownership and financial support provided by XTRA's parent, Berkshire Hathaway Inc. (BRK; long-term IDR 'AA-' with a Stable Outlook by Fitch). BRK has explicitly guaranteed XFC's $400 million 5.15% senior notes due April 1, 2017, which are equalized with BRK's unsecured debt rating of 'A+'. The notching of XTRA's and XFC's long-term IDR's one notch below BRK's long-term IDR reflects Fitch's belief that XTRA is a strategically important subsidiary to BRK, as defined in Fitch's Global Non-Bank Financial Institutions Rating Criteria' dated April 28, 2015.
The Stable Outlook is linked to that of the parent company, BRK, due to the 100% ownership stake and the explicit debt guarantees from BRK. Any change in BRK's ratings would directly impact XTRA's and XFC's ratings.
The ratings also take into account XTRA's underlying financial performance, strong asset quality trends, relatively low leverage, and the cyclicality of the over-the-road (OTR) trailer segment, both from a seasonal and broader business cycle perspective.
RATING SENSITIVITIES - IDR and SENIOR DEBT
Positive rating momentum will be limited by Fitch's view of BRK's credit profile. Fitch cannot envision a scenario where the subsidiary would be rated higher than its parent. Negative momentum could be driven by a change in the perceived relationship between the parent and subsidiary, such as if adequate financial support was not provided in a time of stress.
In addition, XTRA's business represents a relatively small portion of BRK's overall portfolio of companies and a spin-off or sale of the company by BRK to a lower or unrated entity would likely result in a ratings downgrade. The recognition of consistent operating losses and/or a material increase in leverage could also yield a negative rating action.
Fitch has affirmed the following ratings:
--Long-term IDR at 'A+'.
XTRA Finance Corporation
--Long-term IDR at 'A+';
--$400 million 5.15% senior notes due April 1, 2017, at 'A+'.
The Rating Outlook is Stable.
Additional information is available on www.fitchratings.com
Global Non-Bank Financial Institutions Rating Criteria (pub. 28 Apr 2015)
Dodd-Frank Rating Information Disclosure Form