Moody’s gives Deck Chassis CFR B1, notes B3

Moody's Investors Service said it assigned a B1 corporate family rating to Deck Chassis Acquisition Inc. and a B3 rating to its planned $325 million senior secured notes due 2023.

Proceeds from the notes will be used to help finance the acquisition of and to repay existing debt of Direct ChassisLink, Inc.

The outlook is stable.

Moody’s said the B1 corporate family rating considers Direct ChassisLink’s position as one of three main providers of chassis rental equipment for the transportation of containerized cargo, its attractive profit margins and ability to generate positive free cash flow, balanced against high financial leverage and the cyclical nature of the demand for transportation equipment.

While a substantial majority of the company's revenues is derived from multi-year contractual arrangements, Direct ChassisLink remains susceptible, however, to the risk of an economic downturn, specifically to lower U.S. import and export volumes, the agency said.

Moody's expects EBITDA margins to increase in 2016 to just over 30%, calculated on a Moody's adjusted basis, up from close to 27% in 2015. The increase in margins is primarily due to a significant reduction of costs associated with the acquisition of a fleet of chassis in 2015.

Direct ChassisLink’s ability to manage expenses for chassis maintenance and repair, often carried out by high-cost non-Direct ChassisLink employees at port terminals, is critical to sustaining EBITDA margins at these levels, according to the agency.

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