S&P views Enterprise Fleet negatively

S&P said it revised its outlook for Enterprise Fleet Management Inc. to negative from stable and affirmed its BBB+ issuer credit rating.

Given the recent rise in interest rates, the agency said it expects EFM’s higher interest expense will climb faster than its EBIT. EFM's EBIT interest coverage fell to 2.8x for the fiscal year ended July 31, compared with 5.9x for the prior fiscal year and its debt-to-total-capital ratio rose from 79.8% to 82.8%.

“The negative outlook reflects S&P Global Ratings' expectation that EFM, especially in the current higher-for-longer interest rate environment, will have little cushion to its downside triggers over the next 18-24 months, with EBIT interest coverage closer to 2.4x and debt to total capital around 82%. Our outlook also considers EFM's leading position in the automotive fleet leasing industry, its profitability metrics, and its access to the leased vehicle asset-backed securities (ABS) market,” S&P said in a press release.

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