Moody's pumps up Wabtec

Moody's Investors Service said it upgraded the senior unsecured ratings of Westinghouse Air Brake Technologies Corp. (Wabtec) to Baa3 from Ba1. The agency also boosted the ratings on the senior unsecured notes issued by Wabtec Transportation Netherlands BV's to Baa3 from Ba1. Concurrently, Moody's withdrew the Ba1 corporate family rating, the Ba1-PD probability of default rating and the SGL-2 speculative grade liquidity rating.

“The ratings upgrade reflects continued strength and resilience in Wabtec's operating results and the company's strong and defensible market position within the freight and transit rail sector. Moody's expects that EBITDA growth of roughly 5% in 2023-2024 will result in improved credit metrics despite the ongoing macroeconomic uncertainty.

“The ratings upgrade also reflects Moody's expectation that Wabtec's financial policy will remain conservative, including an emphasis on deleveraging and measured shareholder distributions that will support adjusted debt/EBITDA below 3x,” the agency said in a press release.

However, the cyclical nature of the freight rail sector limits the rating. “A global economic downturn would curb rail freight volumes and reduce demand for Wabtec's products and services. However, Wabtec's good balance between freight and transit customers, as well as its global diversification insulates it from weakness in any specific regional market,” Moody’s noted.

The outlook is stable.

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