Secured Transportation Debt Rtgs Raised by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/22/98-- Standard & Poor's today raised its ratings on 29 issues of secured debt and lease-backed debt of six transportation companies (see list below). About $1.6 billion of rated securities are affected. The upgrades reflect implementation of Standard & Poor's corporate criteria, which provide for ratings above the corporate credit rating on secured debt issues where full recovery of principal is likely, even at depressed asset values in a bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most scenario (see Corporate Ratings Criteria, 1998, pp. 65-66). The upgrades follow a review of all eligible transportation debt issues excepting airport revenue bonds airport revenue bond Tax-exempt debt issued by a city, county, state, or airport authority with debt service guaranteed either by general revenues generated by the airport or by lease payments for facilities used by a particular airline. , which have different characteristics and will be addressed in a subsequent review. The extent of the rating enhancement for secured debt is determined based on: -- Level of confidence that the obligation will be fully satisfied in an insolvency insolvency Condition in which liabilities exceed assets so that creditors cannot be paid. It is a financial condition that often precedes bankruptcy. In the context of equity, insolvency is the inability to pay debts as they become due; insolvency under the balance-sheet ; -- Whether only principal, or principal and interest, is likelyto be covered; -- The length of delay likely before outstanding obligations are satisfied; and -- The corporate credit rating of the issuer in question: a greater emphasis on the post-insolvency recovery scenario, and thus a potential for greater rating enhancement, is accorded speculative grade issuers than investment grade issuers. The attractiveness of transportation equipment as collateral falls between that of highly liquid financial assets Financial assets Claims on real assets. and that of relatively illiquid Illiquid An asset or security that cannot be converted into cash very quickly (or near prevailing market prices). Notes: A house is a good example of an illiquid asset. See also: Cash, Liquidity Illiquid In the context of finance. and special purpose plant and equipment of manufacturing concerns. Some of the desirable characteristics of transportation equipment include: -- Value, while affected by industry conditions, is relatively unaffected by the fortunes of the company operating it; -- Fairly easy to transfer from one user to another, with varying amounts of repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. cost; -- Most types are generic to a global market, enhancing resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. prospects; -- Value is relatively easy to determine, due to many comparable units which are resold and appraised frequently; -- Technological risk is relatively low for most types; and -- Assets have fairly long (10-30 year) lives, so used equipment can have considerable value. The principal unfavorable characteristic of transportation equipment as collateral is a tendency to periodic industry oversupply o·ver·sup·ply n. pl. o·ver·sup·plies A supply in excess of what is appropriate or required. tr.v. o·ver·sup·plied, o·ver·sup·ply·ing, o·ver·sup·plies in most sectors, due to: -- Long lives and durability du·ra·ble adj. 1. Capable of withstanding wear and tear or decay: a durable fabric. 2. of these assets; -- Ease of financing, including substantial tax-oriented leasing; and -- Operators in some sectors (for example: airlines and shipping) are state subsidized sub·si·dize tr.v. sub·si·dized, sub·si·diz·ing, sub·si·diz·es 1. To assist or support with a subsidy. 2. To secure the assistance of by granting a subsidy. . Most rated transportation obligations backed by equipment collateral or equipment leased are already rated above airline and railroad railroad or railway, form of transportation most commonly consisting of steel rails, called tracks, on which freight cars, passenger cars, and other rolling stock are drawn by one locomotive or more. corporate credit ratings, because they are covered under existing criteria for obligations benefiting from Section 1110 and Section 1168, respectively, of the U.S. Bankruptcy Code Bankruptcy Code may refer to:
The affected issues fall into two categories: leveraged lease debt (sold as equipment trust certificates or pass-through certificates Pass-Through Certificates (PTCs) are instruments that evidence the ownership of two or more Equipment Trust Certificates. In other words, Equipment Trust Certificates may be bundled into a pass-through structure as a means of diversifying the asset pool and/or increasing the size ) of railroad equipment leasing Equipment Leasing is a financing option to lease equipment for a certain amount of time. Leasing Benefits
Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. . The former does not qualify for Section 1168 protection (like railroad equipment trust certificates) because that provision requires that the issuer of the obligation be a railroad. However, the equipment which indirectly secures these obligations (tank cars, intermodal in·ter·mod·al adj. Relating to transportation by more than one means of conveyance, as by truck and rail: intermodal transport. railcars) is nevertheless desirable collateral. The mortgage bonds upgraded were all issued long ago (in some cases in the 19th century) and are now very substantially overcollateralized. As a result, they received a two notch notch (noch) incisure; an indentation on the edge of a bone or other organ. aortic notch dicrotic n. cardiac notch 1. enhancement above the railroads' corporate credit ratings (which is rare for secured debt of investment grade companies), indicating high confidence of full recovery of principal and interest. All of these various issues were formerly rated at the company's corporate credit rating. Standard & Poor's reviewed, but did not upgrade, various other secured debt of airlines, air freight air freight n → flete m por avión air freight n → fret aérien air freight air n → Luftfracht f carriers, shipping, and other transportation companies. The collateral in those cases, mostly ships and older aircraft, was judged to be vulnerable to declines in value beyond what could be covered by the level of overcollateralization Overcollateralization The posting of more collateral than is needed to obtain financing. Notes: This is often done in order to get a better debt rating from a credit rating agency. See also: Collateral, Overcapitalization in the reviewed issues. ---CreditWire
RATINGS RAISED
Ratings
To From
Burlington Northern and Santa Fe Railway Company (The)'s units
Great Northern Railway Co.
$33.5 mil 3.125% gen mtg bnds ser 0 A- BBB
$28.8 mil 2.625% gen mtg bnds ser Q
due 1/1/2010 A- BBB
Northern Pacific Railway Co.
$35 mil 3% sr secd bnds due 1/1/2047 A- BBB
CSX Corp.'s unit
Louisville & Nashville Railroad Co.
$30.5 mil 2.875% 1st & rfdg bnds ser G
due 4/1/2003 A- BBB
$35.1 mil 3.375% 1st & rfdg bnds ser F
due 4/1/2003 A- BBB
General American Transportation Corp.
$53.5 mil 7.80% pass-thru certs due
2/22/2013 A- BBB+
$50.6 mil 9.18% pass through certs ser
1991 due 3/11/2011 A- BBB+
$107.245 mil ser 1993-1 pass-through
certs A- BBB+
$99.8 mil 7.28% pass-through certs
ser 1995-1 due 7/2/2016 A- BBB+
$94 mil 8.42% pass-through certs ser
1994-1 A- BBB+
$77 mil 7.5% pass-through certs ser
1996-1A A- BBB+
$30 mil 7.85% pass-thorugh certs ser
1996-1B A- BBB+
TTX Co.
$54.4 mil 9.16% equip trust certs due
5/2/2006 AA- A+
$32.8 mil 10.1% cond sale certs of interest
due 2/1/2004 AA- A+
$45.9 mil equip trust certs series A
due 2004 AA- A+
$48 mil equip trust certs due 6/2009 AA- A+
$48 mil equip trust certs due 2008 AA- A+
$66.6 mil equip trust certs ser B due 2013 AA- A+
Union Pacific Corp.'s units
Missouri Pacific Railroad Co.
$103 mil 4.25% 1st mtg bonds ser C
due 1/1/2005 BBB+ BBB-
Texas & Pacific Railway Co.
$29 mil 5% 1st mtg bnds due 6/1/2000 BBB+ BBB-
Union Tank Car Co.
$100 mil 9.25% equip trust certs ser 21 due
9/15/2004
$100 mil 10% equip trust certs ser 22 AA- A+
due 5/15/2006 AA- A+
$58 mil 6.5% equip trust pass-thru certs
ser 1993-A due 4/15/2008 AA- A+
$73.3 mil 6.6% equip trust certs ser 24
due 2/15/2009 AA- A+
$95 mil pass-thru certs ser 1994A AA- A+
$45.7 mil 6.58% pass-thru certs ser
1005-A due 1/2/2005 AA- A+
$73 mil 6.76% pass-thru certs ser 1995-A2 due
1/2/2006 AA- A+
$34 mil 6.94% pass-thru certs ser 1996-A due
1/2/2005 AA- A+
$97.9 mil 6.57% pass-thru certs ser 1998-A due
1/2/ 2014 AA- A+
CONTACT: Philip Baggaley, 212/208-1309
For more information on criteria or subscriptions:
http://www.ratings.standardpoor.com
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