Heavy debt load, flat container shipments lead Moody’s to cut TRAC rating

Intermodal transportation has been experiencing steady growth in recent years, with companies like TRAC Intermodal seeing positive trends. However, despite this overall positive trajectory, Moody’s recently made the decision to downgrade TRAC Intermodal’s debt rating. This move has raised concerns about the company’s financial health and stability in the market.

Moody’s cut TRAC Intermodal’s corporate family rating from B2 to B3, which is six notches below the cut line for investment-grade ratings. This downgrade was primarily driven by TRAC Intermodal’s heavy debt load, which Moody’s believes will continue to impact the company’s credit metrics in the coming quarters. Additionally, weak demand for TRAC’s services further exacerbated the situation, leading to Moody’s negative outlook on the company.

While S&P Global Ratings has maintained a B rating for TRAC Intermodal since January 2022, the company’s outlook remains negative. This indicates that conditions are in place for a potential downgrade in the future, although there is no specific timeline for when this might occur.

In response to the downgrade, TRAC Intermodal has taken steps to strengthen its finances. The company implemented a general rate increase for its TRAC Connect product, an online portal that allows customers to manage TRAC assets and secure capacity. TRAC Intermodal remains committed to modernizing and upgrading its chassis fleet, with over $1 billion invested in new, refurbished, and upgraded units over the past decade.

Despite the challenges posed by the debt rating downgrade, TRAC Intermodal has a stable outlook moving forward. Moody’s expects modest revenue and earnings growth over the next 12 months, despite softness in container import volumes. To improve its debt rating, Moody’s suggests that TRAC Intermodal focus on reducing its debt/EBITDA ratio, improving EBIT/interest expense coverage, and generating consistently positive free cash flow.

Overall, TRAC Intermodal is facing financial challenges due to its heavy debt load and weak demand for its services. However, the company’s commitment to financial stability and modernization initiatives may help improve its financial position in the long run. Investors and industry stakeholders will be closely monitoring TRAC Intermodal’s progress as it navigates these challenges in the intermodal transportation sector.