OREANDA-NEWS. S&P Global Ratings today assigned its 'BBB' issue-level rating to GATX Corp.’s senior unsecured notes due 2026. The company will use the proceeds for general corporate purposes, including working capital and capital expenditures.

Our ratings on Chicago-based GATX reflect its position as a major North American tank car lessor. Tank car leasing is a business that benefits from relatively consistent demand and long-term leases and contracts that produce relatively stable cash flow. However, our ratings also incorporate the company's fairly high debt leverage relative to its peers and the less-predictable revenue and earnings from its American Steamship Co. segment. S&P Global Ratings characterizes GATX's business risk profile as satisfactory and its financial risk profile as intermediate.

The stable outlook on GATX reflects that we expect the company's credit metrics to remain relatively consistent through 2016, with weaker demand for tank cars that transport crude oil offset by increased demand for other car types, particularly those related to the chemicals sector.

We could lower our ratings on GATX if the company's demand weakens by more than we expect, leading to a more significant decline in its railcar utilization and lease rates than we had anticipated and causing its funds from operations (FFO)-to-debt ratio to decline to the high-single-digit percent area on a sustained basis. We could also lower our ratings if the company's financial policy becomes more aggressive (for example, through a substantial share repurchase or major debt-financed acquisition), leading it to sustain the credit metrics cited above.

An upgrade is not likely until GATX's demand improves significantly, causing its EBITDA interest coverage to increase to more than 4x and its FFO-to-debt ratio to increase to the mid-teens percent area on a sustained basis.