Penske Truck Leasing refinances, extends partnership to 2023 Penske

Penske Truck Leasing refinances, extends partnership to 2023

Truck lessor gains new $1.0 billion five-year unsecured senior credit facility

Penske Truck Leasing Co., LP (PTL) has announced completion of a series of transactions that include $700 million of new equity investments from its existing partners-- Penske Corp., Penske Automotive Group and General Electric Capital Corp.-- and a new $1.0 billion five-year unsecured senior credit facility established with a group of 17 financial institutions.

In addition to increasing their investment in PTL, the partners have agreed to extend the term of the partnership to 2023.

PTL stated that it expects to use the $700 million of equity proceeds to retire existing debt. In addition, it said capacity under the new bank credit facility will be kept available to finance working capital and support the future growth of the business. PTL will continue to retain a credit agreement with GE Capital which, if not earlier repaid, will continue until 2018.

"Over the last 40 years, including 24 years in partnership with GE Capital, we have built an outstanding brand in the transportation industry,” said Brian Hard, president & CEIO of PTL.

 “We are excited that our partners have increased their commitment to us by investing significant capital and extending the term of the partnership,” he continued. “In addition, we are pleased that some of the leading financial institutions in the world have agreed to provide us with a new $1.0 billion unsecured credit facility which reflects their confidence in the strength of our business model."

PTL also announced that it had received investment grade ratings from three major rating agencies: Fitch, Moody's and Standard & Poor’s.

"We're very pleased that the rating agencies have recognized our company's financial strength and long history of consistent performance,” Hard noted. “These strong credit ratings will allow us to consider additional diversified sources of capital in the financial markets."

According to a Bloomberg news story posted on BusinessWeek.com, the refinancing of PTL is the “first step” in a GE Capital Corp. strategy to get out from under “bankrolling” PTL as it has for the past 15 years.  

“After relying solely on GE Capital for financing since 1996, Penske Truck hired JPMorgan Chase & Co. to arrange a $1 billion loan and plans to tap the corporate bond market as borrowing costs reach record lows,” wrote Bloomberg reporter Tim Catts. “The transactions come as GE Capital shrinks assets after $32 billion of credit losses in the aftermath of Lehman Brothers Holdings Inc.’s 2008 collapse.”

Hitin Anand, an analyst with CreditSights Inc., was quoted by Catts as pointing out that: “This is setting up Penske to be an independent borrower down the line without GE’s support.  It’s good from the standpoint of what GE’s doing for its own shareholders.”

“This is essentially a refinancing transaction, and it strengthens Penske Truck Leasing by allowing them to take advantage of a strong market and attractive interest rates to raise third-party debt,” Russel Wilkerson, a GE Capital spokesperson told Bloomberg.

Catts also reported that GE Capital has reduced its ownership share of PTL to 49.9% from 79% in 2006, according to the prospectus, and noted that Penske Corp. and Penske Automotive own the remaining 50.1%.

Penske Truck Leasing Co., LP, headquartered in Reading, PA., is a joint venture of Penske Corp., Penske Automotive Group and General Electric Capital Corp.

A global transportation services provider, PTL operates more than 200,000 vehicles and serves customers from more than 1,000 locations in North America, South America, Europe and Asia.

PTL’s offerings include full-service truck leasing, contract maintenance, commercial and consumer truck rentals, used truck sales, transportation and warehousing management and supply chain management solutions.

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