Family-owned lessor needs insight into its debt ratings potential

SITUATION

A family-owned lessor’s business was growing rapidly but its financing was dependent on expensive bank funding sources. The client retained The Alta Group to review its capital structure and investigate alternative cost-effective sources of funds including the public markets. Accessing public markets as a funding source would necessitate a first-time debt rating.

SOLUTION

Alta developed a sophisticated capital structure that laddered maturities and strengthened the use of alternative funding sources. We provided feedback that the value of the company’s portfolio and underlying collateral was unknown to the rating agencies, a critical element in ratings determination. Alta developed a peer benchmarking dashboard that showcased the company’s strength relative to the competition and designed a communications strategy that enabled the company to better dimension its business, portfolio strengths, and business successes. After conducting a ratings assessment on the company, we concluded that it was premature to seek a rating at that time. We described in precise detail what the agencies would need for an investment grade rating and the optimal time to approach the agencies. The client successfully implemented Alta’s recommendations to improve the capital structure and diversify its funding sources. The client continues to re-assesses the need for a credit rating with each planning cycle, following the Alta blueprint.