Fitch rates CAR notes BB+

Fitch Ratings said it assigned a final rating of BB+ to the $300 million 6% senior unsecured notes due 2021 issued by CAR Inc.

This rating is in line with the expected rating assigned Aug. 3, Fitch said.

The notes are rated at the same level as CAR’s senior unsecured rating as they represent direct, unconditional, unsecured and unsubordinated obligations of the company, the agency said.

The company’s net leverage is expected to increase to 2.8x by the end of 2015 from 0.9x at year-end 2014 due to a faster-than-expected fleet expansion, Fitch said.

This expansion is driven by growing demand for short-term rentals and CAR’s cooperation with UCAR, a chauffeured car service provider in which CAR owns a 10% stake, the agency said.

The risk posed by the higher leverage during this period of rapid growth is mitigated by the improved profitability that stems from better economies of scale, Fitch said.

Fitch said it estimates CAR will quadruple its EBITDA to $1 billion by year-end 2017 with EBITDA margin improving to more than 50% in the next 24 months, from 45.4% in 2014.

The agency said it sees strong market potential for the chauffeured car service industry in China, with growth driven by demand for premium and differentiated transportation services from high-end customers.

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