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S&P assigns EquipmentShare.com B-
S&P said it assigned a B- rating to EquipmentShare.com Inc. and B- issue and 4 recovery ratings to its planned $750 million of senior secured second-lien notes. The 4 rating indicates lenders would receive an average recovery (30%-50%; rounded estimate: 40%) of principal and accrued interest if the company defaults. The outlook is stable.
“EquipmentShare has expanded to become the fourth-largest player in the highly competitive and fragmented U.S. equipment rental equipment industry and primarily serves the cyclical nonresidential construction end market. The company trails United Rentals Inc., Sunbelt Rentals Inc., and HERC Rentals Inc. in revenue. We view the equipment rental market as having limited barriers to entry, and the company has a modest 3% share in this large and fragmented market,” S&P said in a press release.
“Despite being the fourth-largest player, EquipmentShare has significantly smaller scale than market leader United Rentals, which is approximately 7x larger in revenue. We view equipment sales as more volatile than equipment rental, and they drove about 35% of EquipmentShare's revenue and about 20% of gross profit in 2022,” the agency added.
EquipmentShare.com will use the note proceeds to repay debt, pay call protection and transaction-related fees, and add cash to its balance sheet.
“Our stable outlook on EquipmentShare reflects our expectation that leverage will decline to about 5x over the next 12 months amid a continued favorable rental environment, supported by a persistent shortage of new equipment amid continued supply chain challenges at original equipment manufacturers as well as longer-term drivers of demand, including recent legislation such as the Infrastructure Investment and Jobs Act (IIJA) and the CHIPS and Science Act (CSA),” S&P said.
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