Element Fleet Management Corp.

The stable outlook reflects S&P Global Ratings' expectation that over the next 18-24 months, Element will maintain its industry-leading position in the automotive fleet management industry, continue to improve profitability through delivery on transformation initiatives, and maintain ongoing access to wholesale financing markets. We expect EBIT coverage of 1.70x-2.20x, debt to total capital of 75%-78%, and funds from operations (FFO) to debt of 30%-40%. We could lower the ratings if the following were to occur on a sustained basis: EBIT coverage falls below 1.7x; FFO to debt falls below 30%; Debt to total capital rises above 82%; Element experiences difficulty obtaining stable funding for vehicle purchases; or Operational missteps or a weakened business climate results in a significant loss of

...The hit to Element Fleet Management Corp.'s earnings from the COVID-19-induced economic slowdown has been mitigated by stronger interest coverage, lower net debt, and higher tangible equity. S&P Global Ratings believes Element's revenue and EBIT could decline by 15%-20% in 2020 because of the unfavorable economic conditions caused by COVID-19. Nevertheless, leverage metrics have improved due to lower funding expenses, a decline in match-funded debt, and capital retention. Element has sold the assets of 19th Capital and settled third-party debt at a discount. On May 1, 2020, the company sold the equipment under operating leases and certain other assets of 19th Capital for $63.3 million, resulting in a pretax loss on sale of $52.4 million. Prior to the sale, during the second quarter of 2020, the company settled all third-party debt at a discount, resulting in a pretax gain on the settlement of debt of $38.6 million....

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