Pacific National Holdings Pty Ltd.

The stable outlook reflects our expectation that PN's strong competitive position in the Australian rail industry and planned transformation initiatives will enable the company to generate stable credit metrics. In addition, the outlook reflects our expectation that PN's free operating cash flow would remain positive and funds from operations (FFO)-to-debt ratio would remain at 17%-19% over the next two to three years. The rating could come under pressure if the company's financial metrics deteriorated such that its FFO to debt remains below 15% due to, for example, a significant debt-funded acquisition or delays in achieving targeted transformation savings. Sustained weak economic conditions affecting intermodal trade or possible weakening in the company's competitive position (for example, significant weakening of the coal

...Pacific National has a strong competitive position in its core market and stable business. Pacific National Holdings Pty Ltd. (PN) has a strong competitive position in its core markets across both thermal and metallurgical coal, intermodal, and bulk rail haulage. We anticipate that the new Parkes and planned St Mary's freight facilities, both in the State of New South Wales (NSW), will support PN's strong competitive position from the year ending June 30, 2020. Significant debt-funded capex pipeline over next few years will support fleet maintenance and renewal. The company has a significant debt-funded capital expenditure (capex) pipeline over the next few years. About 60% of the forecast outlay is likely to support the maintenance and safety of PN's existing fleet, with growth capex focused on fleet replacement. In addition, the capex will support likely volume growth from new freight terminals. Stable metrics of 17%-19% are likely, depending on transformation initiatives. Despite PN's...

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