Research Update: AutoNation Inc. Outlook Revised To Negative On Expected Pressures From The Coronavirus Pandemic; 'BBB-' Rating Affirmed

As the U.S. economy has plunged into a likely severe recession, we now expect a full-year contraction in the U.S. before the economy regains its growth path next year. While we continue to forecast a U-shaped recovery in the second half, the path and severity of the coronavirus outbreak remains uncertain. We expect both sales and margins will decline significantly within the next several months for AutoNation Inc. and will increase the risk of cash flow adequacy metrics breaching our thresholds for an investment-grade rating over an extended period. We are therefore affirming the 'BBB-' long-term issuer credit rating and revising the outlook on AutoNation to negative from stable. The negative outlook reflects the risk of a downgrade to 'BB+'

...- As the U.S. economy has plunged into a likely severe recession, we now expect a full-year contraction in the U.S. before the economy regains its growth path next year. While we continue to forecast a U-shaped recovery in the second half, the path and severity of the coronavirus outbreak remains uncertain. - We expect both sales and margins will decline significantly within the next several months for AutoNation Inc. and will increase the risk of cash flow adequacy metrics breaching our thresholds for an investment-grade rating over an extended period. - We are therefore affirming the '###-' long-term issuer credit rating and revising the outlook on AutoNation to negative from stable. - The negative outlook reflects the risk of a downgrade to '##+' if there is a prolonged negative effect on demand and operational performance from the coronavirus pandemic, causing debt to EBITDA to remain above 3x or free operating cash flow (FOCF) to debt to remain below 15%, without near-term prospects...

Research Update