OREANDA-NEWS. S&P Global Ratings today assigned its 'BBB+' issue-level rating to St. Louis-based ERAC USA Finance LLC's senior unsecured notes. The notes are a rule 144A offering without registration rights. ERAC's parent, Enterprise Holdings Inc., guarantees the notes. The company will use the proceeds from this issuance for general corporate purposes.

Our ratings on Enterprise Holdings reflect the company's leading market position in the relatively stable off-airport (i. e., replacement and local) segment of the car rental industry and its good earnings and cash flow generation. Enterprise Holdings (parent of Enterprise Rent-A-Car, Alamo Rent-A-Car, and National Car Rental) is the largest car rental company globally, although most of its operations are based in the U. S. We assess Enterprise Holdings' business risk profile as satisfactory and its financial risk profile as intermediate.

The stable outlook reflects our expectation that the company's credit metrics will remain relatively consistent through 2017, with a funds from operations (FFO)-to-debt ratio averaging around 40%, because stronger cash flow will offset the incremental debt it will take on to fund its fleet additions.

We don't expect to downgrade Enterprise during the next two years. However, we could lower our ratings on Enterprise Holdings if its FFO-to-debt ratio declined to 30% for a sustained period--potentially because of reduced levels of airline travel--or if the used car market returns to the depressed levels that we saw in late 2008 and early 2009, leading to losses on the company's vehicle sales.

Alternatively, we could raise our ratings over the next two years if demand is stronger than we expect, or if prices on new vehicles are lower than we expect and/or used vehicle prices are higher than we expect, causing the company's FFO-to-debt ratio to climb to at least 50% on a sustained basis. We would also need to believe that the company's financial policies would preserve its FFO-to-debt ratio at that level.