Moody's Investors Service lowered the ratings for National Equipment Services, citing “continuing deterioration in NES's performance, protracted weak demand in the construction and industrial end-markets, and concerns over the company's ability to refinance its maturing debt obligations.” Moody's also said it expects a continuing challenging environment for NES and the equipment rental industry, and "uncertainties with regard to [NES'] debt refinancing.
Moody's said that despite NES' recent sale of its trench shoring business to United Rentals for $110 millions, the proceeds of which were used to reduce outstanding debt under its senior credit facility, the Evanston, Ill.-based company's debt level remains at about $759 million. Moody's expressed concern over declines in non-residential construction and still-weak manufacturing, leading to prolongued demand for rental equipment.
“NES' rental rates for scissors fell 15 percent from a year ago, while rental rates for boom lifts were down 6 percent and rough terrain vehicles down 5 percent… The company's dollar utilization rate also fell sharply, from 53 percent in 2Q01 to 46.5 percent in 2Q02…. We expect utilization and rental rates to trend even lower in the next few quarters.”
Moody's said a restructuring of the company's debt was increasingly likely, barring a "quick and significant turnaround in rental demand." NES is No. 4 on the RER 100.
