Swift Transportation's planned public offering got a boost Sept. 15 when Moody's Investors Service raised the truckload carrier's ratings outlook to positive.
The switch from a negative to positive outlook reflects the company's "strengthening financial performance," Moody's said, as well as improving industry trends.
Swift remained profitable at the operating income level during the recession, but had overall weak financial metrics due to its extremely high debt load, Moody's said.
By The Numbers: U.S. Truck Shipping Costs.
That debt was incurred in a $2.5 billion transaction that took Swift private in 2007. The company has almost $3 billion in debt, according to Moody's.
The planned initial public offering "suggests the potential for substantial de-leveraging through debt repayment from equity issuance," Moody's said. "As industry conditions improve, Swift will be able to expand operating margins, which will be important to generate cash to support fleet investments and debt service."
Swift hopes to raise at least $700 million through the stock offering, which would be the largest trucking IPO since Overnite Transportation went public in 2003.
Swift lost $435.6 million in 2009 on about $2.5 billion in revenue and had a net loss of $53 million on $654.8 million in revenue in the first quarter this year.
The carrier's credit rating stays at Caa1, which reflects "sizeable debt levels resident in the company's current capital structure," the credit ratings service said.
Moody's expects only small improvements to Swift's credit metrics unless the trucking operator makes "substantial changes to its capital structure."
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