The truck, container, railcar and aircraft leasing sectors are commonly considered to share many common attributes.
These include: reliance on wholesale funding; business cyclicality; and potential residual value risk.
Nevertheless, there are some points of differentiation which can result in a more or less favorable credit view of the respective sectors.
Fitch Ratings considers, for example, that the truck leasing sector is typically less exposed to business cyclicality as a result of more diversified/durable earnings streams, while also typically employing higher unsecured funding levels.
On the other hand, the truck leasing sector is viewed as relatively more susceptible to technological change/disruption - especially as it relates to the fuel efficiency and emissions of the leased equipment.
Truck leasing also tends to be concentrated within individual countries or regions as opposed to exhibiting global diversity.
Container leasing less sensitive to technological change
The container leasing sector typically benefits from increased global diversification, relatively longer-lived portable assets that are less sensitive to technological change, and lower relative historical loss experience.
Conversely, the container leasing sector typically exhibits a higher reliance on secured funding, less revenue diversity and higher customer concentrations.
The railcar leasing sector typically exhibits higher relative customer industry diversity, and the railcars themselves are also generally viewed as less exposed to residual value risk than trucks and aircraft given the slower pace of technological change.
Similar to the truck leasing sector, the railcar leasing sector tends to be concentrated within individual countries or regions as opposed to exhibiting global diversity.
Weaker credit profiles for aircraft lessors
Aircraft lessors are viewed as having higher relative growth opportunities and greater flexibility in moving assets between lessees to match supply and demand or reposition fleets during stress. However, along with these positive attributes comes exposure to relatively weaker sovereign environments, less proven regulatory frameworks and weaker relative credit profiles for lessees.
Fitch explained: “Ratings assigned to large equipment leasing companies are typically centered in the 'BBB' rating category; however, individual issuers may be rated higher/lower depending on their individual risk characteristics, the magnitude to which they are exposed to sector-level strengths/constraints, or the presence of a more highly rated parent company."
The sector attributes outlined in Fitch's special report include operating environment, company profile, management, risk appetite and financial profile, which all correspond to the key rating drivers outlined in Fitch's Global Financial Institutions Rating Criteria, dated Jan. 31, 2014