Corporate Finance

Hertz Shares Jump on Private Debt Offering

The stock rises more than 8%, recouping some of the losses it suffered after Hertz reported disappointing first-quarter results.
Matthew HellerMay 31, 2017
Hertz Shares Jump on Private Debt Offering

Hertz shares rose sharply on heavy volume Wednesday after the car-rental company announced it would offer $1 billion of senior second priority secured notes in a private placement.

According to a news release, Hertz will use the proceeds from the offering in part to pay $700 million in outstanding principal amounts for notes that are due 2018 and 2019. The rest of the money will go toward refinancing other debt.

The company’s stock had fallen dramatically earlier this month, reaching eight-year lows, after it reported a larger-than-expected quarterly loss in the midst of turnaround efforts. For the year so far, it had dropped more than 30%, following a more than 60% decline in 2016.

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But in trading Wednesday, the shares rose 8.4% to $10.21, suggesting investors welcome Hertz’s refinancing efforts.

“The company’s results have suffered as prices of used cars have dropped, and the company’s turnaround plans have included selling off its aging cars and renewing its fleet,” The Financial Times said. “It has also faced increasing competition from ride-share companies like Uber and Lyft.”

Investors have also been concerned about Hertz’s very high leverage and continued struggles to generate profits and free cash flow. For the first quarter, it lost $223 million or $2.69 a share from continuing operations, compared with a narrower loss of $52 million or 61 cents a share in the year-ago period, while total revenues fell 3% to $1.92 billion.

Adjusting for one-time items, the company’s loss of $1.61 a share was nearly double Wall Street estimates of 84 cents.

Hertz is expecting the senior second priority secured notes to pay interest twice a year in arrears. The offering will be made through Hertz Corporation, a wholly-owned subsidiary of Hertz Global Holdings.