HERTZ Global Holdings, seeking to bolster its balance sheet after an electric vehicles (EVs) blunder, is considering the sale of at least US$700 million in secured debt as well as a convertible notes offering, according to sources with knowledge of the matter.
The rental car company’s advisers, JPMorgan Chase and Barclays, have begun contacting potential investors regarding the secured debt issue, some of the sources said. No final decisions have been made and the size and other terms of any financing could change.
Hertz’s new management team, led by former Delta Air Lines executive Gil West, is working to improve liquidity and operations and reduce costs. One focus is an effort to dispose of Tesla EVs that the company bought, only to discover customers were reluctant to rent them and the cars had high repair costs.
The century-old business burned through US$860 million in the last two quarters, when it announced that a bet on EVs had become a drag on profits. In April, Hertz reported a first-quarter loss of US$1.28 a share, or US$392 million, which was almost triple analyst expectations.
“Hertz’s issues stem from cost, not revenue, and any potential debt sale helps to fill cash gaps while the company sorts through its fleet issues,” said Jody Lurie, Bloomberg Intelligence senior credit analyst.
Representatives for Hertz, JPMorgan and Barclays declined to comment.
A NEWSLETTER FOR YOU
Property Insights
Get an exclusive analysis of real estate and property news in Singapore and beyond.
Hertz shares closed down 4.5 per cent on Thursday (Jun 6) after paring a decline of as much as 13 per cent following Bloomberg’s report.
The company’s US$1 billion of 5 per cent notes due in 2029 fell on Thursday and touched a record low of 61 US cents, according to the bond-price reporting system Trace. The company has US$15.7 billion in debt outstanding as at Mar 31.
‘Fleet issues’
While West plans to sell 30,000 EVs by the end of the year, Hertz is also trying to enhance its vehicle-tracking system to put cars where they will meet demand and bring costs in line with those of rival Avis Budget Group.
Hertz has been exploring financing options after reporting the loss in April, Bloomberg News reported last week.
“We expect this step to be one of many as Hertz tries to solve for company-specific challenges,” Lurie said. “Topline dynamics are favourable for rental-car companies, but fleet issues and management strategies are getting in Hertz’s way.” BLOOMBERG
