- The Washington Times - Friday, October 27, 2006

NEWARK, N.J. (AP) — Less than a year after being taken private, Hertz Global Holdings Inc. is making preparations to go public again.

Underwriters yesterday set a pricing range for the car-rental company’s upcoming initial public offering of 88.2 million shares of $16 to $18 per share.

At the upper end of that price range, the shares being sold would amount to a 27.5 percent stake in the company and the sale would raise nearly $1.59 billion. At $18 a share, the entire company would be worth nearly $5.9 billion.

Hertz, which operates car rental businesses at about 7,600 locations in 145 countries, will trade under the “HTZ” symbol on the New York Stock Exchange.

Park Ridge, N.J.-based Hertz was purchased in December from Ford Motor Co. for $5.6 billion in cash and assumption of $10 billion in debt by a group of private equity companies including Clayton, Dubilier & Rice Inc., Carlyle Group and Merrill Lynch Global Private Equity.

Ford, the nation’s second-biggest automaker, had owned Hertz since 1994.

The sale by Ford prompted Fitch Ratings to downgrade Hertz’s debt rating to “junk” status, where it should remain, Fitch analyst Christopher D. Wolfe said yesterday.

“The IPO, in and of itself, is unlikely to lead to a re-evaluation of the rating,” Mr. Wolfe said.

Hertz had disclosed in July that it was pursuing a public offering.

In a form filed yesterday with the Securities and Exchange Commission, Hertz stated, “We believe that we have significant opportunities for growth within our global car rental business that will allow us to sustain growth rates in this business consistent with historical levels.”

A Fitch report this month on the rental car industry, however, said that while the business has recovered from the travel slowdown following the September 11 terrorist attacks, other challenges are affecting profitability.

“The financial deterioration of U.S. vehicle manufacturers and rising interest rates have combined to produce growing fleet expenses, depreciation rates and funding costs, only a portion of which have been passed on to the renter,” the Fitch report said.

Fitch ranked Hertz as one of the largest general-use car renters in the world, and the third-largest equipment rental company in the United States.

Hertz officials said the company would not comment beyond the filing.

Net proceeds to Hertz from the public offering are expected to be about $1.43 billion and will be used to repay borrowings and to pay related transaction fees and expenses. The company said it would pay a special cash dividend, estimated at about $1.83 per share, or $426.8 million, immediately before the offering with the bulk of that going to the equity funds.

Those firms received a payout of $991.4 million in the form of a special dividend in June.

As of Sept. 30, the company had nearly $14 billion in debt, including a $1 billion loan facility it received in June that it used to pay the June dividend.

During the six months ended June 30, the company said it lost $31.4 million, or 14 cents per share, compared with a profit of $120.1 million, or 52 cents per share during the same period a year ago.

Revenue increased 9 percent to $3.83 billion from $3.5 billion a year ago.

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