Hertz Corp. Senior Secured Second-Lien Note Rating Lowered To 'BB-' On $250 Million Upsizing
View Analyst Contact Information
NEW YORK (S&P Global Ratings) June 5, 2017--S&P Global Ratings today lowered
its issue-level rating on Hertz Corp.'s $1.25 billion second-lien secured
notes due 2022 to 'BB-' from 'BB' and revised its recovery rating on the notes
to '2' from '1'. The '2' recovery rating indicates our expectation that
lenders would receive substantial recovery (70%-90%; rounded estimate: 75%) of
their principal in the event of a payment default. All of our other ratings on
Hertz and its parent Hertz Global Holdings Inc. remain unchanged.
We lowered our issue-level rating on these notes to reflect that the company
has upsized the issuance by $250 million, which has reduced our recovery
expectations.
The corporate credit rating on Hertz (parent of the Hertz, Dollar, and Thrifty
brands) reflects our assessment of the company's position as the largest
global car renter as well as the negative effect that its weak operating
performance has had on its credit metrics over the last few years.
The stable outlook on Hertz reflects our expectation that the company's credit
metrics will remain relatively consistent over the next year due to continued
pressure on used car prices and a modest improvement in its pricing.
Specifically, we expect the company to maintain a funds from operations
(FFO)-to-debt ratio in the high teens percent area.
We could lower our ratings on Hertz over the next year if the company's
operating performance weakens further, which could be caused by continued weak
pricing or weaker-than-expected used car prices, leading its FFO-to-debt ratio
to decline below 15% on a sustained basis.
Although unlikely, we could raise our ratings on Hertz over the next year if
better-than-expected earnings, due to stronger volumes or pricing, cause its
EBIT interest coverage to improve to at least 1.1x while its FFO-to-debt ratio
increases to the low 20% area on a sustained basis.