Rental car company Hertz Corp., a unit of Ford Motor Co. that will soon become a stand-alone entity, is not expected to issue significant amounts of auto ABS after it becomes a stand-alone company, say analysts. Despite having a near-junk corporate debt rating (BBB-/Baa3/BBB-), which is soon expected to fall even further, the company is expected to maintain its foothold in the high-yield debt market and should not be forced to over-utilize the ABS market for funding.
Hertz is expected to issue $5 billion of rental fleet lease ABS in December, as part of the leveraged buy-out of the company, being shopped by Deutsche Bank Securities, Merrill Lynch and Lehman Brothers. Craig Hutson, analyst with Gimme Credit, an independent research firm targeting institutional corporate debt investors, said Hertz will likely try to securitize its rental fleet as soon as possible, and that will use most of the company's capacity for future securitizations, as the company would not be likely to securitize more than half its fleet. According to the most quarterly filing with the Securities & Exchange Commission, Hertz had about $10.5 billion in revenue-earning vehicles and other equipment.