Hertz is slated to issue what will be its first securitization deal outside of the U.S. The 1.5 billion ($2.4 billion) International Fleet Financing 1 will be a multi-jurisdictional transaction covering Australia, France, Italy and the Netherlands.
BNP Paribas and the Royal Bank of Scotland are joint managers on the deal.
Hertz's rental fleet securitization platform is well-established in the U.S., where the last public transaction was rated in December 2005. However, it will be the first time the issuer taps the European market. Each European jurisdiction will have its own SPV and different tax treatment.
The notes have been rated triple-B and given the complexity of the multi-jurisdictional platform for a first-time issuer, it's likely that Hertz would have opted for a monoline wrap. However, in the current market environment, a guarantee would have offered no benefit to the transaction.
The deal is backed by security interest in vehicles, manufacturer repurchase agreements and leases that rental car companies have with car manufacturers.
The securitization will isolate the repurchase agreements into special-purpose entities (SPEs) called FleetCos. These programs will be set up in each jurisdiction to purchase vehicles from manufacturers and dealers using advances provided by the issuer. Hertz will finance the advances via the subordinated loan facility.
The FleetCos lease the vehicles to the relevant jurisdictional Hertz entities
to operate their rental businesses. Protection to the holders of the variable funding notes will be provided through a combination of over collateralization, of which part will be offered through a standby reserve facility and a subordinated loan facility.
The transaction will operate on a dynamic basis where the fleet mix will change in line with Hertz's business operations, and the credit enhancement will be adjusted periodically to reflect this, Standard & Poor's said. Germany could potentially be added as a jurisdiction at a future date, analysts said.
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