In a one-two punch, Hertz is preparing to issue $500 million in asset-backed securities (ABS) through two separate trusts,
The Hertz Vehicle Financing III LLC, Series 2023-3 and Series 2023-4 will run concurrently and with almost identical characteristics, especially concerning the frequency of note repayments and the expected ratings for each class of notes, according to ratings analysts from DBRS Morningstar.
Where Series 2023-3 and 2023-4 differ is in the expected and legal final payment dates. For Series 2023-3, the expected and legal final payment dates are February 2027 and February 2028, respectively. For the Series 2023-4 transaction, the expected and legal final payment dates are March 2029 and March 2030, respectively, DBRS analysts said.
Series 2023-3 and 2023-4 will be the 10th and 11th term securitizations from the HVF III platform, as it is known. DBRS also said the classes of notes could be upsized proportionally on the Rule 144a deal, depending on demand from investors.
For Series 2023-3 and 2023-4, DBRS expects to assign ratings of 'AAA' on the class A notes; 'A' on the class B notes; 'BBB' on the class C notes and 'BB' on the class D, it said.
Credit enhancement on the notes includes cash or a letter of credit, or both, subordination and overcollateralization, DBRS said. It is dynamic and depends on certain market value tests, as well as the composition of vehicles in the fleet, according to DBRS. As far as the fleet composition goes, DBRS looked at whether the vehicles are program or non-program, and whether the manufacturer is investment grade or below investment grade.
Among non-program vehicles, enhancement might increase as a result of a marked-to-market test that compares the market value to the net book value and a disposition proceeds test. For the latter, the actual disposition proceeds of vehicles are sold with the vehicles' net book value, DBRS said.
The repayment schedule is also subject to certain amortization events, which include default in the payment of amounts due after five consecutive business days, default in the payments of due amounts by the expected final payment date, and deficiency of amounts available in the liquidity reserve account, among other factors.
