Hertz plans to issue up to $4B in bonds for delay-draw ABS notes offer

Hertz Corp. is sponsoring a $4 billion delayed-draw, asset-backed notes offering, which will be sold to fund new rental-fleet purchases as the company works through its Chapter 11 bankruptcy.

According to ratings agency presale reports, Hertz will offer a Class A note tranche that can issue up to $3.5 billion in bonds, and a Class B tranche totaling up to $500,000.

Moody’s Investors Service has assigned a preliminary Baa1 rating to the Class A notes and a Ba3 to the Class B notes. Kroll Bond Rating Agency assigned ratings higher than the corresponding Moody’s ratings: a single A for the Class A notes and a BB for the Class B notes.

Last week, Hertz Corp. obtained permission in bankruptcy court to proceed with the new offering as a means to purchase new vehicles to operate in its fleet for Hertz, Thrifty and Dollar brand rental-car locations.

“Hertz plans to refresh its rental fleet in 2021 and anticipates purchasing approximately 229,000 vehicles through the HVIF 2020-1 facility,” according to a report from Kroll. “Hertz has negotiated manufacturer commitments for the majority of its 2021 fleet needs.”

The issuance will be the first for Hertz since it filed for bankruptcy on May 22, after it exhausted its liquidity during the pandemic-induced slowdownthat throttled the U.S. travel industry Hertz depends on.

This summer Hertz reached an agreement with ABS investorsto pay proceeds from fleet vehicle sales as well as about one-third of contractual lease payments owed to Hertz, as part of a bankruptcy-court settlement to continue supporting outstanding ABS notes issued in previous years to finance fleet purchases.