Hertz paying down $1.5-2 billion of debt
By DAVID HOLLEY Bloomberg News on Aug 6, 2013, at 2:28 AM Updated on 8/06/13 at 6:07 AM
Hertz customer Paul Ratcliff rents a car from an employee at Tulsa International Airport. The company announced Monday plans to pay down nearly $2 billion in debt. MATT BARNARD / Tulsa World file
Transportation
As automakers race to make cheaper electric cars with greater battery range, General Motors is working on one that can go 200 miles per charge at a cost of about $30,000, a top company executive said Monday.
BNSF Railway Co. announced Monday it is spending $125 million to expand and improve its system in Oklahoma. Projects will include a new bypass connection at the Cherokee rail yard in west Tulsa and extending a siding area on the carrier's tracks near Mannford.
Hertz Global Holdings Inc., the largest publicly traded U.S. auto-rental chain, plans to pay down $1.5 billion to $2 billion of debt over three years using free cash flow as it seeks an investment-grade rating.
Among targets for refinancing or repayment are $2.1 billion in term loans, an asset-based U.S. loan and 400 million euros ($530 million) of speculative-grade bonds, according to Treasurer Scott Massengill. The Park Ridge, N.J.-based company is seeking to use an estimated $500 million to $600 million in free cash flow this year, which Hertz expects will increase to as much as $1 billion by 2015, to reduce borrowings.
"We really laid out the capital structure to be able to facilitate a pay-down of debt based on our cash-flow forecast," Chief Financial Officer Elyse Douglas said in an Aug. 2 telephone interview. "We think we'll have investment-grade statistics by 2015."
To achieve investment grade, the company would need to cut in half its ratio of net corporate debt to earnings before interest, taxes, depreciation and amortization, or Ebitda, to less than 1.6 times, Douglas said. The ratio is currently 3.1 times when including savings and a full year of Ebitda from Dollar Thrifty Automotive Group Inc., which Hertz acquired for $2.3 billion last year, Douglas said in a July 29 conference call to discuss second-quarter earnings with analysts and investors.
The company is rated B+ by Standard & Poor's, four levels below investment-grade.
Hertz can redeem its 8.5 percent euro-denominated notes due July 2015 at 104.25 cents on the euro now, or wait until July 2014 to call them at par. The company could issue new European bonds that mature in seven years at about 5.25 percent to pay off the debt early, saving interest costs, Massengill said.
The car-rental company may seek to reduce the interest costs on a $750 million portion of its term loan used to finance the Dollar Thrifty buyout. That debt pays 275 basis points more than the London interbank offered rate with a 1 percentage-point minimum on the lending benchmark, Bloomberg data show. Lenders in March agreed to reduce interest on a $1.37 billion portion of the loan paying the same rate to 225 basis points more than Libor with a 0.75 percentage-point minimum, the data show.
"When we did it, it was the tightest pricing of a company of our rating," Massengill said in the telephone interview. "The term-loan market continues to be very hot."
Original Print Headline: Hertz planning to pay down $1.5-2 billion of debt
Transportation
As automakers race to make cheaper electric cars with greater battery range, General Motors is working on one that can go 200 miles per charge at a cost of about $30,000, a top company executive said Monday.
BNSF Railway Co. announced Monday it is spending $125 million to expand and improve its system in Oklahoma. Projects will include a new bypass connection at the Cherokee rail yard in west Tulsa and extending a siding area on the carrier's tracks near Mannford.
