Fitch Ratings has affirmed the Hertz Corporation's (Hertz) Issuer Default Rating (IDR) and outstanding debt ratings as follows:
--IDR at 'BB';
--Senior secured revolving facility at 'BBB';
--Secured term facility at 'BBB-';
--Letter of credit facility at 'BBB-';
--Senior unsecured debt at 'BB-';
--Subordinated Debt at 'B+';
Fitch has also revised Hertz's Rating Outlook to Stable from Positive.
Hertz Global Holdings, Inc. ( HTZ 4.94, -0.17, -3.3%) is the ultimate parent company of Hertz. Approximately $4.2 billion of debt is affected by this rating action.
The affirmation of Hertz's ratings reflects the strength of the company's stable market position in the car rental and commercial equipment markets, positive free cash flow generation, and good collateral coverage for its debt. Fitch's rating also incorporates Hertz's secured funding profile, increasing vehicle costs and cyclical operating performance.
Fitch's Outlook revision to Stable from Positive reflects the belief that weakening economic conditions in the United States and unprecedented capital market dislocations have hampered Hertz's near-term ability to sustain improvements in operating performance and free cash flow. Fitch expects weakening economic conditions will reduce demand for rental cars and rental equipment. Further, weakening of used car prices will generate additional downward pressure on operating results due to the increased percentage of at-risk vehicles in Hertz's rental fleet.
Although liquidity remains sufficient to support funding and maturing debt requirements through 2009, Fitch believes that Hertz's ongoing efforts to develop funding alternatives to insured asset securitization also represent a meaningful near-term challenge. This effort is necessary given its exposure to monoline guarantors.
Fitch notes that overall collateral coverage is substantial and supports full repayment of all debt classes, assuming an orderly liquidation. Full repayment of debt is substantially less reliant on the sale or liquidation of Hertz's trademark. Fitch will continue to assess the relative adequacy of collateral to support repayment of debt and may revise the current notching of security specific ratings from their current levels relative to Hertz's IDR, including equating the senior unsecured debt rating with the IDR.