That didn’t take long. While it traded briefly below its $15 issue price last week, debt laden Hertz managed to close over that price since each day since. Today it’s looking like it’s not gonna be so lucky. Oink, Oink.
Hertz goes public at $15 — below its expected range
On November - 16 - 2006
They had to cut the price of Hertz to $15 from the expected $16-18 range, but at least the deal got done. Clayton Dubilier & Rice Inc., the Carlyle Group and Merrill Lynch must be relieved as they laugh all the way to the bank. We suspect that in time there will be plenty of bag holders in this name ultimately squealing in pain. OINK, OINK:
Hertz Global Holdings Inc., [HTZ] the world’s biggest car-rental agency, raised $1.32 billion in an initial share sale, less than it planned as investors balked at enriching the owners who paid themselves a $1 billion dividend.
Hertz, the world’s largest rental car company, sold 88.2 million shares for $15 each in a public offering that was underwritten by Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Merrill Lynch & Co., bankers involved in the sale said today. Hertz said last month it planned to sell shares for between $16 and $18 each.
Hertz Initial Public Offering Raises $1.32 Billion – Bloomberg
Tags: Hertz, IPO, Private equity
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Allan Sloan: Hertz investors making out like bandits
On November - 7 - 2006
Fee-ding frenzy: Last week we noted how Hertz bondholders got screwed in the company’s buyout. Allan Sloan focuses on just how much the Hertz investors stand to make in fees and dividends in the LBO.
Assuming that the initial public offering of stock goes as planned later this month, the Hertz deal will become a Wall Street legend for quick profits and massive fees. The three investor groups that combined to buy Hertz from Ford last December will have made a paper profit of about 340 percent (before fees) on their investment in a mere 11 months. And Wall Street stands to make more than $1 billion in fees for helping buy Hertz and then convert it into a public company. All these numbers are based on my reading of documents that Hertz—now owned by buyout funds run by Clayton, Dubilier & Rice, the Carlyle Group and Merrill Lynch—has filed with the SEC. These firms all cited SEC rules that limit their ability to discuss pending stock offerings. But the numbers speak for themselves.
Investors Sing, ‘Hertz So Good’ – Newsweek
Tags: Hertz, LBO / MBO, Private equity
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LBOs may be great for shareholders, but suck for bondholders
On November - 1 - 2006
Bloomberg shows why it’s tough to be a corporate bondholder these days. In an environment where just about any company, no matter how large, could be targetted as an LBO, the bondholders usually are big losers in the deals. That’s bacause those company lever themselves up, resulting in less cash available to service debt. Of course, that hurts bond prices. Further pressuring the bonds in recent LBOs, the firms are borrowing more than ever specifically to fund fat cash dividend payments to the LBO sponsors which they’re taking earlier than ever in deals. Bloomberg cites several examples where bondholders got nailed because of their LBOs, including Hertz.
The debt of companies owned by buyout firms has risen to the equivalent to 5.4 times their cash flow, the most ever, S&P says. Debt rated below BBB- by S&P and Baa3 by Moody’s Investors Service is considered non-investment grade, or junk.
Payouts to buyout firms were partly to blame for the lagging performance of bonds sold by Hertz Corp., Brake Bros Plc and Impress Holdings BV. Their bonds trailed the 8 percent average return this year for securities with junk ratings, costing holders about $70 million in total, according to U.S. indexes compiled by Merrill Lynch & Co.
Hertz pummeled bondholders after the rental-car company said in September 2005 it was being acquired for $15 billion. Its $175 million of 7.625 percent notes due 2012 lost as much as 10 percent of their face value. S&P cut the ratings on the Park Ridge, New Jersey-based company to BB- from BBB-….
Buyout Firms Punish Bondholders by Gorging on Record Dividends – Bloomberg
