Hertz considers debt buyback

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Car Rental News - 26/03/2009


The rental car giant said the move would offer it breathing room with near-term debt obligations.

Richard Broome, a spokesman for Hertz Global Holdings, said that buying back debt was "a step that we are seriously considering and we're working with various outside agencies to move that process forward." The spokesman would not reveal any details of the plan under consideration.

On Tuesday, Standard & Poor's said that Hertz Global Holdings was looking at amending its term loans so that it would be able to purchase up to $500 million of its approximately $1.4 billion term loan at around 70 cents on the dollar – which is the current market price.

Buying back loans at significantly-discounted prices would help "create additional breathing room for future periods," commented Kip Penniman, an analyst with KDP Investment Advisors.

As of 31 December 2008, Hertz was in full compliance with the terms of all its loans, but "we believe there remains a chance that Hertz will breach its financial covenants in the third quarter of 2009, at which time we expect loan investors will be asked to approve an amendment to relax the covenants for a duration of time," Penniman said.

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