Car rental company Hertz (HTZ) strongly objected to being included on our list of 10 major companies heading towards bankruptcy.
Here’s the full statement from Richard Broome at Hertz Corporate Affairs:
Recently, there’s been a published Audit Integrity report which claims Hertz could go bankrupt or suffer severe financial distress. Hertz believes its inclusion in this report is baseless and misguided. The authors ignore quantitative and qualitative data commonly relied upon by financial analysts, lenders and rating agencies and provides an unfounded
conclusion that Hertz is a bankruptcy risk. Hertz’s solid financial performance contradicts the findings, as follows:
1. One year ahead of schedule, Hertz successfully refinanced approximately $2.1 billion in asset-backed fleet debt. Moody’s credit rating of Aa1 for these notes, as well as the advance by a consortium of major banks, clearly demonstrates the confidence the financial industry has in Hertz.
2. Hertz recently raised approximately $544 million of net proceeds in an equity offering. Approximately $200 million of the proceeds came from two of Hertz’s private equity sponsors, clearly indicating their confidence in Hertz’s future prospects.
3. More than half of Hertz’s debt is asset-backed fleet debt. If rental demand decreases, Hertz can sell its fleet, quickly and at predictable values, and use the proceeds to reduce its debt.
4. Hertz has more than $1 billion of excess corporate liquidity (funds that can generally be used for any corporate purpose) and very little of the Company’s debt matures prior to 2012.
5. In Hertz’s corporate debt facilities, the banks require that the Company meets certain financial covenants. Hertz has consistently adhered to the covenants in spite of severe macro economic pressures.
Hertz’s compliance with the covenants confirms our lenders’ belief that Hertz has the ability to service its debt.
6. Both Hertz’s equity and bond securities have increased in value over the past six months.
7. Hertz’s cash flow has improved through the first half of 2009. For the first 6 months of the year, Hertz’s Total Net Cash Flow improved $1.6 billion year over year due to fleet downsizing, continued improvement in working capital, and deleveraging via successful equity offering.
8. Several analysts who follow Hertz have significantly increased their per-share price estimates of Hertz’s common stock from six months ago.
Hertz feels the report, by focusing exclusively on narrow data points, ignores many of the indicators, including a qualitative analysis of Hertz and the car and equipment rental industries that financial analysts, lenders and credit rating agencies typically consider when assessing Hertz’s bankruptcy risks. The findings, and subsequent statements made by Audit Integrity about Hertz being a bankruptcy risk, are inaccurate and a disservice to the investing public at large.