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Rating Action:

MOODY'S REVIEWS HERTZ'S RATINGS FOR POSSIBLE DOWNGRADE

Global Credit Research - 12 Sep 2005
MOODY'S REVIEWS HERTZ'S RATINGS FOR POSSIBLE DOWNGRADE

Approximately $5 Billion of Debt Affected

New York, September 12, 2005 -- Moody's Investors Service is reviewing the Baa3 long-term and Prime-3 short-term ratings of The Hertz Corporation for possible downgrade following the announcement that Ford Motor Company has signed a definitive agreement to sell all of its shares of Hertz to an investor group composed of Clayton Dubilier & Rice, The Carlyle Group and Merrill Lynch Global Private Equity. The transaction is valued at approximately $15 billion including assumed debt. Under the terms of the transaction, Ford will receive approximately $5.6 billion for the equity of Hertz.

In connection with the transaction, Hertz plans to commence a cash tender offer for up to $2.3 billion of certain of its outstanding debt securities. In addition, Ford intends to offer to exchange debt securities of Ford Motor Credit Company for up to $2.4 billion of Hertz's outstanding debt securities. The terms of the Ford Credit securities are expected to be similar to the terms of the Hertz debt securities for which they are exchanged. Certain other Hertz debt will be refinanced.

Moody's review is focusing on the financial and operating strategy that the purchasing group will implement for Hertz, as well as the precise terms and likely success of the tender and exchange offers. The rating agency believes that Hertz has a strong competitive position in the domestic, on-airport car rental sector and that its position in the off-airport market will continue to improve. The rating agency also notes that the company's equipment rental operations continue to benefit from a strong cyclical rebound that should continue through 2006. Despite these positive operating and market fundamentals, the investor group that is acquiring Hertz will likely fund a significant portion of the purchase price through a large increase in Hertz's leverage and possibly through asset sales. The impact on Hertz's existing ratings will be driven by: the ultimate level of leverage within the Hertz capital structure, the proceeds that can be generated by asset sales balanced against any foregone earnings, and the degree to which the proposed tender and exchange offers preserve value for existing debt holders. Moody's anticipates that existing debt that is not tendered or exchanged could be subject to multiple-notch downgrades into the speculative grade range.

The Hertz Corporation, headquartered in Park Ridge, New Jersey, operates the largest general use car rental business in the world, and one of the largest industrial, construction and material handling rental businesses in North America.

New York
Michael J. Mulvaney
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
J. Bruce Clark
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.

 

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