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Rating Action:

Moody's takes rating actions on 6 classes of Hertz-sponsored subordinate rental car ABS notes

07 Dec 2012

Approximately $285.3 million of securities affected

New York, December 07, 2012 -- Moody's Investors Service announced today that, as a result of recent and expected future changes in the composition of the rental car fleet backing the notes, it has downgraded four classes of Class B subordinate rental car asset backed notes and placed on review for downgrade two additional classes of Class B subordinate rental car asset backed notes issued by Hertz Vehicle Financing LLC (the Issuer). The Issuer is a special purpose entity wholly owned by The Hertz Corporation (Hertz, B1/ Stable outlook).

The complete rating action is as follows:

Issuer: Hertz Vehicle Financing LLC, Series 2009-2

Series 2009-2 Class B-2, Downgraded to Baa1 (sf); previously on December 10, 2010 Upgraded to A1 (sf)

Issuer: Hertz Vehicle Financing LLC, Series 2010-1

Series 2010-1 Class B-1, Downgraded to Baa2 (sf); previously on December 10, 2010 Upgraded to A1 (sf)

Series 2010-1 Class B-2, Downgraded to Baa2 (sf); previously on December 10, 2010 Upgraded to A1 (sf)

Series 2010-1 Class B-3, Downgraded to Baa2 (sf); previously on December 10, 2010 Upgraded to A1 (sf)

Issuer: Hertz Vehicle Financing LLC, Series 2011-1

Series 2011-1 Class B-1, A3 (sf) Placed on Review for Downgrade; previously on January 12, 2012 Upgraded to A3 (sf)

Series 2011-1 Class B-2, A3 (sf) Placed on Review for Downgrade; previously on January 12, 2012 Upgraded to A3 (sf)

The Series 2011-1 Class B-1 and Class B-2 notes are placed on review for downgrade pending expected amendments that would alter the credit protections for the Class B-1 and Class B-2 notes.

The Series 2009-2 Class B-1 notes are unaffected due to their near-term maturity date in March 2013. Also, the Aaa (sf) ratings on the senior Class A notes from the Series listed above are unaffected by this action.

RATINGS RATIONALE

The rating actions are prompted by a significant shift in the mix of vehicles in the Issuer's daily rental car fleet, which collateralizes the Issuer's notes. Specifically, the car fleet mix has shifted with respect to two important credit characteristics and now has and is expected to have: (i) a lower proportion of "program" vehicles, i.e. vehicles that benefit from original equipment manufacturer (OEM)-guaranteed depreciation or repurchase agreements, and (ii) a lower proportion of vehicles from financially stronger OEMs. Both of these shifts are credit negative for the related notes. In addition, these recent shifts introduce a degree of variability to the fleet mix that had, until recently, been relatively stable, and Moody's has changed its expectations accordingly.

Firstly, the proportion of program vehicles in the collateral pool backing the transactions has decreased considerably over the past year, from 29% as of 31 January 2012 to 16% as of 31 October 2012. Moreover, Hertz has disclosed that the proportion of program vehicles in their fleet will move towards 10% in the future.

Secondly, Hertz is shifting the mix of OEM in its fleet, decreasing the proportion of financially stronger OEMs, like Toyota and Nissan (rated Aa3 and A3, respectively) while increasing the proportion of vehicles from financially weaker OEMs, such as Chrysler, Ford, and GM (rated B2, Baa3, and Ba1, respectively). This also represents a shift from vehicles with historically higher residual value retention towards vehicles with historically lower residual value retention. The financial strength of the OEMs and the residual value retention of their vehicles are drivers of credit quality in rental car ABS.

The ratings of the notes are based on, among other things, the credit quality of Hertz as the lessee, the liquidation values of the vehicles in the rental car fleet, the credit quality of automobile manufacturers providing vehicle disposition program agreements for program vehicles, the experience of Hertz as the servicer of the rental car fleet and the administrator for the Issuer, and the available credit support provided by a combination of overcollateralization, cash and/or Letters of Credit (LOCs).

The primary assets backing the notes are the monthly lease payments by Hertz as well as the pool of vehicles comprising the bulk of the Hertz daily rental car fleet.

The primary source of assumption uncertainty is the market value of vehicles in the fleet should fleet liquidation be necessary. To address this uncertainty, we make assumptions we believe to be conservative about appropriate recovery value haircuts.

PRINCIPAL RATING METHODOLOGY

The principal methodology used in these ratings "Moody's Approach to Rating Rental Car ABS and Rental Truck ABS," published in July 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Research & Ratings directory, in the Rating Methodologies sub-directory on www.moodys.com.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art. 4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com

Information sources used to prepare each of the ratings are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service information.

Moody's did not receive or take into account a third party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of these transactions in the past six months.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these reviews.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Gregory J. Gemson
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Luisa De Gaetano
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's takes rating actions on 6 classes of Hertz-sponsored subordinate rental car ABS notes
No Related Data.
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