Hertz Global Holdings (HTZ) Stock: Crashes 40% as $350M Notes Deal Fuels Concerns

TLDR

• Hertz stock crashes 40% after pricing a $350 million secured notes deal.

• HTZ drops again pre-market as debt and dilution concerns intensify sharply.

  

• The secured notes carry 6.75% interest and will mature in July 2030.

• A concurrent share-lending deal may add more selling pressure on HTZ stock.

• Hertz plans to use the proceeds to repay debt and support its operations.

Hertz Global Holdings (HTZ)stock extended its sharp decline after the company priced a $350 million secured notes offering. HTZ shares fell 40.71% to $3.00 during Wednesday’s session. The stock then dropped another 6.53% to $2.79 in Thursday’s pre-market trading.

Hertz Global Holdings, Inc., HTZ

Hertz Prices $350 Million Secured Notes Offering

Hertz’s subsidiary priced $350 million in exchangeable senior first-lien secured PIK notes due in 2030. The company increased the offering from its earlier target of $300 million. It also granted purchasers an option to acquire another $50 million in notes.

Hertz expects net proceeds of about $339.5 million after the initial purchasers’ discount. That amount could reach approximately $388 million if purchasers exercise the full option. Hertz plans to repay revolving credit borrowings and fund general corporate needs.

The notes carry a 6.75% annual interest rate and will mature on July 1, 2030. Hertz will pay half the interest in cash and the remaining half through additional debt. Therefore, the structure limits immediate cash payments but increases the outstanding principal over time.

Exchange Terms Raise Dilution and Debt Concerns

Holders may exchange the notes for cash, Hertz shares, or a combination of both. The initial exchange rate equals 279.5248 shares for each $1,000 in capitalized principal. This rate produces an initial exchange price of about $3.58 per share.

The exchange price stands 32.5% above the $2.70 price used in a concurrent share offering. However, future exchanges could increase Hertz’s outstanding share count and dilute existing ownership. Hertz capped possible share issuance at 19.9% without shareholder approval.

The notes will carry first-lien security over assets supporting Hertz’s existing secured debt. Hertz and several domestic subsidiaries will also guarantee the new obligations. As a result, the transaction adds another secured claim across the company’s capital structure.

Share Lending Deal Adds Pressure on HTZ Stock

Hertz also priced a separate public offering involving 37,037,037 shares at $2.70 each. The company will lend those shares to a financial institution under a share lending agreement. However, Hertz will receive only a nominal fee and no offering proceeds.

The share borrower plans to sell the shares and establish a short position. Note holders may then use that position to hedge their exchangeable securities exposure. Consequently, the related selling activity could place further pressure on HTZ stock.

Hertz entered the transaction after a difficult period for its balance sheet and market value. The company continues managing high debt while adjusting its vehicle fleet and operating strategy. The latest financing improves near-term liquidity but adds secured debt and possible dilution risks.

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