Thursday, November 16, 2006

another private equity pos ipo "hertz"

pos is probably a bit harsch. but i like to know what are buyers of this ipo thinking. they buy a debt burdened company with almost no safetynet or marin of error when things slow down or rates or riskpremiums are going up.

"stück dreck" ist sicher zu hart. aber ich frage mich wirklich was die käufer des ipo denken. sie bekommen eine kreditüberladene firma mit null sicherheitsnetz wenn die wirtschaft nachläßt oder sich kreditbedingungen verteuern (zinsen oder risikoaufschläge)

Hertz Bonds
The debt of companies owned by buyout firms has risen to the equivalent to 5.4 times their cash flow, the most ever, S&P says. ...Payouts to buyout firms were partly to blame for the lagging performance of bonds sold by Hertz Corp., Brake Bros Plc and Impress Holdings BV.

Their bonds trailed the 8 percent average return this year for securities with junk ratings, costing holders about $70 million in total,

Hertz pummeled bondholders after the rental-car company said in September 2005 it was being acquired for $15 billion. Its $175 million of 7.625 percent notes due 2012 lost as much as 10 percent of their face value. S&P cut the ratings on the Park Ridge, New Jersey-based company to BB- from BBB-.

more on private equity,

Hertz IPO Falls Short as Some Investors Balk Over Owner Payout

Nov. 16 (Bloomberg) -- Hertz Global Holdings Inc.'s initial share sale raised less than the company planned as some investors were unwilling to reward owners who more than doubled their investment.

Hertz, the world's largest rental-car company, raised $1.32 billion by selling 88.2 million shares for $15 each, the company said today in a statement. Park Ridge, New Jersey-based Hertz intended to sell as much as $1.59 billion of shares at $16 to $18 each.

Owners Clayton Dubilier & Rice Inc., Carlyle Group and Merrill Lynch & Co., put up $2.3 billion of the $15 billion they paid for Hertz in December. The firms rattled potential investors by adding debt, raising the company's interest costs and pushing down profit.

The owners have received a dividend of $1 billion and plan to get another payout of about $420 million. Coupled with the group's remaining 72 percent stake valued at $3.46 billion, the owners more than doubled their investment. (since december 2005!!!)

The share sale represented about 28 percent of the company. ......, have an additional 13.2 million shares available to sell.

Since buying Hertz, the Clayton Dubilier ownership group has raised debt by $3.4 billion and shaved cash and cash equivalents almost in half.

In a leveraged buyout, the acquirer borrows most of the purchase price and uses the target company's cash flow to repay lenders.

The ownership group bought Hertz from Ford Motor Co., the second-largest U.S. automaker, in December for $15 billion.

Net Income Falls
For the nine months through Sept. 30, Hertz's net income slumped 77 percent to $76.1 million, or 33 cents a share, from $325.3 million, or $1.42, a year earlier. Sales rose 7.8 percent to $6.07 billion,

The group also arranged new debt and refinanced existing debt at higher interest rates. Total debt increased 32 percent to $14 billion. Interest expense almost doubled to $672.6 million. Betsy Snyder, a fixed-income analyst with Standard & Poor's in New York, said the company paid higher rates on the new debt. ( what a refinance.....)

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