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Hertz Shares Lower on Plan to Sell $1.5 Billion of Unsecured Notes

Hertz stock recently traded lower on the rental-car icon's plan to sell debt.
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Shares of Hertz  (HTZ) - Get Hertz Global Holdings Inc Report, one of retail investors’ favorite meme stocks, dropped on Wednesday after the rental-car icon said it would sell $1.5 billion of five-year and eight-year senior unsecured notes.

They will be sold in a private offering, the chain said.

Hertz intends to use the proceeds from the notes, together with available cash, to buy back some or all its Series A preferred shares outstanding, either directly or indirectly by funding a dividend to Hertz.

If funds are left over, Hertz may keep as much as $250 million for general purposes.

Hertz recently traded 0.5% lower at $23. Earlier in the premarket it was off in the teens percent. The stock had slumped 20% from its recent re-initial public offering at $29 on Nov. 9 through Wednesday.

Investors often react negatively when a company increases its debt obligations. 

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The company’s debt totaled $10.12 billion in the third quarter, according to Morningstar.

Meanwhile, Hertz reported stronger-than-expected third-quarter results last month, benefiting from the recovery in travel.

The coronavirus pandemic sent the Estero, Fla., company into bankruptcy proceedings last year, but it emerged in June and came back with a vengeance.

In the three months through Oct. 27, the old Hertz stock skyrocketed 82%, as retail investors expressed enthusiasm for the company’s fortunes.

Profit totaled $571 million, or $1.13 a share, in the third quarter, swinging from a loss of $222 million, or $1.42 a share, in the pandemic-hammered year-earlier period.

Analysts surveyed by FactSet expected 85 cents in the latest quarter.

Revenue soared 76% to $2.23 billion in the third quarter, matching analysts’ forecast.