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Hertz Plans $1.2 Billion of Debt for Dollar Thrifty Purchase

Hertz Global Holdings Inc., the second-largest U.S. car-rental company, is issuing $1.2 billion of debt to help fund its acquisition of Dollar Thrifty Automotive Group Inc.

The company, which operates in about 150 countries, may raise as soon as today $700 million of eight-year notes to yield about 6 percent and $500 million of 10-year securities to yield about 6.25 percent to 6.5 percent, according to a person familiar with the transaction who asked not to be identified because terms aren’t set. The bonds were originally both sized at $600 million.

Proceeds will go toward the acquisition and to refinance existing Dollar Thrifty debt, the Park Ridge, New Jersey-based company said today in a statement.

Hertz last sold debt in February, issuing $250 million of 6.75 percent debentures maturing in April 2019 to yield 448 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg.

In August, Hertz reached a $2.6 billion deal to purchase Tulsa, Oklahoma-based Dollar Thrifty. The company had made an earlier bid in 2010 of about $1.2 billion that was rejected by shareholders.

Term Loan

The new bonds will be rated B2, five levels below investment-grade, by Moody’s Investors Service and an equivalent B by Standard & Poor’s, the ratings companies said in separate statements. Enterprise Holdings Inc. is the largest U.S. car-rental company.

Hertz set the price on a $750 million term loan related to the purchase on Sept. 28, according to a person with knowledge of that transaction.

The debt will be sold at 99 cents to 99.5 cents on the dollar, said the person, who asked not to be identified because the terms are private. The so-called original-issue discount reduces proceeds for the borrower and increases the yield to investors.

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