Halister News

(Bloomberg) -- Citi upgrades 5.875% notes due in 2020 and 7.375% notes due in 2021 to buy from neutral, initiates on 2nd lien notes due in 2022 at neutral, as co.’s liquidity position is “undoubtedly on better footing for now,” according to analysts Manish Somaiya and Sesha Kadakia.

• Excess proceeds from 2nd liens gives co. added flexibility, “generally covered” by asset value assuming no further dilution, analysts write in report Monday
• Residual pressures may be normalizing as less new-car production appears to be bringing used prices more in-line with expectations
• Mgmt comments on fleet alignment industry-wide, and specifically at HTZ, “provide a reason to be more optimistic” about pricing
• Citi estimates Hertz’s U.S. fleet is worth ~$1.3b vs co.’s ~$1.5b
• 1% change in residuals impacts liquidity by ~$60m; fleet equity should remain “relatively insulated” from changes in residual values
• NOTE: Manheim’s rental risk index was down 2% y/y in May versus the 3-4% decline that Hertz and Avis expect for 2017
  • GM sees used-car prices falling 7% this year, lender Ally Financial said that prices fell that much in 1Q
  • Earlier: Ford, GM Debt Maturities Face ‘Wild Card’ in Auto Residuals: BI
  • Related story: GM Joins Chorus Warning Used-Car Prices to Fall on Auto Glut

To contact the reporter on this story: Molly Smith in New York at msmith604@bloomberg.net To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net Rick Green, Dan Wilchins