Hertz Corp. debt tumbled in early trading as ongoing headwinds dragged the company’s first-quarter results far below analyst expectations.
The car rental company managed a slight increase in revenue, which rose in line with estimates, to $2.08 billion, from $2.05 billion in the same quarter last year. However, Hertz posted an adjusted loss of $392 million, or $1.28 per share, for the three months ended March 31, down from adjusted earnings of $126 million, or 39 cents a share, in the year-ago equivalent period and well wide of Wall Street’s consensus view for a loss of $147 million, or 44 cents a share.
Management blamed escalating fleet and direct operating costs for the performance as it works to rebalance its inventory in light of lower-than-expected customer demand for EVs. The company reported a $588 million increase in vehicle depreciation in recent months, including a $195 million charge related to an additional 10,000 EVs that it is trying to offload on top of the 20,000 it earmarked for sale in January. That pushed adjusted corporate EBITDA to negative $567 million, with the company reporting negative EBITDA in its Americas and International RAC segments despite revenue upticks in both units.
While Hertz stock slumped more than 20% to its lowest level since it emerged from bankruptcy in 2021, its 5% senior notes due 2029 today fell 3.375 points to a fresh low of 69.5, for a yield of about 12.8%. Its less active 4.625% senior 2026 bonds were down three points heading into the afternoon session, also hitting a new nadir, at 80.5 for a 13.8% yield.
Meanwhile, Hertz’s $1.268 billion term loan B and its $245 million term loan C, both due June 2028 and priced at S+350, with a 0% floor, slipped more than a point this morning to 92.5/93.5, having already shed two points after the company last week announced an amendment to provide covenant relief. The amendment, among other things, revised the issuer’s total first-lien net leverage ratio covenant to 5x through Sept. 30; 4.75x through March 31, 2025; 3.5x through Sept. 30, 2025; and 3x thereafter. The covenant was revised from the prior 3.5x.
The issuer also has an incremental term loan B due June 2028 (S+375, 0% floor) that is now quoted at 93/94.5, from around 96.5/97.5 last week.
Hertz finished the first quarter with around $15.75 billion of debt while liquidity stood at $1.3 billion.
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