By Adriano Marchese


Hertz Global Holdings said Friday that it has increased the size of its bond offering to $1 billion as it looks for more flexibility while it works to accelerate its vehicle fleet rotation.

The company plans to sell $750 million worth of its 12.625% first lien Senior secured notes due 2029, which was upsized from a previous $500 million.

Hertz' plans to sell $250 million aggregate principal amount of 8% exchangeable senior second-lien secured PIK notes due 2029 remain unchanged. PIK notes, or payment-in-kind notes, offer an issuer the flexibility to make interest payments with securities instead of cash. This portion of the new debt is convertible into stock, raising the risk that existing shareholders will see their stakes diluted.

The new debt will be secured by Hertz' corporate assets, placing its holders above existing bondholders in the case that the company ever does a debt restructuring.

Hertz reported about $16 billion of debt at the end of March with $11 billion of it tied to its vehicle fleet.

In a filing on Thursday, Hertz said it was accelerating its fleet refresh to rotate out of more expensive vehicles with high capital costs into lower-capital-cost vehicles.

This move follows its previously announced sale of about 30,000 electric vehicles. As of May 31, it had sold 19,000 of those EVs.

But the benefits of that fleet rotation are expected to be slower to come. Depreciation per vehicle per month, or DPU, is expected to be $575 to $600 for the second quarter, compared with $592 for the first quarter. Hertz is targeting average fleet DPU levels to reach the low $300s per month by early 2026.

On Thursday, Hertz said it expects elevated vehicle-depreciation rates to continue for the rest of the year as it accelerates its fleet rotation.

Hertz said it is targeting $500 million in annual cost initiatives designed to reduce direct operating expense per transaction day to its target of low $30s.

The company also plans to lower its selling, general and administrative expenses.

"Once our newer and lower cost fleet is in place, we believe the consequential reduction in these operating expenses will approximate $150 million annually," Hertz said in a filing on Thursday.

In the meantime, the company expects elevated vehicle depreciation to continue throughout 2024, adding that it will be further burdened by an elevated cost structure that doesn't yet include any benefits from its major cost-cutting program.


Write to Adriano Marchese at adriano.marchese@wsj.com


(END) Dow Jones Newswires

06-21-24 0831ET