Hertz expected to bring bonds for Dollar Thrifty acquisition in late September or early October

By Paul A. Harris

Portland, Ore., Aug. 27 - Hertz Global Holdings Inc. is expected to hit the leveraged markets in late September or early October with $1.95 billion of new debt to help fund its acquisition of Dollar Thrifty Automotive Group Inc., according to an informed source.

A $1.95 billion bridge loan, which the company announced during a Monday conference call, will be taken out with high-yield bonds and an incremental term loan.

While the exact breakdown of the new debt was not disclosed, officials remarked during the call that the majority of the financing will be done in bonds but a piece will be done as a term loan within the current credit agreement's Most-Favored-Nation language.

Barclays, Bank of America Merrill Lynch and Deutsche Bank are the lead banks on the financing.

According to commitment letter filed with the Securities and Exchange Commission, the 365-day unsecured bridge loan is priced at Libor plus 537.5 basis points with a 1% Libor floor. The spread will increase by 50 bps every three months until it hits a cap.

Total debt to EBITDA will be 3.7 times, or 3.4 times with cost synergies, and total debt to gross EBITDA will be 4 times, or 3.8 times with cost synergies.

Under the agreement, Dollar Thrifty is being purchased for $87.50 per share, for an equity value of $2.6 billion and a corporate enterprise value of $2.3 billion.

The combined company would have had sales for the 12 months ending June 30 of $10.2 billion and EBITDA of around $1.8 billion.

Closing of the acquisition is expected in mid-to-late October, subject to the tender of at least a majority of the shares of Dollar Thrifty common stock, regulatory clearance by the Federal Trade Commission and other customary conditions.

Hertz also announced today that it has reached an agreement to sell the Advantage business to Franchise Services of North America and Macquarie Capital. The closing of that divestiture is conditioned upon, among other things, the completion of the Dollar Thrifty acquisition.

Hertz is a Park Ridge, N.J.-based auto and equipment rental company. Dollar Thrifty is a Tulsa, Okla.-based renter and leaser of vehicles.

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