Hertz launches two master trust issues totaling $ 800 million
Master Trust Hertz Vehicle Financing III LLC is preparing to issue approximately $ 800 million in auto asset backed securities (ABS) as part of the 2022-1 and 2022-2 issues, and will use the proceeds to support the global brand of Hertz car hire.
The collateral to repay the bondholders will include Hertz’s lease payments, the aggregate net book value (NAV) of the underlying leased vehicles that will ultimately go on sale, and any refunds receivable from incentive and refund programs. from the manufacturer.
Moody’s Investors Service has noted several credit strengths that should benefit ratings. One is the Hertz brand itself and the other is its commitment to continue paying as little as possible on its fleet of cars. In an automotive market where the supply of vehicles remains limited, and another strength is that the underlying warranty is very liquid.
Used vehicle prices have increased dramatically in recent times, due to a shortage of semiconductor chips, which has limited the supply of new vehicles and increased demand for used vehicles, the agency noted. rating.
The notes also benefit from several forms of credit enhancement, including subordination, over-collateralization and liquidity reserves, Moody’s said. The rating agency plans to assign ratings ranging from “Aaa” to class A notes; “A2” on the course notes; “Baa2” on class C tickets and “Ba2” on class D tickets.
Hertz Vehicle Financing, 2022-1 and 2022-2 is not without its challenges. Moody’s notes that Hertz does not have an investment grade rating. The company is the sponsor of the transaction and the principal lessee. The main risk for ticket reimbursement is that Hertz will not be able to recover sufficient funds, through the sale of used vehicles, to finance the payments. Additionally, the car rental industry relies heavily on air travel, both for business and leisure.
“The spread of new variants will weigh on new bookings, temporarily slowing the pace of the industry’s recovery to 2019 levels,” Moody’s analysts wrote in the pre-sale report.
If Hertz misses a lease payment on the ABS transaction and a liquidation period ensues, the market value of the vehicles could continue to depreciate against their NBV.