Fitch cuts Hertz watch to negative

Fitch Ratings said it revised The Hertz Corp. and its subsidiaries' Rating Watch status to negative from evolving.

Ratings on Rating Watch negative include The Hertz Corp.'s senior debt at BBB- and commercial paper at F2; Hertz Finance Centre plc's senior debt at BBB- and commercial paper at F2; Hertz Australia Pty. Ltd.'s commercial paper at F2; and Hertz Canada Ltd.'s commercial paper at F2.

This action was in response to the announcement by Ford Motor Co. of its intention to sell Hertz to a consortium of private equity investors composed of Clayton Dubilier & Rice, The Carlyle Group and Merrill Lynch Global Private Equity for about $15 billion. This amount includes $5.6 billion for Ford's equity ownership of Hertz.

Fitch said the purchase price could result in about $3 billion of goodwill being added to Hertz's balance sheet in addition to the existing $544 million at June 30, 2005. As a result, from a financial institutions' perspective, Hertz leverage will rise sharply, on a tangible basis, while the company's risk-adjusted capitalization could weaken. Initial debt funding for this transaction will be provided by a group of financial institutions.

Hertz will seek to tender its long-term debt maturing before 2010 while Ford will seek to take out Hertz's debt maturing in 2010 and beyond.

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