HTZ - Hertz

[petec]

A 50% drop in the share price would be a 1.3% drop in enterprise value (valuing bonds at par). Why would that make any difference to your assessment of value, out of interest?

[lnofeisone]

I don't have any info on who owns what debt but there was an interview with Icahn this weekend on Bloomberg. He gave a very poor answer about HTZ and potential bk file. Outside of that, HTZ hired BK specialists to restructure the debt. All signs point towards BK. I have a very small short on this one (via Jan 21 puts).

[Uccmal]

I took a cursory look at Hertz and Budget-Avis last week.  I am not impressed.  These are both companies that have been around forever. 

 

Neither pays a dividend.  That’s a big red flag for me.  What does the shareholder get in a slow growing industry, prone to mild cyclicality, if there is no dividend?  These companies seem to be in a perpetual state of buying up smaller players, who seem in a perpetual state of appearing and competing on price.  Every once in a while they get kicked back to the pond by a recession when they can’t move their old fleet out at a profit. 

 

When I rent a car I rent on price, and nothing else.  I can go online and choose from 15 companies in every airport, have at least of which are owned by the two or three players, who compete with themselves. 

 

While your at it look at the ten year charts.  Neither stock has moved in ten years.  Stock doesn’t move and they pay no dividends.  What’s to like. 

 

[UK]

https://www.wsj.com/articles/hertz-misses-lease-payment-prepares-for-potential-bankruptcy-11588172258

[wescobrk]

I didn't look at the debt in detail. I read that article yesterday. Icahn actually bought more stock in early March.

Maybe he is slipping. He was betting in early March that the equity won't be impaired.

I haven't read anything that he has been buying the debt.

Gabelli has also been buying heavily. 13D filing yesterday.

 

[Gamecock-YT]

Probably betting the lobbyists in DC will get them a bailout like everybody else.

[Uccmal]

Anyone notice that CAR (Avis) issued 500 Million in 5 year bonds at around 10%. 

 

The stock won’t recover with those kind of headwinds.  I cleared car rental companies from my watch list. 

 

 

[Cigarbutt]

Something bizarre going on.

i think Mr. Icahn has sold his equity stake at a huge loss and insiders have been unloading.

Still, with the announcement of the bankruptcy, shares have rallied to such an unusual degree?

To such an unusual degree that Hertz just filed (docket 387) for an emergency ruling allowing to sell stock at better terms than DIP financing (!).

Up to a billion$ of it (at least at the price it was a few hours ago).

It is very hard to explain the rationale and i guess the best way to win is not to play.

https://restructuring.primeclerk.com/hertz/Home-DocketInfo

 

[meiroy]

 

1. Is this legal? Will SEC allow this to go through?

2. In theory, if it works out, can they keep doing that until they are out of BK?

[Jurgis]

I'm running out of popcorn dudes.

 

Maybe I should buy CAG.

[Mephistopheles]

Lol , tomorrow the Fed will announce it's buying Hertz stock

[SHDL]

Haha so much financial entertainment these days I’m having trouble keeping up.

 

Quote from document:

 

Given these developments, the Debtors now seek emergency relief from this Court to allow the Debtors to capture the potential value of unissued Hertz shares for the benefit of the Debtors’ estates.

 

At least I admire the honesty...

[Spekulatius]

Haha so much financial entertainment these days I’m having trouble keeping up.

 

Quote from document:

 

Given these developments, the Debtors now seek emergency relief from this Court to allow the Debtors to capture the potential value of unissued Hertz shares for the benefit of the Debtors’ estates.

 

At least I admire the honesty...

 

The risk section of the prospectus will be something to behold. Of course the inhabitants of Sherwood Forest won’t read it anyways, so it doesn’t matter.

[SHDL]

So if this actually works well enough some of their bonds could be multi-baggers right?

 

Although I also have the feeling that this could actually be part of an elaborate scheme devised by sophisticated 2nd level thinkers who are trying to pump and dump the bonds onto “value speculators” who are attracted to this type of situation...

[Cigarbutt]

In a way, the rationale is to try to find a way to cover the 19B debt. Not easy.

As far as the SEC is concerned, the documentation is lengthy and tedious but it's all there and Hertz is not a simple anecdote: 'this' is occurring in lots of places perhaps as a sign of the times.

It represents some kind of debt to equity swap but with debt owners selling the equity of the existing shareholders at an inflated price during distress. This is really weird.

Why would anyone buy such zombie companies with enthusiasm?

What do I know?

Pre-market now: 3.07 +1.05 (51.98%)

[wescobrk]

I wouldn't buy puts on Tesla or Nikola but this looks like an interesting one. It will open based on premarket up 50%.

[rb]

So it looks like Hertz bondholders are gonna dump a billion dollars worth of worthless stock in the Sherwood Forrest. You wouldn't be able to make this shit up.

[Jurgis]

So it looks like Hertz bondholders are gonna dump a billion dollars worth of worthless stock in the Sherwood Forrest. You wouldn't be able to make this shit up.

 

If you send a wagon laden with fake gold through Sherwood Forest, can this be considered entrapment?

 

Merry Men want to know

[rb]

I've checked and it is not. Professionals must hone own craft. No tears.

[Jurgis]

I've checked and it is not. Professionals must hone own craft. No tears.

 

It's only a flesh wound.

[Spekulatius]

In a way, the rationale is to try to find a way to cover the 19B debt. Not easy.

As far as the SEC is concerned, the documentation is lengthy and tedious but it's all there and Hertz is not a simple anecdote: 'this' is occurring in lots of places perhaps as a sign of the times.

It represents some kind of debt to equity swap but with debt owners selling the equity of the existing shareholders at an inflated price during distress. This is really weird.

Why would anyone buy such zombie companies with enthusiasm?

What do I know?

Pre-market now: 3.07 +1.05 (51.98%)

 

Somebody is going to buy trading sardines for $1B. I wonder if motivates some companies to file, especially if their stock Is already popular with day traders, as way to raise funds. A lot of E&P stocks would fit that bill perfectly.

 

What are you going to do as a short seller? Logic went out the window a while ago...

[Guest roark33]

There is really not 19B of debt, most of that debt is secured by the auto, or ABS securitization.  There is only about 4B in corporate debt.  If this wasn't a travel related business, this plan could actually work, but who knows.  The filing was due to the decline in the auto values based on the used car index, but that has since significantly rebounded, so if they could have lasted until now, they probably would not have filed. 

 

All that being said, given the fixed operating cost nature, there is still a long way for this to go. 

[scorpioncapital]

It's all part of the same trend that 'Game Over' is no longer over. It's part of the same moral hazard, backstop zombies even after bankruptcy. It does seem a bit as if free markets are dying and government is getting more and more into all aspects of business. Now it's no longer picking winners and losers, it's just picking losers and losers.

[Cigarbutt]

There is really not 19B of debt, most of that debt is secured by the auto, or ABS securitization.  There is only about 4B in corporate debt.  If this wasn't a travel related business, this plan could actually work, but who knows.  The filing was due to the decline in the auto values based on the used car index, but that has since significantly rebounded, so if they could have lasted until now, they probably would not have filed. 

All that being said, given the fixed operating cost nature, there is still a long way for this to go.

You bring relevant and interesting points.

If you look at tradable bond pricing levels as one of the inputs, there has been some kind of rebound (and access to free money would help) but, on a business and capital structure levels, the odds look very unfavorable.

Going to the market for a share issue upon the initiation of chapter 11 proceedings is (AFAIK) unprecedented.

There are about 142M shares outstanding and yesterday 267.6M shares changed hands.

I wonder how many 'investors' really took a look at financials and assessed odds from a business point of view.

When playing Roulette, there is a 'strategy', the "straight up bet", where you put everything on one number and the payout is x35 and of course it can work out but i hear people typically choose their lucky number or their birthdays..

It feels like a bunch of people going around and trying to catch falling knives, with their hands tied behind their back. It's cruel in a way but the show must go on.

 

[KJP]

It's all part of the same trend that 'Game Over' is no longer over. It's part of the same moral hazard, backstop zombies even after bankruptcy. It does seem a bit as if free markets are dying and government is getting more and more into all aspects of business. Now it's no longer picking winners and losers, it's just picking losers and losers.

 

I'm confused.  Why does the government (through any agency or branch) choosing not to intervene here and stop this sale of Hertz stock to the public show that "free markets are dying and government is getting more and more into all aspects of business"?  These shares are being sold to the public in a "free market," aren't they?