Hertz Global Gets $2 Bln Proceeds From Separation Of Equipment Rental Unit

(RTTNews) - Hertz Global Holdings Inc. (HTZ) said it is receiving proceeds of about $2 billion from the previously announced separation of its equipment rental business into a separate, publicly traded company. The transaction was completed at 5 p.m. U.S. Eastern today.

Following today's transaction and the related 5-for-1 spin distribution, Hertz Global expects to begin trading on July 1, 2016, with approximately 85 million common shares issued and outstanding.

The company will use the proceeds to pay down a portion of its corporate debt as it focuses on continuing to strengthen its car rental and related services business. In addition, the Hertz Global Board of Directors has authorized a $395 million share repurchase program as a means to enhance shareholder value.

Hertz Global sold the majority of its stake in CAR Inc., China's largest rental car company, while extending its commercial agreement to 2023. From these stock sales, Hertz Global received $476 million, which it used to partially fund its previous share repurchase program. In addition, Hertz Global executed a series of debt transactions since the beginning of the year that will significantly reduce the company's interest expense and extend its corporate debt maturity schedule dates. As a result, interest expense is expected to decline by approximately $45 million in the second half of 2016 and approximately $90 million in 2017 related to the debt reduction associated with the spin proceeds and the redemption of its 7.5% Senior Notes due in 2018. In addition, no significant corporate debt maturities are due until 2019.

"We've accomplished a great deal to refocus the company on being an industry leader positioned to capitalize on opportunities in the evolving transportation market. We are today a considerably stronger company with great prospects for performance improvement and poised to deliver on our three-to-five year plan target of 16-18 percent EBITDA margins," said John Tague, president and chief executive officer.