Hertz was upgraded by both Moody’s and S&P to B2 and BB- from B3 and B respectively. Moody’s notes that the upgrade reflects its view that Hertz is emerging from bankruptcy proceedings stronger than anticipated, with earnings boosted in the near-term. The structural cost reductions achieved during bankruptcy, its revenue enhancing initiatives and financial leverage of around 4x will help its financial performance as per Moody’s. As of September 30, Hertz had $2.7bn of unrestricted cash and available capacity under its revolving credit facility of $1.1bn. However, Hertz used $300mn of cash to repurchase shares at the time of the listing of its common stock and has substantial funding requirements to grow its fleet size which can be a drag. Moody’s though, expects Hertz to maintain ample headroom over the next 12 months.
Similar to Moody’s, S&P expects Hertz’s operating performance to exceed its previous expectations. S&P sees Hertz’s liquidity as adequate with debt maturities of around $560mn in the next 12 months and net capital spending for new vehicles of around $4bn. S&P expects its EBIT interest coverage of close to 3x in 2021 and 5x in 2022, vs. just 1x in 2019. On the larger scale, S&P also sees volume of airline traffic to continue recovering and thereby helping Hertz since it generates majority of its revenues at airports.