Hertz sells nearly $3 billion in junk bonds for buyout
NEW YORK – Hertz Corp. sold nearly $3 billion of junk bonds Thursday to help fund the second largest leveraged buyout ever.After a standing room only New York roadshow, the deal priced with lower coupons than initially expected. Some investors didn’t get the allocations they were hoping for.Hertz sold $1.8 billion of nine-year senior notes to yield 8.875 percent and 225 million euros ($268.8 million) of nine-year senior notes to yield 7.875 percent. A $600 million, 11-year subordinated piece was sold with a 10.5 percent yield.The junk bonds – a high-risk, non-investment grade bond with a low credit rating – along with a nearly $4 billion in loans and a multi-billion asset-backed deal, are being used to fund Hertz’s $15.1 billion leveraged buyout by a consortium of private equity buyers.The buyers include powerhouses Clayton Dubilier & Rice Inc., The Carlyle Group and Merrill Lynch Global Private Equity. Those companies are pitching in $2.3 billion in cash to help fund the deal.Hertz Corp. is the car-rental arm of Dearborn, Mich.-based Ford Motor Co. The struggling auto maker is shedding the unit to generate much-needed cash amid a prolonged market share slump.The largest senior chunk was reduced slightly, from an originally expected $1.95 billion. That piece was originally expected to yield around 9 percent.The euro piece was expected to yield around 8 percent and the subordinated notes were expected to yield around 10.75 percent.The maturities on all three chunks were extended by one year from initial expectations.The largest buyout of all time was the nearly $25 billion takeover of RJR Nabisco in 1989.