Herc Holdings Announces Pricing of Upsized $800 Million Senior Unsecured Notes Offering
Herc Holdings (NYSE: HRI) announced an upsized offering of $800 million in 6.625% senior unsecured notes due 2029. This increase from the initial $500 million offering was well-received, and the closing is anticipated around June 7, 2024, subject to customary conditions. The notes, guaranteed by current and future domestic subsidiaries, aim to repay part of the company's senior secured asset-based revolving credit agreement and cover associated costs. The offering was made under Rule 144A and Regulation S of the Securities Act, targeting qualified institutional buyers in the U.S. The notes are not registered under the Securities Act and cannot be offered in the U.S. without registration or an applicable exemption.
- Upsized offering indicates strong investor demand, increasing from $500 million to $800 million.
- Interest rate set at 6.625%, potentially attractive to investors seeking stable returns.
- Proceeds will be used to repay existing debt, possibly improving the company's financial health.
- Notes guaranteed by current and future domestic subsidiaries, adding a layer of security.
- New issuance of debt could increase the company's leverage and financial risk.
- High-interest payments at 6.625% could strain the company's cash flow.
- Notes are not registered under the Securities Act, limiting liquidity and resale opportunities for investors.
- Repayment of existing debt may not necessarily lead to a significant improvement in overall financial performance.
Herc Holdings' announcement of pricing its upsized $800 million senior unsecured notes offering at 6.625% is a significant update for investors. Firstly, the substantial increase from the previously announced $500 million indicates a higher demand and confidence from institutional investors. This could be interpreted positively as it suggests that Herc Holdings is seen as a creditworthy entity.
However, the interest rate of 6.625% is relatively high, which can be a double-edged sword. On one hand, it offers an attractive yield for investors purchasing the notes, potentially improving the company's market position among lenders. On the other hand, the high interest rate could imply that the market perceives higher risk associated with the company's debt. This could heighten concerns regarding the company's creditworthiness or general market conditions.
Furthermore, the intended use of proceeds primarily to repay existing debt is prudent. By reducing their current indebtedness, Herc Holdings might be aiming to improve its financial flexibility and reduce interest expenses over the long term. However, it is essential to monitor how effectively the company manages its overall debt levels following this transaction.
In terms of implications, retail investors should consider the long-term impact of increased debt and the associated interest obligations. While the immediate benefit is reduced pressure from existing obligations, the company will carry a higher interest burden through 2029. This may affect its profitability and cash flow over the period, which could have varying impacts on shareholder value.
The issuance of $800 million in senior unsecured notes by Herc Holdings is a noteworthy event in the context of the broader market. Senior unsecured notes are considered higher risk compared to secured debt since they are not backed by specific assets. However, they do offer seniority over other unsecured debts in case of liquidation, which can be appealing to investors.
It is essential to analyze the market sentiment surrounding such a substantial debt offering. The upsized nature of the offering suggests strong initial demand, which can be seen as a positive signal of market confidence in Herc Holdings' business model and future prospects. Additionally, the notes being guaranteed by the company's domestic subsidiaries, including Herc Rentals Inc., adds a layer of security for investors, albeit limited.
For retail investors, it's important to consider the broader macroeconomic environment. High interest rate environments generally mean increased borrowing costs, which Herc Holdings is locking in for the next several years. While this could be hedging against potentially higher rates in the future, it also means the company commits to a higher fixed cost of debt service, which might limit financial flexibility in adverse conditions.
Investors should weigh these factors, particularly the company's strategic decisions and market conditions. While the demand and pricing are favorable, the overarching economic implications are equally important for understanding the potential long-term impacts on the company's financial health and stock performance.
The notes will be senior unsecured obligations of the Company, and interest will be payable semi-annually in arrears. The notes will be guaranteed on a senior unsecured basis, subject to limited exceptions, by the Company’s current and future domestic subsidiaries, including Herc Rentals Inc.
The net proceeds from the sale of the notes are expected to be used to repay a portion of the indebtedness outstanding under the Company’s senior secured asset-based revolving credit agreement and to pay related fees and expenses.
The notes were offered and sold to qualified institutional buyers in
The notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in
This press release shall not constitute an offer to sell or a solicitation of an offer to purchase the notes or any other securities, and shall not constitute an offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful. This press release is being issued pursuant to and in accordance with Rule 135c under the Securities Act.
About Herc Holdings Inc.
Founded in 1965, Herc Holdings Inc., which operates through its Herc Rentals Inc. subsidiary, is a full-line rental supplier with 412 locations across
All references to “Herc Holdings” or the “Company” in this press release refer to Herc Holdings Inc. and its subsidiaries, unless otherwise indicated.
Forward-Looking Statements
This press release includes forward-looking statements as that term is defined by the federal securities laws, including statements concerning our business plans and strategy, projected profitability, performance or cash flows, future capital expenditures, our growth strategy, including our ability to grow organically and through M&A, anticipated financing needs, business trends, our capital allocation strategy, liquidity and capital management, exploring strategic alternatives for Cinelease, including the timing of the review process, the outcome of the process and the costs and benefits of the process, and other information that is not historical information. Forward looking statements are generally identified by the words "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts," "looks," and future or conditional verbs, such as "will," "should," "could" or "may," as well as variations of such words or similar expressions. All forward-looking statements are based upon our current expectations and various assumptions and there can be no assurance that our current expectations will be achieved. They are subject to future events, risks and uncertainties - many of which are beyond our control - as well as potentially inaccurate assumptions that could cause actual results to differ materially from those in the forward-looking statements. Further information on the risks that may affect our business is included in filings we make with the Securities and Exchange Commission from time to time, including our most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, and in our other SEC filings. We undertake no obligation to update or revise forward-looking statements that have been made to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240604798972/en/
Leslie Hunziker
Senior Vice President,
Investor Relations, Communications & Sustainability
Leslie.hunziker@hercrentals.com
239-301-1675
Source: Herc Holdings Inc.
FAQ
What is the size of Herc Holdings' senior unsecured notes offering?
What is the interest rate on Herc Holdings' senior unsecured notes due 2029?
When is the closing date for Herc Holdings' notes offering?
How will Herc Holdings use the proceeds from the notes offering?
Who guarantees Herc Holdings' senior unsecured notes?
