Hertz Prices 37M Share Offering at $2.70, $350M in Notes

Hertz Global priced a 37 million-share offering at $2.70 each, the company said in a regulatory filing. The car rental firm also sold $350 million of 6.75% exchangeable notes due 2030. The combined capital raise will bring in roughly $450 million.

The 37 million new shares dilute existing holders. Hertz had about 317 million shares outstanding before the offering, according to Reuters data. The new shares represent an 11.7% increase in the float. Offering prices typically include a discount to attract institutional buyers; the discount was not disclosed. The size of the placement relative to daily trading volume is large, often putting downward pressure on the stock when the shares start trading.

The exchangeable notes add a layer of debt that can be converted into shares of a specified company. If converted, they would raise the share count further, compounding dilution. The coupon of 6.75% is well above investment-grade benchmarks. Corporate bonds rated BBB yield around 5%, so the rate reflects Hertz's credit profile. The notes mature in 2030.

Hertz emerged from Chapter 11 in 2021 with a lower debt load. It still carries significant obligations. The new capital appears aimed at fleet purchases or refinancing. Car rental companies depend on vehicle financing, and higher interest rates have raised borrowing costs. The equity and note sales indicate that internal cash flow and bank lines alone may not cover needs.

The equity offering will raise about $100 million fully subscribed. The notes add $350 million. Together, the $450 million infusion gives Hertz more liquidity at the expense of higher share count and higher interest expense. The exchange feature creates an overhang: if HTZ shares rise above the conversion price, note holders might switch to equity, adding selling pressure. If the shares stay below that price, the notes remain debt and Hertz must pay the coupon for seven years.

The offering is registered with the SEC and expected to close within days. After that, the market will absorb the new supply. A rapid recovery in the share price would suggest investors view the raise as necessary. A sustained decline would indicate that dilution and debt costs outweigh the benefit. The broader rental car market has been under pressure from higher interest rates; for more on market trends, see AlphaScala's market analysis.

Hertz's fleet is heavily financed through debt and asset-backed structures. The equity sale reduces leverage but dilutes shareholders. Whether the new capital earns a return above its cost depends on the company's ability to raise utilization and rental rates. That answer will emerge over the next several quarters.