Hertz goes public; price is less than forecast

From the Associated Press

Car rental firm Hertz Global Holdings Inc. went public late Wednesday at $15 a share, below the $16 to $18 the company had expected. But the investors who bought the firm from Ford Motor Co. still made a huge profit.

The company, as planned, sold about 88 million shares, or more than one-fourth of the firm, raising $1.3 billion. The stock will begin trading today on the Big Board under the symbol HTZ.

Analysts warned that buyers of Hertz shares would have to cope with a company whose earnings have plunged in recent months, in part because of the huge debt the company took on to fund big payouts to its owners.

There also are indications Hertz may have to pay Ford and other carmakers substantially more for new cars in the coming years to keep its fleet current.

Private equity firms Clayton, Dubilier & Rice Inc. and Carlyle Group, along with a unit of investment bank Merrill Lynch, paid $2.3 billion in cash, borrowed more than $3 billion and assumed $10 billion in debt to acquire Hertz last December.

Since then, those owners have used borrowed funds to pay themselves a $1-billion dividend.

After the IPO, those three firms will collect an additional $425 million in one-time dividends, according to the company's stock registration statement.

"That's not a bad return," said James DeStefano, an analyst at Renaissance Capital.

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