Plunging Used Car Prices Wreak Havoc On Rental Car Bondholders

Once hedge fund darlings, almost no one is more perfectly aligned to get obliterated by falling used car prices than America’s auto rental companies, Hertz and Avis. As Bloomberg notes today, on a combined basis, Hertz and Avis dump about 400,000 vehicles per year into the used car market and operate fleets that are multiple times larger.
And with used car prices plunging, bondholders are starting to get slightly anxious about the collateral impact of writing down billions of dollars worth of capital assets.
Debt issued by Hertz Global Holdings Inc. and Avis Budget Group Inc., which had traded at or above par in recent years, tumbled to new lows earlier this month amid signs that used-vehicle prices are dropping twice as much as expected. That’s bad news for companies that collectively have to dispose of about 400,000 vehicles a year, and especially for Hertz, whose junk-rated debt is teetering close to a downgrade.

This post was published at Zero Hedge on Apr 19, 2017.