Hertz Global (HTZ) Base Case Lowered to $0, Bull Case to $3 at Morgan Stanley
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Morgan Stanley analyst Adam Jonas took his base case on Hertz Global (NYSE: HTZ) to $0 and his bull case to $3 - down from $2 and $8, respectively. The shares don't have a formal rating at the firm.
Jonas cited new disclosure and developments at the company, including the cancellation of plans to raise equity, for the cut to the targets.
"We moved our Base Case to $0 after the equity issuance was cancelled as we are now more concerned that there is a potential risk of a NYSE de-listing, or potential liquidity shortfall where the company may exhaust available cash to run the business by the end of 2020, potentially leaving the equity with little or no residual claim," Jonas commented. "In the event that Hertz is able to secure financing, such as what is being stated by the June 18 WSJ article, where it is claimed Hertz is in discussions with lenders for a $1bn financing package (the company did not comment on the article), we have concerns of material equity dilution. As equity holders are at the bottom of the pecking order of the capital structure with over $18.8bn of debt outstanding, according to its 10Q, comprised of ~$4.3bn corporate and ~$14.5bn vehicle debt (and up to $24.4bn in total debt outstanding according to Hertz' bankruptcy filing), we believe it is more likely, than not, that equity will not carry a meaningful residual value as secured creditors will have first claim to cash or assets in the waterfall."
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