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Private Equity
Session 3
Source: Case The Hertz Corporation
Year 2003
CD&R convinced that Hertzs capital structure was not attractive New visit to Ford - the deal capable of being financed Hertz was non-strategic to Ford Ford executives not impressed as well as Hertzs CEO
Early 2005 Fords US auto business showing signs of weakness In-cashing Hertz investment becomes a priority
For strengthening Fords balance sheet
Ford makes full revelations in regard to financing and operating information for the benefit of investors Hertz executives initiate meetings with potential buyers to provide additional information After due diligence, CD&R formulates specific measures / plans to optimize Hertzs operations
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Hertz
HERC
Hertz International
Operating Company
Operating Company owns residual Hertzs assets Carries out all rental business with customers Leases fleet from Fleet Company and provides equity
Fleet Company
SPV entities provide enhanced securitization for asset backed fund raising Leasing-related cash flow from Operating Company covers debt amortization
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Capitalized @ 10% with 3% perpetual growth $5,674 Capitalized @ 15% with 3% perpetual growth $3,310
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Notes Figures for the Terminal Value of Equity do not include dilution from management (or other) stock options Including dilution due to stock options would reduce the value realized by CCM on exit accordingly, the estimated IRR for CCM
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Transaction closed December 21st, 2005 Several 2005 Deal of the Year Awards
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