TEXT - S&P affirms Hertz Global Holdings Inc

Overview
-- Car and equipment rental and leasing company Hertz Global Holdings
Inc. (Hertz) has received regulatory approval to acquire competitor
Dollar Thrifty Automotive Group Inc., and we expect the transaction to close
shortly.
-- We are affirming our ratings, including the 'B+' corporate credit
ratings on Hertz and its major operating subsidiary Hertz Corp.
-- We are also removing all ratings from CreditWatch, where we placed
them with negative implications on Aug. 27, 2012, when the company announced
the proposed acquisition.
-- The outlook is stable, reflecting our expectation of stable to
modestly improving credit metrics, pro forma for the acquisition and the
related debt.

Rating Action
On Nov. 19, 2012, Standard & Poor's Ratings Services affirmed its ratings on
Park Ridge, N.J.-based car and equipment renter and lessor Hertz Global
Holdings Inc. and its major operating subsidiary Hertz Corp., including the
'B+' corporate credit rating on both entities. We removed the ratings from
CreditWatch, where we placed them with negative implications on Aug. 27, 2012,
when Hertz announced it had entered into a definitive agreement to acquire
competitor Dollar Thrifty Automotive Group Inc. (DTAG). Hertz received
regulatory approval to acquire DTAG on Nov. 15, 2012, for $2.6 billion of cash
and the assumption of $1.6 billion of DTAG's fleet debt, and we expect the
acquisition to close shortly. The outlook is stable.

Rationale
The affirmation reflects Hertz's relatively stable financial profile, pro
forma for the pending acquisition. This is Hertz's third attempt to acquire
DTAG since April 2010, and each bid has become increasingly more costly. The
company will fund the acquisition through a combination of Hertz's cash,
DTAG's cash, and debt, which Hertz has already raised. Hertz will also assume
$1.6 billion of DTAG's fleet debt. Hertz has indicated it expects at least
$160 million of annual cost synergies, in addition to revenue opportunities
from combining the two companies. The Federal Trade Commission approved the
acquisition on Nov. 15, 2012, and Hertz agreed to divest its relatively small
value brand Advantage and certain DTAG rental locations to gain approval. We
believe the acquisition will aid Hertz's competitive position, expanding its
reach in the value/leisure car rental segment.

Hertz's margins have improved over the past two years. Its operating margin
(after depreciation) was 15% for the 12 months ended Sept. 30, 2012, compared
with 10% two years earlier, because of higher revenues, cost reduction
programs, and a strong used-car market that has resulted in lower vehicle
expense. This has resulted in stronger credit metrics. For the 12 months ended
Sept. 30, 2012, EBITDA interest coverage was 4.8x, compared with 3.3x two
years earlier; funds from operations (FFO) to debt was 22%, compared with 19%;
debt to EBITDA was 4.3x, compared with 5.2x; and debt to capital was 85%,
compared with 88%. We expect incremental earnings and cash flow to result in
stable to modestly improving credit metrics, despite the additional debt, for
the combined entity. Under our criteria, we characterize Hertz's business
risk profile as "fair," its financial risk profile as "aggressive," and its
liquidity as "adequate."

Hertz's acquisition of DTAG will result in an increase in its market share in
the U.S. There currently are three major on-airport car rental companies:
Hertz, Avis Budget Group Inc. (B+/Stable/--; parent of the Avis and Budget
brands), and Enterprise Rent-A-Car Co. (BBB+/Stable/A-2; parent of the
Enterprise, Alamo, and National brands), and each have approximately a 30%
market share. DTAG accounts for most of the balance. DTAG focuses on the
leisure segment, which has been faster growing and has been more profitable
than business rentals over the past few years, while Hertz serves a mixture of
business and leisure travelers. The acquisition will result in increased
penetration for Hertz in the leisure segment, giving it a brand that can
compete aggressively without undermining Hertz's pricing structure.

Our ratings on Hertz reflect an aggressive financial profile and the
price-competitive, cyclical nature of on-airport car rentals and equipment
rentals. The ratings also incorporate the company's position as the largest
global car rental company and the strong cash flow its businesses generate.

Liquidity
We characterize Hertz's liquidity as adequate. As of Sept. 30, 2012, the
company had $453 million in unrestricted cash, $1 billion available under its
$1.8 billion asset-based loan (ABL) which matures in 2016, and $796 million
available under its various fleet financing facilities. The company has no
financial maintenance covenants in its corporate credit facilities.

In accordance with Standard & Poor's methodology and assumptions, in our view,
the relevant aspects of Hertz's liquidity, pro forma for the potential DTAG
acquisition, include:
-- Coverage of cash uses by cash sources of at least 1.2x (the minimum
threshold for an adequate designation) for the next year;
-- Our expectation that net sources would be positive, even with a 15%
decline in EBITDA, consistent with our criteria standard of 15%;
-- Our belief Hertz's ability to absorb high-impact, low-probability
events with limited refinancing is likely; and
-- Generally prudent financial risk management, including long-term
balance sheet goals.

We expect that sources of funds will consist of:
-- Cash;
-- Funds from operations (as reported, not fully adjusted, based on our
expectations) of more than $2 billion annually in 2012 and 2013;
-- Availability under its various credit facilities; and
-- Proceeds from vehicle sales.

Major uses of funds include:
-- Combined debt maturities of about $1.3 billion in 2012 and $3.5
billion in 2013; and
-- Capital expenditures for new vehicles.

Recovery analysis
The rating on Hertz Corp.'s first-lien secured debt is 'BB' (two notches
higher than the corporate credit rating), and the recovery rating is '1',
indicating our expectation that lenders would receive very high (90%-100%)
recovery in a payment default scenario. The rating on Hertz Holdings
Netherlands BV's secured notes is 'B+' (the same as the corporate credit
rating), and the recovery rating is '4', indicating our expectation that
lenders would receive average (30%-50%) recovery in a payment default
scenario. The rating on Hertz Corp.'s unsecured debt is 'B' (one notch lower
than the corporate credit rating), and the recovery rating is '5', indicating
our expectation that lenders would receive modest (10%-30%) recovery in a
payment default scenario. The rating on Hertz Global Holdings Inc.'s
subordinated and convertible notes is 'B-' (two notches lower than the
corporate credit rating), and the recovery rating is '6', indicating our
expectation that lenders would receive negligible (0%-10%) recovery in a
payment default scenario. (See the recovery report on Hertz published Oct. 12,
2012, on RatingsDirect).

Outlook
The outlook is stable. Pro forma for the proposed acquisition, we anticipate
Hertz's credit metrics will remain stable or improve modestly through 2013,
with higher earnings and cash flow offsetting the incremental debt from the
acquisition. We expect FFO to debt of about 20% and EBITDA to interest
coverage in the low-4x area. We could raise the ratings if
better-than-expected earnings or significant debt reduction resulted in FFO to
debt increasing to the mid-20% level on a sustained basis. Although less
likely, we could lower the ratings if demand declined significantly or
used-car prices declined substantially, resulting in a loss upon the sale of
vehicles causing FFO to debt to decline to the mid-teens percent level on a
sustained basis.

Related Criteria And Research
-- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
-- Methodology And Assumptions: Liquidity Descriptors For Global
Corporate Issuers, Sept. 28, 2011
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

Ratings List
Ratings Affirmed; Ratings removed from CreditWatch
To From
Hertz Corp.
Corporate Credit Rating B+/Stable/-- B+/Watch Neg/--
Senior Secured BB BB/Watch Neg
Recovery Rating 1 1
Senior Unsecured B B/Watch Neg
Recovery Rating 5 5

Hertz Global Holdings Inc.
Corporate Credit Rating B+/Stable/-- B+/Watch Neg/--
Senior Unsecured B- B-/Watch Neg
Recovery Rating 6 6

HDTFS Inc.
Senior Unsecured B B/Watch Neg
Recovery Rating 5 5

Hertz Holdings Netherlands BV
Senior Secured B+ B+/Watch Neg
Recovery Rating 4 4