28 March 2017 by lberuti
Much has been said recently about the energy sector which has been put under severe pressure – albeit nothing similar to the bloodbath of late 2015 early 2016 – and was singled out as one of the factors behind the underperformance of the high yield universe in the US compared to investment grade. Car rental companies have also played their part. A week ago ALLY ( Ally Financial Inc ) warned on profit and drew investors’ attention to decreasing used-car prices. Concern is effectively mounting, as consumers have recently turned to leasing more than ever before to lower their monthly payments on new vehicles which are selling at record prices in the US. A surging number of cars coming off leases is fuelling a supply glut and dragging down prices. The National Automobile Dealers Association’s Used Car Guide index declined 3.8% in February, the eighth consecutive drop and the steepest since November 2008. That has consequently sent alarm bells ringing regarding car rental companies which could be forced to boost provisions against future losses. Since the 21st of March, HTZ’s ( The Hertz Corporation ) 5-year risk premium jumped 45bps to 717bps and CAR’s ( Avis Budget Group Inc ) jumped 36bps to 462bps.