11 May 2017 by lberuti
HTZ’s ( The Hertz Corporation ) bonds have been among the worst performers in the US High Yield universe in 2017. At the beginning of the week, the company reported numbers that significantly missed numbers analysts’ expectation and failed to provide formal guidance for the full year or even Q2 after underperforming peer CAR ( Avis Budget Group Inc ) in Q1. HTZ has embarked into an aggressive fleet upgrading, selling off their compact cars and family sedans which are out of favour in the US and stocking up on new models. In a challenging environment - according to the most recent industry data, rental pricing per day keep falling in the US and overseas thanks to overheated competition -, the strategy is a gamble and investors are on the edge. They punished the lack of clarity by sending HTZ’s 5-year risk premium soaring. The 5-year default probability now stands at 63%, the highest it has been over the last eight years.