IVanguard Car Rental USA is coming back to market nine months after a reworked dividend deal was pulled. The new credit will refinance exsisting debt and pay a dividend to sponsor Cerberus Capital Management. Investors and bankers expect it to be completed, especially after the success of deals syndicated for Hertz Corp. and Avis Rent A Car.
The new Vanguard financing consists of a six-year, $175 million revolver and a seven-year, $800 million term loan "B." Pricing is LIBOR plus 2 1/2% on both tranches. A bank meeting was held Friday at the St. Regis Hotel. Goldman Sachs and JPMorgan lead the financing, with Lehman Brothers, a lead on the original deal, playing a smaller, supporting role.
"Two successful deals have been done in the industry, so that bodes well for it," said one portfolio manager. "There will be two deals to comp it against, which should help it go better. You saw what they got on Avis, 125; if the structure compares well to the other two deals in terms of leverage that should help it."
JPMorgan and Deutsche Bank led the $2.375 billion deal for Avis, which helped Cendant Corp. spin off the rental car company. Due to oversubscription, pricing on the $875 million term loan was flexed down from LIBOR plus 1 1/2% to LIBOR plus 1 1/4% (CIN, 4/14). Deutsche Bank, Lehman Brothers and Merrill Lynch also flexed down pricing on the credit to back the buyout of Hertz by The Carlyle Group, Clayton Dubilier & Rice and Merrill Lynch Global Private Equity. The $2 billion term loan had been talked in the LIBOR plus 2 1/2%-2 3/4% range, but pricing was cut to LIBOR plus 2 1/4%. Pricing on the $1.6 billion ABL was cut to LIBOR plus 2 % (12/23).
With the market being as easy as it is and considering Vanguard is a new deal and not a repricing the credit will get done no matter what, another portfolio manager said. "At the right price, anything is going to sell," he said. Standard & Poor's assigned a B+ corporate credit rating and a BB rating to the facility. The ratings agency said the ratings reflect Vanguard's weak financial profile and very aggressive financial policy, but it is helped by the company's significant presence in the North American airport car rental market.
Lehman and Goldman led the initial deal, which launched at the end of July and consisted of a $175 million revolver and a $725 million term loan "B," with pricing expected to be in the LIBOR plus 4 1/2% area on both tranches (LMW, 8/1). It was then reworked two weeks later as a $525 million first lien priced at LIBOR plus 5% and a $100 million second lien priced at LIBOR plus 7 1/2% (CIN, 8/15). When it was pulled, a company spokesman said that based on investor input, the company and owners felt the execution of the transaction would be helped by third quarter results, and they pulled the deal. A banker said that third quarter results are important for car rental companies because they include the summer travel season (8/19). The spokesman declined comment for this article. A call to Cerberus was not returned.
