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Vanguard Dividend Deal Pulled

The credit facility for Vanguard Car Rental USA was pulled from the market last week, just a week after it was downsized by $275 million and pricing was upped by as much as 300 basis points on the second lien.

The credit facility for Vanguard Car Rental USA was pulled from the market last week, just a week after it was downsized by $275 million and pricing was upped by as much as 300 basis points on the second lien.Lehman Brothers and Goldman Sachs are leading the deal, which refinances existing debt and pays a dividend to sponsor Cerberus Capital Management. As first reported on CIN's Web site last week, the deal is expected to come back to the market in the fall.

"We did experience strong interest in the bank financing transaction," a spokesman for Vanguard said. "However, based on some investor input, ultimately the company and its owners viewed that the execution of this transaction would be enhanced with the benefit of our third quarter results. Accordingly, the company and its owners have decided to delay the transaction until early in the fourth quarter."

One banker explained that the third quarter is important to car rental companies because it includes the summer travel season. Vanguard might not be expecting better third quarter earnings, but rather want concrete earnings as opposed to expected earnings when proceeding with the deal.

An investor said he thought this deal being pulled was a good sign the market has some limitations. Another buysider said the move was not surprising because the deal was having a tough time. "The deal was struggling, the company has not been doing well, but it is surprising in the sense that even bad deals have been getting done in this market and it is surprising lenders have drawn a line," he explained.

The second buysider anticipates that when the deal hits the market in the fall, the facility will be reworked a bit and the dividend might be taken out completely.

After the downsizing, Vanguard's credit comprised a $525 million first lien priced at LIBOR plus 5% and a $100 million second lien priced at LIBOR plus 7 1/2%. Call protection was listed as to be determined. Initially, the deal was going to pay a $275 million dividend to the sponsors, but was cut to $175 million when the deal was reworked.

It was initially launched as a $175 million revolver and a $725 million term loan "B." Based in Tulsa, Okla., Vanugard operates Alamo Rental Car and National Car Rental. It bought both companies from ANC Rental Corp. in October 2003. A call to Cerberus was not returned by press time.

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