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Tuesday, September 19, 2006

Hertz Rolls Dice On Ford Bankruptcy (HTZ)(F)

According to The New York Times, Hertz has done Ford the rare kindness of mentioning the car manufacturer's bankruptcy in the SEC documents for the car rental company's IPO.

Why bring it up at all? Ford has a deal to buy back cars from Hertz once they have been used in the rental process.

In the S-1 filed with the SEC on September 18, Hertz (HTZ) states that: "we estimate that if Ford Motor Company, but not its subsidiaries, were to file for bankruptcy reorganization and reject all its commitments to repurchase program cars from us, we would sustain material losses, which could be as high as several hundred million dollars, upon disposition of those cars."

That is a lot of money.

Otherwise, Hertz looks like a strong, growing business. Revenue rose each year from 2003 to 2005. In 2005, the top line hit $7.5 billion, and net income was $371 million. Revenue rose again for the six months ending June 30, 2006 to $3.8 billion from $3.5 billion in the same period a year ago.

Hertz stay in good shape if Ford does.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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