Wednesday, October 22, 2008


Fitch affirmed its ratings of the Hertz's debt but changed the outlook from stable to negative.Fitch issues ratings action on Hertz: Financial News - Yahoo! Finance  The rating on the senior unsecured debt remains at BB-, which is a junk classification.  The Trust Certificate for the Hertz bond maturing in 2012, DKR, is up 23% this morning to 12.6.  For prior discussions, see my two earlier posts: TRUST CERTIFICATE HERTZ BOND DKR HERTZ BONDS  DKR is up 100% since my purchase on October 13th.  For a risky investment like this junk rated senior bond, which I am unable to resist, I am always alert to the downside, even more so than the potential large reward in the event Hertz stays out of bankruptcy until June 2012.  At some point, the gain will become to large to ignore and will have to be captured, at least in part.  The potential gain on this one, as I noted, is about 75% tilted to a narrowing of the spread from the $25 par value, payable in 2012 (with the 75% being the annualized amortization of that  spread),  and my cost, with the only 25% or so being the dividend (annualized based on my cost), for a total of 100% annualized based on my cost.    If I can capture a large part of that 75% fairly quickly, as in 6 months, I may not take the chance of trying to capture the 25% over the remaining life of the bond, or, at a minimum under those circumstances, paring my small position by one half.  

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