Stock photo of a man holding car keys.Jupiterimages
Toronto-based private equity fund Catalyst Capital Group is looking at getting into the car rental business, putting up a stalking-horse bid for Advantage Rent A Car after the company filed for creditor protection in the U.S.
Advantage, North America's fourth largest car rental company, was spun off by Hertz Global Holdings Ltd. at the behest of competition regulators. It received court protection from creditors on Tuesday amid a conflict with Hertz, which, in addition to being a major competitor, was also leasing cars and providing financing to Advantage.
With the backing of Advantage management, Catalyst beat out two prominent U.S. hedge funds, Cerberus Capital Management and Magnetar Capital, for the right to put up financing to see Advantage through creditor protection while the company works out its conflicts with Hertz. If a higher bidder for the whole company does not come through, Catalyst could end up owning Advantage.
Hertz sold the company a little more than a year ago to Calgary-based Franchise Services of North America Inc. and Macquarie Capital for $12-million (U.S.), the Wall Street Journal reported at the time. Advantage was left in the lurch when Hertz recently terminated leases on 24,000 cars Advantage was using in its fleet.
Advantage has 72 locations in 33 states, with airport locations at 60 fields.
Catalyst managing director Gabriel de Alba is in charge of the transaction, said Catalyst managing partner Newton Glassman.
"It's an incredibly complex transaction, executed in a matter of two weeks," said Mr. Glassman.
The transaction may signal a new tack for Catalyst, which is Canada's second-largest private equity firm.
Catalyst built its main business as a distressed debt firm, focusing on buying senior secured bonds as a route to taking control of companies. That often put Catalyst at odds with management.
At the moment, Catalyst is battling in court over another investment in Canadian wireless provider Mobilicity. In that case, Catalyst is arguing that there is a conflict between classes of creditors that a court needs to resolve.
In the Advantage transaction, Catalyst is working with management. This is the second recent instance where Catalyst has provided a friendly loan package that's more in the style of a bridge loan. It appears the firm may be getting set to launch a new line of business running a mezzanine loan fund.
The Advantage deal and the Mobilicity case aren't the only news-worthy aspects of Catalyst, either. There's also speculation that the firm's successful Callidus Capital Corp. lending unit may soon tap public markets. Sources say Catalyst and Callidus are talking to underwriters about the possibility of a public offering.