NEW YORK, June 28 (Reuters) - Moody's Investors Service on Wednesday revised Hertz Corp.'s outlook to negative from stable, citing an arrangement for a debt financing to pay a dividend to stockholders.
"The negative outlook recognizes a potentially more aggressive financial strategy that is reflected in the willingness of Hertz's owners to seek up to a $1 billion distribution only six months after completing the buyout of Hertz," Moody's said in a statement.
A negative outlook indicates a company's ratings could be lowered over the next 12 to 18 months. A ratings downgrade usually increases a company's borrowing costs.
At the same time, Moody's affirmed the car rental company's corporate family junk debt rating at "Ba3," the third-highest junk level.
"The debt issued by Hertz Holdings to fund any dividend would have to be serviced by the receipt of dividends from Hertz and could be a source of pressure on the operating subsidiary's financial position," the rating agency said.
Hertz, recently spun off fromMotor Co. , is the largest general use car rental business in the world.