- Files Plan of Reorganisation and Disclosure Statement
- Proposed plan provides for Knighthead Capital Management and Certares Opportunities LLC to invest up to $ 4.2 b for majority ownership of the reorganised Hertz
Hertz Global Holdings, Inc. this week announced that it has reached a key milestone in the Company’s Chapter 11 process by filing its proposed Plan of Reorganisation (Plan) and related Disclosure Statement with the US Bankruptcy Court for the District of Delaware.
The proposed Plan contemplates that Knighthead Capital Management, LLC and its affiliates (Knighthead) and Certares Opportunities LLC and its affiliates (Certares) will serve as the Plan Sponsors and will commit to invest up to $ 4.2 billion to purchase up to 100% (but not less than a majority) of the common stock of the reorganised Hertz. This proposed investment, if consummated, will, together with a new $ 1 billion first-lien financing, a new $ 1.5 billion revolving credit facility, and a new asset-backed securitisation facility to finance Hertz’s US vehicle fleet, provide the basis for the proposed Plan and the funding needed for Hertz to complete its financial restructuring and emerge from Chapter 11 in early to mid-summer.
The equity investment will take the form of a direct purchase of up to approximately $ 2.3 billion of common equity of reorganised Hertz, together with a commitment to backstop a rights offering for up to approximately $ 1.9 billion of common equity in reorganised Hertz, which will be made available to unsecured creditors as part of the Plan. The proposed Plan is subject to Court approval and the satisfaction of certain conditions, including all conditions to the Plan Sponsors’ commitment, which is subject to, among other things, the completion of satisfactory documentation and due diligence.
The proposed Plan would provide for a new, sustainable capital structure that would substantially reduce Hertz’s corporate debt and provide for a less leveraged vehicle debt structure. If confirmed, the proposed Plan would provide for the payment in cash in full of all of Hertz’s existing first- and second-lien debt and all administrative and priority claims, including the obligations owed under Hertz’s $ 1.65 billion debtor-in-possession facility.
Confirmation of the proposed Plan would also result in a 70% cash recovery to general unsecured creditors (including the guarantee of the € 725 million Euronote facility issued by Hertz’s affiliate, HHN), subject to the right of the holders of funded unsecured debt claims to elect to take a portion of their recovery in the form of common equity in reorganised Hertz. In addition, it is contemplated that certain obligations of Hertz’s international businesses, which are not in Chapter 11, will be restructured on a consensual basis.
Overall, the proposed Plan will enable Hertz to exit Chapter 11 stronger both financially and operationally.
Hertz President and Chief Executive Paul Stone said: “We are excited to reach this important milestone in our restructuring process. Our Plan of Reorganisation provides us a clear path forward to completing our financial restructuring and emerging from Chapter 11 by early to mid-summer. The support of the Plan sponsors demonstrates their confidence in Hertz’s growth potential; moreover, they bring valuable experience in the travel and leisure industry.”
“We’ve been making excellent progress on our financial and operational initiatives and repositioning our business as we prepare for increased travel demand as the pandemic subsides. We’re grateful for the commitment of our exceptional employees and teams around the world working tirelessly to maintain smooth operations with safe and outstanding service to our customers. We would like to thank our customers, franchise partners, vendors and other business partners for their continued support and loyalty. Based on actions we’ve taken during the restructuring process, we believe Hertz will be well-positioned to resume growth and secure the long-term success of our iconic brand,” he added.
The Hertz Corporation, a subsidiary of Hertz Global Holdings, Inc., operates the Hertz, Dollar and Thrifty vehicle rental brands throughout North America, Europe, the Caribbean, Latin America, Africa, the Middle East, Asia, Australia and New Zealand. The Hertz Corporation is one of the largest worldwide vehicle rental companies, and the Hertz brand is one of the most recognised globally.