Hertz creditors committee objects to proposed $1.65 billion DIP loan

By Sarah Lizee

Olympia, Wash., Oct. 26 – Hertz Corp.’s official committee of unsecured creditors objected to the debtors’ motion for approval of $1.65 billion of debtor-in-possession financing provided by some of the company’s pre-petition first-lien lenders, according to a Friday filing in the U.S. Bankruptcy Court for the District of Delaware.

The committee said that while it does not object to the debtors’ decision to seek DIP financing, the consensual priming DIP that the debtors selected has “serious flaws” from the perspective of unsecured creditors.

“The allegedly superior terms of the proposed old first-lien DIP come at a price payable by unsecured creditors,” the objection said.

“The old first liens, in their capacity as old first-lien DIP lenders, are consensually priming their own debt using the provisions of their own documents, without the need for any court order.

“They are seeking to use Section 364(d)(1) solely to enhance their own rights to the detriment of unsecured creditor recoveries, and in the face of evidence of non-priming financing that was offered to the debtors.”

The committee also said it is possible that a further competing DIP loan will be offered between now and the hearing currently scheduled for Oct. 29, and that it has been in discussions with a group of unsecured noteholders regarding their proposed financing.

Hertz is an Estero, Fla.-based car rental company. It filed Chapter 11 bankruptcy on May 22. The Chapter 11 case number is 20-11218.

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