Hertz Global receives competing plan proposal; negotiations continue

By Sarah Lizee

Olympia, Wash., March 30 – Hertz Global Holdings, Inc. has received an enhanced plan proposal from a group of investors led by Centerbridge Partners, LP, Warburg Pincus LLC and Dundon Capital Partners, according to court documents filed Monday.

Hertz said the new proposal is competitive with the proposal in the company’s initial plan, proposed by sponsors Knighthead Capital Management, LLC and Certares Opportunities LLC.

The company said it analyzed the enhanced proposal and sought to secure firm commitments from the alternate sponsor group, while continuing to negotiate with and seeking additional commitments from Knighthead and Certares.

In response, Knighthead and Certares indicated a willingness to enhance their original proposal.

“This competitive process remains ongoing,” Hertz said in court documents. “At this point, neither of the plan sponsor groups has made a legal and binding commitment to a final deal. But both proposals are similar in certain important ways.”

Specifically, both plans provide for the payment in full in cash of all senior claims, including the debtor-in-possession facility, the debtors’ pre-petition first- and second-lien debt, and administrative and priority claims.

Both plans also include cash distributions to general unsecured creditors and to the holders of the HHN notes guarantee claims equal in value to the estimated recoveries to be received by holders of unsecured funded debt claims receiving common equity – anticipated to constitute a recovery of between 75 to 80 cents on the dollar, with the balance of the obligations with respect to the HHN notes being paid in full near the effective date of the plan.

Either plan would be funded by a new facility by the plan sponsors. The facility would be issued by Hertz International Ltd. in mid to late April and would fund the debtors’ European business.

Additionally, both plans provide for subscription rights permitting some eligible holders of unsecured funded debt to buy equity at a discount to plan value.

Both plans also provide for the funding of plan cash requirements with an up to $1.3 billion exit term loan; a $300 million loan to refinance the HIL facility, whether as part of an upsized exit term loan or as a separate loan; about $2.6 billion of equity capital from the direct sale of reorganized equity and from a backstopped rights offering; cash on the balance sheet; and a $1.5 billion revolver to provide post emergence liquidity.

“Either of these transactions would leave the reorganized debtors with a strong and sustainable balance sheet with over $2 billion of liquidity and only $1.3 billion of corporate debt, not including any ABS facilities,” Hertz said.

“This enhanced liquidity and reduced corporate debt would give the debtors the financial strength and flexibility required to execute their business plan.”

The company said that at this point, the key material issues that remain to be resolved are the identity of the plan sponsors, the allocation of equity among existing creditors and the plan sponsors, the value of the debtors at emergence in light of the ultimate amount of investment in the debtors by the plan sponsors and existing creditors, the precise recovery to general unsecured creditors, whether the debtors will emerge as a public or private company, and the governance structure.

“Given the fact that the plan sponsors and the alternate sponsor group continue to negotiate improvements to their proposals, the debtors are moving the process forward while the potential sponsors finalize their proposals and provide binding commitments,” Hertz said.

“This will allow the debtors to emerge from Chapter 11 before the busy summer season and prevent the loss of value that would result from the extension of these cases.”

Hertz is an Estero, Fla.-based car rental company. It filed Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware on May 22, 2020. The case number is 20-11218.

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