Hertz files amended Chapter 11 plan; statement hearing April 21

By Sarah Lizee

Olympia, Wash., April 19 – Hertz Global Holdings, Inc. filed a third amended Chapter 11 plan and related disclosure statement on Friday in the U.S. Bankruptcy Court for the District of Delaware.

A hearing on the amended statement is scheduled for April 21.

The plan equity sponsors are Warburg Pincus LLC, Centerbridge Partners LP and Dundon Capital Partners LLC. Other plan sponsors include initial consenting holders of the company’s the 6¼% senior notes due 2022; 5½% senior notes due 2024; 7 1/8% senior notes due 2026, the 6% senior notes due 2028 and obligations under the company’s credit agreement dated Dec. 13, 2019.

The plan is premised on an implied total enterprise value of about $5.5 billion. Taking into account $1.3 billion of new first-lien debt and the sale of $385 million of new preferred stock, and adding back excess cash, assumed to be about $700 million net of minimum cash at exit, results in an implied plan value for the common stock of parent company Hertz Global Holdings of about $4.53 billion.

Under the plan, the existing equity of Hertz Global will be extinguished and canceled and will entitle holders to no rights whatsoever.

The plan contemplates a recapitalization of the debtors through a combination of the issuance of new debt and equity capital.

Under the plan, the reorganized debtors will issue new reorganized Hertz parent common interests, as follows, subject to dilution from the preferred stock, the issuance of additional shares resulting from increases in ALOC facility claims as described in the rights offering procedures and equity reserved or granted under the management equity incentive plan:

• About 48.2% to the holders of unsecured funded debt claims, pro rata in exchange for those claims;

• About 9.5% to be sold to Dundon for $400 million;

• About 2% to be sold to Centerbridge for $82.5 million;

• About 2% to be sold to Warburg Pincus for $82.5 million; and

• The remaining roughly 38.4% of reorganized Hertz parent common interests will be offered under the rights offering to all holders of unsecured funded debt claims, pro rata.

The plan also provides for the issuance of $385 million of preferred stock that will be sold in equal amounts to each of Centerbridge and Warburg Pincus. The preferred stock is convertible to reorganized Hertz parent common interests.

The preferred stock will accrue dividends in the amount of 4% per annum, compounded quarterly, for the first three years, unless converted earlier, payable in the form of additional liquidation preference for the preferred stock.

The plan also provides for the reorganized debtors to obtain a $1.3 billion senior secured term loan to fund plan distributions and a $1.5 billion revolving credit facility to fund their working capital needs.

The transactions under the plan will raise $3.87 billion in cash proceeds, including the $565 million from the purchase of reorganized Hertz parent common interests by the plan sponsors; $1.62 billion from the purchase of stock under the rights offering, which the plan sponsors have committed to ensure is fully funded; $385 million from the purchase of preferred stock by Centerbridge and Warburg Pincus; and $1.3 billion in proceeds from the exit term loan facility.

The funds generated by the transactions will be used, in part, to provide the following distributions to creditors:

• Payment in full of administrative claims, including all amounts due in respect of the debtors’ debtor-in-possession financing, cure costs arising from the assumption of executory contracts and unexpired leases, section 503(b)(9) claims, and accrued professional fees;

• Payment in full of claims arising from the debtors’ pre-petition first-lien facilities;

• Payment in full of claims arising under the debtors’ pre-petition second-lien notes;

• Payment in full of other secured claims and claims entitled to priority under section 507(a) of the Bankruptcy Code;

• Payment in full of claims on account of the debtors’ guarantee of the HHN notes; and

• Cash distributions to holders of general unsecured claims in the estimated amount of 82% of the allowed amount of those claims.

The holders of unsecured funded debt claims will receive 48.2% of the reorganized Hertz parent common interests, as well as certain subscription rights. Based on a valuation performed by Moelis & Co. LLC, which indicates the midpoint equity value of the reorganized debtors at $4.51 billion, unsecured funded debt holders will receive a recovery of about 75% on account of their claims.

The subscription rights permit holders to purchase pro rata shares of reorganized Hertz parent common interests under the rights offering at a per share price based on a 6.7% discount to plan equity value.

The plan equity sponsors’ commitment to purchase reorganized Hertz parent common interests is at the same per-share price offered to holders of unsecured funded debt claims under the rights offering.

The debtors will emerge from Chapter 11 protection with $2.3 billion in global liquidity, inclusive of capacity under the exit revolving credit facility, and $1.3 billion in corporate debt, exclusive of ABS facilities and letters of credit.

In addition to the transactions described above, the plan provides for the refinancing of the company’s U.S. ABS facilities and the continuation of the company’s foreign ABS facilities.

The debtors will also assume their collective bargaining agreements, assume the Hertz Corp. account balance defined benefit pension plan, and continue to administer and keep in effect the defined benefits plans sponsored by non-debtor affiliate Puerto Ricancars, Inc.

Finally, the plan includes the payment in full of the notes issued by non-debtor affiliate Hertz Holdings Netherlands BV and an injection of cash prior to the effective date to meet the liquidity needs of the debtors’ European business.

Specifically, as part of their agreement to sponsor the plan, some of the plan sponsors have agreed to provide an about $295 million interim facility to fund the European businesses’ immediate cash needs. The facility will be repaid upon the effective date.

Hertz is an Estero, Fla.-based car rental company. It filed Chapter 11 bankruptcy on May 22, 2020. The case number is 20-11218.

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