Hertz picks $6 billion plan proposal from Knighthead, Certares, Apollo

By Sarah Lizee

Olympia, Wash., May 12 – Hertz Global Holdings, Inc. said Wednesday that is has picked a revised proposal from sponsors Knighthead Capital Management LLC, Certares Opportunities LLC and Apollo Capital Management, LP to provide the equity capital needed to fund its revised plan of reorganization and exit from Chapter 11.

The proposed agreements with the sponsor group, as well as any necessary modifications to the plan and solicitation procedures, are subject to the approval of the U.S. Bankruptcy Court for the District of Delaware at a hearing scheduled for Friday.

Under the revised proposal, Hertz’s Chapter 11 plan will be funded through direct common stock investments from the sponsor group and certain co-investors totaling $2.78 billion, the issuance of $1.5 billion of new preferred stock to Apollo and a fully backstopped rights offering to the company’s existing shareholders to purchase $1.64 billion of additional common stock.

The revised plan would provide for the payment in cash in full of all administrative, priority, secured and unsecured claims in the Chapter 11 cases and would deliver significant value to the company’s existing shareholders, including $239 million of cash; common stock representing 3% of the shares of the reorganized company, subject to dilution from warrants and equity issued under a new management incentive plan; and 30-year warrants for 18% of the common stock of the reorganized company, subject to dilution by a new management incentive plan, with a strike price based on a total equity value of $6.5 billion, or the opportunity for eligible shareholders to subscribe for shares of common stock in the $1.635 billion rights offering at plan equity value.

As previously announced, two investor groups have been competing to fund Hertz’s Chapter 11 exit. On April 21, the bankruptcy court authorized Hertz to begin soliciting votes on its Chapter 11 plan and approved a group consisting of Centerbridge Partners LP, Warburg Pincus LLC, Dundon Capital Partners, LLC and an informal group of the company’s unsecured noteholders as the sponsors of the plan.

“When it became apparent that the competition to sponsor the company’s plan would continue, the company sought and obtained court approval of bidding procedures and an auction process to ensure that it received the highest and best sponsorship proposal within a timeframe that would permit the company to continue working toward a planned exit from Chapter 11 by June 30,” Hertz said in the release.

“A robust competition between the CWD group and the KHCA group ensued, concluding with the selection of the revised KHCA group's proposal late yesterday following the auction.”

As with the Centerbridge, Warburg and Dundon group’s previous proposal, the Knighthead, Certares and Apollo group’s proposal would eliminate about $5 billion of corporate debt, including the complete elimination of all corporate debt on Hertz’s European business, and provide the company with over $2.2 billion of global liquidity.

The Knighthead, Certares and Apollo group’s proposal would also replace the bridge financing previously provided by the Centerbridge, Warburg and Dundon group to fund the company’s European fleet needs prior to the plan’s consummation.

The debt funding commitments for Hertz’s Chapter 11 plan, which were approved by the court earlier this week, will remain in place under the Knighthead, Certares and Apollo proposal.

“Our proposed plan provides a robust recovery and excellent value for all of our stakeholders and enables Hertz to emerge as a much stronger, more competitive company,” Paul Stone, Hertz’s president and chief executive officer, said in the release.

“During our restructuring, we have made material improvements in our operational efficiency and have built added cost discipline into our business. Now, we look forward to implementing our Chapter 11 plan, which will substantially strengthen our financial structure by eliminating 79% of our corporate debt.”

A court hearing to confirm Hertz’s plan of reorganization is scheduled for June 10.

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

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.