Hertz gets court OK of Knighthead, Certares, Apollo as plan sponsors

By Sarah Lizee

Olympia, Wash., May 17 – Hertz Global Holdings, Inc. received court approval of its selection of plan sponsors Knighthead Capital Management LLC, Certares Opportunities LLC and Apollo Capital Management, LP, according to an order filed Monday with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, two investor groups competed 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 [May 11] following the auction.”

The company has filed a new Chapter 11 plan of reorganization and related disclosure statement following its selection of the revised proposal from Knighthead, Certares and Apollo.

The plan provides for about $705 million from the purchase of common stock in the reorganized company by the plan sponsors at a per share price based on a discount to the equity value of the plan.

It also provides for $1.62 billion from the purchase of common stock under a fully funded rights offering, and $385 million from the purchase of convertible preferred stock by Centerbridge and Warburg Pincus.

The preferred stock will have a dividend compounded quarterly at 3% per annum for the first three years after issuance, payable in kind, will have a conversion price based on a pre-conversion equity valuation of $4.942 billion, will not be redeemable for the first three years, will be generally voted on an as-converted basis with shares of common stock, and will be mandatorily convertible after the first anniversary of issuance based on a volume weighted average trading price formula.

The plan also provides for $1.3 billion in proceeds from an anticipated new exit term loan facility.

Under the plan, all administrative, priority and secured claims will be paid in cash in full.

Holders of claims with respect to the unsecured senior notes and the letter-of-credit facility dated Dec. 13, 2019 will receive 47.1% of the common stock in the reorganized company and subscription rights for the rights offering.

Holders of the company’s €725 million European vehicle debt will be paid in cash in full.

Each holder of a general unsecured claim will receive cash payments of the greater of its pro rata share of $550 million in the aggregate up to 100% of the allowed amount of the general unsecured claim, and 82% of the allowed amount of the claim.

The company’s existing equity will be canceled and existing equity holders will receive their pro rata share of new 10-year warrants to purchase, in the aggregate, 14% of the reorganized company’s common stock, subject to some conditions, with an exercise price to be determined based on an equity value of the company of $8 billion; cash of $175 million; and $250 million of cumulative perpetual non-convertible preferred stock with a dividend rate of 7.25%.

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.

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