Hertz Global Holdings has announced that it has successfully completed its Chapter 11 restructuring process, saying it has emerged as a financially and operationally stronger company that is well-positioned for the future. The company said that following its restructure, creditors will receive payment in cash in full and existing shareholders will receive more than US$1 billion of value.
With more than US$5.9 billion of new equity capital being provided by Hertz’s new investor group, led by Knighthead Capital Management, Certares Opportunities, and certain funds managed by affiliates of Apollo Capital Management, Hertz has reduced its corporate debt by nearly 80 per cent and significantly enhanced its liquidity to fund operations and future growth. Specifically, the company says it has eliminated nearly US$5 billion of debt, including all of Hertz Europe’s corporate debt. Additionally, Hertz has emerged with a new US$2.8 billion exit credit facility (including an undrawn US$1.3 billion revolving credit facility) and a US$7 billion asset-backed vehicle financing facility, each having terms the company views as “extremely favourable”.
“Faced with the epic and unprecedented challenges presented by the COVID-19 pandemic, and unfazed by early leadership changes, we stayed focused on stabilising the business and seizing opportunities to mitigate losses and create value for our stakeholders,” said Henry Keizer, Chairman of Hertz’s outgoing board of directors. “When the economy began to show signs of recovery earlier this year, we were perfectly positioned to drive a competitive process that would maximise recoveries. The result – paying our nearly US$19 billion of creditors in full and returning substantial value to our shareholders – is remarkable.”
Hertz said it also executed on a series of operational initiatives to create a more focused and profitable enterprise. Among these actions, the company launched a cost reduction programme it says is generating significant savings, ‘right-sized’ its fleet across both its US and international businesses, optimised its location footprint, negotiated cost reductions and concessions at certain airport locations, and completed the sale of its Donlen fleet leasing business for US$891 million in cash.
Additionally, Hertz said it focused on meeting changing demand through its portfolio of neighbourhood rental locations as a complement to its airport business. These efforts, combined with a sharp increase in car rentals in the US and the continued strength in used car sales, are putting the company on track for strong financial results in 2021.
Paul Stone, Hertz’s President and Chief Executive Officer, said the Chapter 11 exit marks a significant milestone in the company’s 103-year history.
“Through the relentless efforts of our board and team, we are moving forward in an incredibly strong position with an exciting road ahead of us,” he said. “Now with a solid financial foundation, a leaner, more efficient operating model, and ample liquidity to invest in our business, Hertz has outstanding potential to drive long-term profitable growth. Both in the US and around the world, we are poised to capitalise on our industry leadership, deep operational expertise and iconic global brand.
“I am tremendously proud of all we have accomplished and confident that this is only the beginning in delivering even greater value to our stakeholders.”
Hertz filed for Chapter 11 bankruptcy proceedings for its US operations on 22 May 2020, following the onset of the COVID-19 pandemic. Hertz’s principal international operating regions including Australia, New Zealand and Europe were not included in the proceedings.