Hertz Global Holdings has approved a revised proposal from funds and accounts managed by affiliates of Knighthead Capital Management, Certares Opportunities, and Apollo Capital Management, (collectively, the KHCA Group) to provide the equity capital required to fund the company’s revised plan of reorganisation and exit from Chapter 11 bankruptcy.
According to Hertz, the proposal will enable it to emerge as a stronger, more competitive company, positioning it well to take advantage of increasing demand for travel, although the new agreements and modifications to the plan are subject to the approval of the Bankruptcy Court.
Hertz said the revised plan would provide for the cash payment in full of all administrative, priority, secured and unsecured claims in the Chapter 11 cases and deliver significant value to the company’s existing shareholders.
Two investor groups have been competing to fund Hertz’s Chapter 11 bankruptcy exit. In April this year, the Bankruptcy Court overseeing Hertz’s cases authorised Hertz to begin soliciting votes on its Chapter 11 plan and approved a group consisting of Centerbridge Partners, Warburg Pincus, Dundon Capital Partners and an ad hoc group of Hertz’s unsecured noteholders (collectively, the CWD Group) as sponsors of the plan.
The company then realised that there was competition for its plan, so it obtained court approval for bidding procedures and an auction process to ensure it received the highest and best sponsorship proposal allowing it to continue working toward a planned exit from Chapter 11 by 30 June. According to Hertz, strong competition between the CWD Group and the KHCA Group followed, leading to the overturning of the original deal and Hertz selecting KHCA to proceed with a revised bankruptcy proposal.
As with the CWD Group, the KHCA Group’s proposal will eliminate approximately US$5.0 billion ($6.47 billion) of corporate debt, including the complete elimination of all corporate debt on Hertz’s European business, and provide the company with more than US$2.2 billion ($2.85 billion) of global liquidity. The debt funding commitments for Hertz’s Chapter 11 plan, which were approved by the court, will remain in place under the KHCA proposal.
“We are very pleased that our plan process produced such a tremendous result for our creditors and shareholders, said Paul Stone, President and CEO of Hertz. “We appreciate the strong interest in Hertz from the competing plan sponsors and thank them for their active engagement, which provided us with excellent options for our exit from Chapter 11. We look forward to working with the KHCA Group to complete the remaining steps in our restructuring and best position Hertz for the future.
“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 per cent of our corporate debt.
“We are well-positioned to take advantage of increasing global travel demand and new long-term growth opportunities. We are excited about Hertz’s future and the benefits for all of our stakeholders, including our employees and customers as well as our investors, franchisees and business partners.”
A court hearing to confirm Hertz’s plan of reorganisation is scheduled for 10 June.