Whether you are a Hertz Bankruptcy lawyer or a consumer, you probably know that the company has filed for bankruptcy and that the restructuring plan is expected to include a payout to equity investors. This could also lead to layoffs at the company.
Getting out of Chapter 11
Getting out of Chapter 11 bankruptcy for Hertz is a major achievement. While the car rental company is in turmoil, its franchised and subsidiary businesses continue to operate.
The company has negotiated with lenders for relief, which includes a plan for a new revolving credit facility and new first-lien financing. The deal calls for a total payout of $8 per share. The plan will also allow Hertz to sell 30,000 cars per month through the end of the year.
The company is also closing all of its affiliated reorganized debtors. In addition, it has closed Rental Car Intermediate Holdings, LLC.
The company is also changing its board of directors. It has appointed two new directors, John Healy and Vincent Intrieri. In addition, the company has selected a new chief executive officer, Paul Stone.
Another step in getting out of Chapter 11 bankruptcy for Hertz is the elimination of nearly $5 billion in debt. Hertz’s debt includes $14.4 billion in corporate bonds and $4.3 billion in debt backed by a fleet of vehicles. The company has also eliminated all of its European corporate debt.
Hertz plans to reorganize its debt, which is expected to provide shareholders with the opportunity to earn more than a billion dollars in cash. In addition to this, the company has negotiated with the U.S. Treasury Department for a loan of $1 billion.
Hertz is expected to exit from bankruptcy protection by the end of the summer. This will give the company time to reorganize, repay its creditors, and resume business. In addition, the company has a new $2.8 billion exit credit facility.
Hertz is expected to announce its second-quarter earnings in mid-August. In addition, the company will sell some of its assets, possibly through a sale or auction.
Restructuring plan includes payout to equity investors
Despite the challenges of the COVID-19 coronavirus pandemic, Hertz was able to successfully enter bankruptcy protection last May. It raised $4 billion in a DIP financing facility to help it stay afloat during the case, and also successfully resized its fleet.
As part of its restructuring plan, Hertz is paying its creditors back, but also providing value to its equity holders when it leaves bankruptcy. Hertz also plans to use its cash to expand the business and invest in new technologies to improve its car rental experience.
In the first phase of its plan process, Hertz received expressions of interest from a variety of groups, including Apollo Global Management, Certares Management, Knighthead Capital Management and Dundan Capital Partners. After reviewing the bids, Hertz selected a group led by Knighthead Capital Management.
The new plan provides Hertz with more than $2.2 billion of global liquidity, and would pay back all first-lien, unsecured and priority claims. The plan also offers equity investors a stake of at least 3% in the restructured business.
Hertz also plans to invest in data tech to reengineer its car rental experience. In the long term, Hertz envisions a transition to electric and alternate fuel vehicles. In the short term, Hertz is planning to improve its distribution channel and increase its demand sensing capabilities.
Hertz’s plan will also allow the company to use its net operating losses more quickly. The company estimates it will pay out between $7 and $8 per share to equity investors.
Hertz also plans to invest in its international business. It plans to make the necessary investments to transition to alternate fuel vehicles, and it is also developing a demand sensing system to provide customers with the most relevant information about their rental car.
Deal with debtor-in-possession financing
Getting debtor-in-possession financing when filing for bankruptcy can help a business survive until its assets can be sold or liquidated. But before you can take out a loan you must get approval from the court. It’s best to start the process as soon as you realize your finances are in jeopardy. This will give you plenty of time to negotiate with your creditors and work out the details of the loan.
The main advantage of getting a DIP loan is the security it offers. Typically, the lender will have a priority position on assets in the event of a liquidation. But the lender must also agree to the terms of the loan.
If you want to get a loan with the best interest rate and terms, it’s best to talk to a DIP lender before filing for bankruptcy. This will ensure your lender has an easier time negotiating with you. You can also increase your company’s liquidity by applying early.
In order to secure the best possible deal you’ll need to consult a competent legal professional. It’s also important to know how to best use the funds you’ve been provided. This means paying employees a fair market wage and submitting appropriate tax returns. You may also need to make appropriate withholdings from your employees’ paychecks.
In addition, you may want to look into equity-linked debtor-in-possession financing. This allows you to take part in the post-reorganization equity of your company. But you’ll also need to find a lender that has experience with the industry.
Aside from getting debtor-in-possession financing when submitting a bankruptcy petition, you’ll also need to get the court’s approval to perform other legal activities. These include closing your old bank accounts and establishing new ones, filing tax returns, and making appropriate withholdings. Ultimately, the key to getting approved is to show your lender that you’re doing everything possible to improve your credit standing.
New board of directors
Earlier this week, Hertz announced the composition of its new board of directors. The board is made up of representatives from companies that funded Hertz’s exit from bankruptcy protection.
The first new board member is former Ford Motor Co. chief executive officer Mark Fields. He was named to the Hertz board in June, and is currently senior adviser to TPG Capital.
Another new member is former Walmart Inc. executive Paul Stone, who was tapped to lead Hertz in March 2018. He will now serve as both the president and chief operating officer. Stone spent the first 28 years of his career with Walmart before joining Hertz last year.
The company has reorganized under a $6 billion reorganization plan. Hertz plans to sell about 180,000 vehicles by 2020. It also plans to invest in yield management, demand sensing, and data technology to reengineer its car rental experience.
The new board includes representatives from several investment firms. Two representatives will come from Knighthead Capital Management, a firm that led a group that gave the company $5.9 billion in new equity capital. It will also have two representatives from Certares Management LLC, a firm that won the bidding war for Hertz.
The new board also includes a representative from Apollo Global Management Inc., one of the companies that purchased a majority of Hertz’s equity in March.
Hertz recently announced a $7.0 billion asset-backed vehicle financing facility. It also has eliminated almost $5 billion in debt. Its new owner has plans to make the company a better player in the future. Hertz also plans to invest in yield management and demand sensing, among other things.
Hertz has also made some recent moves to bolster its customer service operations. It recently upgraded customers to Five Star Elite status through 2021. It also doubled points for existing members through September 30. It also hired an automotive expert to lead the company through adversity.
Restructuring plan could lead to layoffs
Almost a year after filing for bankruptcy, Hertz Global Holdings has emerged from its restructuring process with more than $5 billion in debt eliminated and a new $7.0 billion asset-backed vehicle financing facility. Hertz intends to continue to provide the same high level of service and vehicles it has provided for years. Its primary benefits, such as its customer loyalty programs, will continue as usual.
A new board of directors will be appointed by Hertz on June 30. The board is expected to include representatives from Hertz’s restructuring sponsors, as well as the company’s president and CEO, Paul Stone.
The restructuring plan calls for Hertz to issue new $1 billion in first-lien financing and a new $1.5 billion revolving credit facility. Hertz is also planning to finance its fleet using asset-backed securitization financing.
Hertz is currently operating its business with a fleet of approximately 40,000 vehicles. Its business was hit hard by the COVID-19 pandemic that hit the car rental industry in late February. The impact was dramatic and caused a sudden decline in bookings and revenue.
Approximately 50% of Hertz’s global workforce has been laid off. The company has trimmed non-essential spending, implemented a cost reduction plan, and optimized its location footprint. Hertz has also completed the sale of its Donlen fleet leasing business.
Hertz Global Holdings is owned by billionaire Carl Icahn. The company filed for bankruptcy last May. A plan was approved by the U.S. Bankruptcy Court for the District of Delaware in June.
Hertz has been renting cars since 1918. It has a global footprint and operates in a number of industries, including car rentals, family entertainment centers, and water parks.
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