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Hertz puts new private equity group in a dominant position



Hertz selected a new group of private equity companies to lead it out of bankruptcy, as the expected recovery of global travel triggered a bidding war against the U.S. car rental group that filed for bankruptcy in May 2020.

Hertz said that a recent proposal led by Centerbridge Partners, Warburg Pincus and Dundon Capital Partners, the group will invest US$2.5 billion in the reorganized group, “makes maximum use of the company’s opportunity to use current market conditions for financing. It is. The business moves forward and exits Chapter 11 in a timely and effective manner.”

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In early March, Hertz selected offers from private equity firms Knighthead Capital and Certares Opportunities LLC, and the two companies agreed to make similar multi-billion dollar investments in the Florida-based company.

Just last week, the group led by Centerbridge released details of its competitor’s restructuring plan. Both bidding groups agreed to repay secured creditors in cash, and as key voters win, unsecured bondholders will hold nearly $3 billion in current debt.

Based on documents filed with the bankruptcy court last week, the Centerbridge project estimates that unsecured bondholders will receive 75 cents under their terms, which is 5 cents lower than the Knighthead plan provides.

However, Centerbridge’s offer includes offering at least 48% of New Hertz’s equity to unsecured Hertz bondholders, which is higher than Knighthead’s offer, which increases potential upside opportunities for bondholders. According to court documents, large bondholders include Fidelity, JPMorgan and Canada’s Canso investment advisers.

Hertz unsecured bonds rose from a trading price of less than $10 when they filed for bankruptcy in May to around 100 cents now.

Hertz said on Saturday that 85% of the unsecured bondholder groups support the Centerbridge plan, and said: “The degree of creditors’ support for the sponsor group’s proposal gives it a clear advantage.”

Hertz filed for bankruptcy because the price of used cars plummeted at the height of the pandemic last spring, forcing it to pay cash to lenders that rely on asset purchases, which relied on lenders to buy cars. However, the prospects for travel and hospitality companies have risen sharply due to the slow recovery of travel and increased vaccination. Hertz’s competitor, Avis, saw its stock price rise from about $10 a year ago to more than $70 now.

Both Centerbridge and Knighthead plans call for current equity holders to be eliminated. Last summer, when retail traders using the Robinhood trading app bet on the company, Hertz tried to sell new shares to help it go bankrupt. The bankruptcy court has approved this stock sale, but concerns from the Securities and Exchange Commission ultimately prevented Hertz from moving forward.

Knighthead declined to comment. Representatives of Hertz and Centerbridge did not immediately respond to requests for comment.

Hertz’s market value is still about 300 million U.S. dollars. A group of hedge fund holders announced this week that they have set up a committee to urge shareholders to make demands. A person familiar with its plan stated that the committee is seeking to compile its own restructuring proposals because the committee believes that Hertz’s publicly shared financial forecasts indicate that existing shareholders have sufficient future value to avoid being zeroed out in the reorganization. .

If the Bankruptcy Court approves the Centerbridge plan, the creditors will vote to approve the plan. Hertz said he expects to withdraw from bankruptcy protection in June.


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