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March 30, 2021 2:45 PM, EDT

Hertz Competing Reorganization Plans Hinge on Pending Details

Hertz signage stands at a rental location in Berkeley, Calif., in May 2020. (David Paul Morris/Bloomberg News)Hertz signage stands at a rental location in Berkeley, Calif., in May 2020. (David Paul Morris/Bloomberg News)

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The fate of Hertz Global Holdings Inc. depends on details still pending behind two formally submitted bids, it said in court papers.

Hertz is negotiating with Knighthead Capital Management and Certares Management and competing investors backed by Centerbridge Partners, Warburg Pincus LLC, and Dundon Capital Partners.

The company said “key material issues that remain to be resolved” include final determinations of how much Hertz would be worth after new investments by each side and how much lower-ranking creditors would get back. Answering those and other questions will help decide which sponsor the car renter chooses to take it out of bankruptcy.

RELATED: Hertz Eyes Bankruptcy Exit Via $4.2 Billion Stake Sale

In the filings, Hertz acknowledged strategic advantages inherent to the Knighthead and Certares bid. Certares is a private equity firm focused on travel, tourism and hospitality, whose existing investments include American Express Global Business Travel, Internova Group and TripAdvisor.

Hertz said it calculated that Certares’s position could provide a potential lift in earnings before interest, taxes, depreciation and amortization to the company of between $136 million to $147 million in 2023.

Under both current proposals, Hertz would emerge from bankruptcy as a public company, according to the documents. An earlier Knighthead-Certares plan involved Hertz leaving court protection as a private company, owned primarily by those two plan sponsors.

Multibillion-Dollar Proposals

Hertz is seeking court approval for a generic rights offering that either of the investment groups could use to fund Hertz’s reorganization. Because no official plan sponsor has been picked, another bid is possible, although that is unlikely given the multibillion-dollar proposals outlined by Knighthead and Centerbridge. Early in Hertz’s bankruptcy case, its stock price rallied even though company officials said it was doubtful shareholders would get anything back.

“If shareholders were ever going to do anything, they better do it quickly and come with a big check,” Phil Brendel, a distressed-debt analyst at Bloomberg, said in an interview March 30. “It is all about the economics to the unsecured noteholders now.”

Although there are some unanswered questions, both reorganization proposals would solve Hertz’s most pressing debt problems, according to court documents. Each would pay senior lenders, including first- and second-lien claims, in full. Lower-ranking debts, including those held by noteholders and other unsecured creditors, would get cash and the right to buy new equity at a discount.

To pay for the distributions to creditors, the company would sell $2.6 billion in new stock, take on a $1.3 billion term loan and set up a $1.5 billion revolving line of credit, court papers show.

The case is Hertz Corp. 20-11218, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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