Hertz Announces Committed Offerings Totaling $750 Million

Rhea-AI Summary

Hertz Global Holdings announced two new offerings totaling $750 million. The offerings include $500 million of First Lien Senior Secured Notes and $250 million of Exchangeable Senior Second-Lien Secured PIK Notes, both due in 2029. These private offerings aim to pay down part of Hertz's $2 billion revolving credit facility.

The Exchangeable Notes will bear PIK interest, payable semi-annually, and are expected to have an initial exchange price between $6.00 and $7.00 per share. These notes are exchangeable into cash, shares, or a combination at Hertz's discretion, and holders can require repurchase under certain conditions.

The notes are guaranteed by Hertz and its subsidiaries, with the First Lien Notes being secured by collateral that also backs Hertz's first lien credit facilities.

Positive

• Hertz expects to raise $750 million through new note offerings.
• Proceeds will improve liquidity by paying down part of the $2 billion revolving credit facility.
• The initial exchange price of Exchangeable Notes is set at a 100% premium, between $6.00 and $7.00 per share.

Negative

• The offerings are subject to market and other conditions, introducing uncertainty.
• The Exchangeable Notes will bear PIK interest, potentially increasing financial liabilities.

Insights

Financial Analyst

Hertz issuing $750 million in senior secured notes is a strategic move to manage its debt and liquidity. By using the proceeds to pay down its $2 billion revolving credit facility, Hertz aims to improve its liquidity position, which could enhance financial stability.

One noteworthy aspect is the PIK (Payment-In-Kind) feature of the Exchangeable Senior Second-Lien Secured PIK Notes. PIK notes allow Hertz to defer cash interest payments, paying interest in the form of additional securities instead. This can be a double-edged sword: while it preserves cash in the short term, it increases overall debt in the long term. Retail investors should understand that this can have implications for profitability and financial leverage moving forward.

The variable exchange price of the Exchangeable Notes, set between $6.00 and $7.00 per share, directly ties the debt to Hertz’s stock performance. Investors should be aware that the value of these notes is contingent upon the company’s stock price performance, creating a potential for stock dilution, especially if the stock price exceeds the threshold.

Overall, while this move may improve liquidity, it also increases financial complexity and potential long-term debt obligations.

Market Research Analyst

From a market perspective, Hertz's decision to issue these notes can be seen as a response to the current financial climate and investor appetite. The backstop commitment and firm commitment from CK Amarillo LP and other investors show a strong vote of confidence in Hertz’s strategy and its ability to manage debt. This can positively influence investor sentiment in the short term.

Additionally, issuing secured notes indicates that Hertz is prioritizing its secured creditors, a common strategy for companies looking to strengthen financial credibility. This may help Hertz negotiate better terms in future financial dealings, although it also increases the company's leverage, which could be a concern if market conditions worsen.

The move to issue the notes as private offerings exempt from the registration requirements of the Securities Act limits the initial reach to institutional investors. While this can be seen as limiting for retail investors initially, it ensures that only sophisticated investors who understand the inherent risks participate, potentially stabilizing the trading environment.

For retail investors, the key takeaway is the potential short-term liquidity improvement and the long-term implications of increased debt.

Comprised of $500 Million of First Lien Senior Secured Notes and $250 Million of Exchangeable Senior Second-Lien Secured PIK Notes Issued by The Hertz Corporation

ESTERO, Fla., June 20, 2024 /PRNewswire/ -- Hertz Global Holdings, Inc. (NASDAQ: HTZ) ("Hertz" or the "Company"), a leading global rental car company, today announced that its wholly-owned indirect subsidiary, The Hertz Corporation ("Hertz Corp."), intends to offer, subject to market and other conditions, $500 million in aggregate principal amount of First Lien Senior Secured Notes due 2029 (the "First Lien Notes") and $250 million in aggregate principal amount of Exchangeable Senior Second-Lien Secured PIK Notes due 2029 (the "Exchangeable Notes" and, together with the First Lien Notes, the "Notes"), in private offerings exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act").

Concurrently with the offerings of the Notes, investors affiliated with CK Amarillo LP have committed to Hertz Corp. and an investor has provided a firm commitment to an initial purchaser to purchase up to $250 million aggregate principal amount of Exchangeable Notes. In addition, Hertz Corp. has received a backstop commitment to purchase up to $500 million aggregate principal amount of First Lien Notes.

Hertz Corp. intends to use the net proceeds of the offerings to pay down a portion of its $2.0 billion committed revolving credit facility, improving liquidity. The completion of the offering of the First Lien Notes and the completion of the offering of the Exchangeable Notes are not contingent on each other.

The Exchangeable Notes will bear PIK interest payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2024. Hertz Corp. expects that the initial exchange price for the Exchangeable Notes will be at a 100% premium to the volume-weighted average price of the common stock of the Company ("Common Stock") on the date of pricing of the Exchangeable Notes, but in no event greater than $7.00 or less than $6.00 per share of Common Stock. The interest rate and certain other terms of the Exchangeable Notes will be determined by negotiations between Hertz Corp. and the initial purchasers. The Exchangeable Notes will mature on June 15, 2029, unless repurchased, redeemed or exchanged in accordance with their terms prior to maturity. Prior to March 15, 2029, the Exchangeable Notes will be exchangeable only upon satisfaction of certain conditions and during certain periods, and thereafter, the Exchangeable Notes will be exchangeable at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The Exchangeable Notes will be exchangeable on the terms set forth in the indenture into cash, shares of Common Stock, or a combination thereof, at Hertz Corp.'s election.

Holders of the Exchangeable Notes will have the right to require Hertz Corp. to repurchase all or a portion of their Exchangeable Notes at 100% of their initial principal amount of the Exchangeable Notes to be repurchased plus PIK interest on such Exchangeable Notes for each interest payment date occurring on or prior to the repurchase date plus accrued and unpaid PIK interest to, but excluding, the date of such repurchase, upon the occurrence of certain corporate events constituting a "fundamental change" as defined in the indenture governing the Exchangeable Notes. Hertz Corp. may not redeem the Exchangeable Notes prior to June 21, 2027. On or after June 21, 2027 and on or prior to the 31st scheduled trading day immediately preceding the maturity date, if the last reported sale price per share of Common Stock has been at least 250% of the exchange price for the Exchangeable Notes for certain specified periods, Hertz Corp. may redeem all (but not part) of the Exchangeable Notes at a cash redemption price equal to the initial principal amount of the Exchangeable Notes to be redeemed plus PIK interest on such Exchangeable Notes for each interest payment date occurring on or prior to the redemption date plus accrued and unpaid PIK interest on such Exchangeable Notes to, but not including, the redemption date.

The Notes are expected to be guaranteed by the Company, Rental Car Intermediate Holdings, LLC, Hertz Corp.'s direct parent company, and each of Hertz Corp.'s existing domestic subsidiaries and future restricted subsidiaries that guarantees indebtedness under Hertz Corp.'s first lien credit facilities or certain other indebtedness for borrowed money. The First Lien Notes and the related guarantees (other than the guarantee by the Company) are expected to be secured (subject to certain exceptions and permitted liens) on a first-lien basis by the same assets (other than certain excluded property) that secure indebtedness under Hertz Corp.'s first lien credit facilities (the "Collateral") and are therefore expected to be effectively pari passu with indebtedness under Hertz Corp.'s first lien credit facilities. The Exchangeable Notes and the related guarantees (other than the guarantee by the Company) are expected to be secured (subject to certain exceptions and permitted liens) on a second-lien basis by the Collateral and are therefore expected to be effectively junior to the First Lien Notes and indebtedness under Hertz Corp.'s first lien credit facilities.

The Notes and the guarantees of the Notes are being offered only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act and, except for the Exchangeable Notes and the related guarantees, to non-U.S. persons outside the United States pursuant to Regulation S under the Securities Act. The Notes, the guarantees of the Notes and any shares of Common Stock issuable upon exchange of the Exchangeable Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Securities Act and the securities laws of any other jurisdiction.

This press release is not an offer to sell or purchase, or a solicitation of an offer to sell or purchase, the Notes, the guarantees of the Notes or the shares of Common Stock issuable upon exchange of the Exchangeable Notes and shall not constitute an offer, solicitation or sale in any state or jurisdiction in which, or to any person to whom such an offer, solicitation or sale would be unlawful.

ABOUT HERTZ

The Hertz Corporation, a subsidiary of Hertz Global Holdings, Inc., operates the Hertz, Dollar and Thrifty vehicle rental brands throughout North America, Europe, the Caribbean, Latin America, Africa, the Middle East, Asia, Australia and New Zealand. The Hertz Corporation is one of the largest worldwide vehicle rental companies, and the Hertz brand is one of the most recognized globally. Additionally, The Hertz Corporation owns and operates the Firefly vehicle rental brand and Hertz 24/7 car sharing business in international markets and sells vehicles through Hertz Car Sales.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking statements" within the meaning of the federal securities laws. Words such as "expect," "will" and "intend" and similar expressions identify forward-looking statements, which include but are not limited to statements related to our positioning, strategy, vision, forward looking investments, conditions in the travel industry, our financial and operational condition, our sources of liquidity, the proposed offerings, the anticipated terms of the Notes and Hertz Corp.'s expected use of proceeds from the proposed offerings. We caution you that these statements are not guarantees of future performance and are subject to numerous evolving risks and uncertainties that we may not be able to accurately predict or assess, including risks and uncertainties related to completion of the offerings on the anticipated terms or at all, market conditions (including market interest rates) and the satisfaction of customary closing conditions related to the offerings, unanticipated uses of capital and those in our risk factors that we identify in the offering memorandums for these offerings and our most recent annual report on Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission on February 12, 2024, and any updates thereto in the Company's quarterly reports on Form 10-Q and current reports on Form 8-K. We caution you not to place undue reliance on our forward-looking statements, which speak only as of their date, and we undertake no obligation to update this information.

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SOURCE Hertz Global Holdings, Inc.

FAQ

What is the total value of Hertz's new offerings announced on June 20, 2024?

Hertz announced offerings totaling $750 million.

What are the components of Hertz's $750 million offerings?

The offerings include $500 million of First Lien Senior Secured Notes and $250 million of Exchangeable Senior Second-Lien Secured PIK Notes.

What is the purpose of Hertz's new note offerings?

The proceeds will be used to pay down a portion of Hertz's $2 billion revolving credit facility.

When will the Exchangeable Notes bear interest?

The Exchangeable Notes will bear PIK interest payable semi-annually on June 15 and December 15.

What is the expected exchange price range for Hertz's Exchangeable Notes?

The initial exchange price is set between $6.00 and $7.00 per share of common stock.