Bankrupt Hertz Mulls Rival Takeover Plan From Lender Group

Hertz Global Holdings Inc. received a takeover bid from a group of bondholders backed by Centerbridge Partners, Warburg Pincus and Dundon Capital Partners, it said in court filings.

The proposal rivals an earlier one from Knighthead Capital Management and Certares Management, and the fate of the bankrupt car renter depends on details still pending behind two formally submitted bids, Hertz said in court papers.

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 recover. Answering those and other questions will help decide which sponsor Hertz chooses to take it out of bankruptcy.

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 Inc.

Hertz said it calculated that Certares’s position could boost a measure of the company’s earnings by between $136 million and $147 million in 2023. That increase was calculated based on a five-year agreement contemplated between Hertz and American Express Global Business Travel, the filings show.

Under both 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. Hertz said in the court filing that it must still determine whether it will be a public or private company after it exits bankruptcy.

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 also possible, although that’s unlikely given the multibillion-dollar proposals outlined by Knighthead and Centerbridge. Early in Hertz’s bankruptcy case, the company’s 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 Intelligence, said in an interview Tuesday. “It is all about the economics to the unsecured noteholders now.”

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). To view the docket on Bloomberg Law, click here.

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