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Hertz sets path for ‘bright future’ after Chapter 11 restructuring

Hertz has emerged from US Chapter 11 bankruptcy protection triggered by Covid-19 following a lengthy restructuring and a massive cash injection.

Almost $6 billion of new equity capital is being provided by Hertz’s new investor group, led by Knighthead Capital Management, Certares Opportunities and certain funds managed by affiliates of Apollo Capital Management.

The car rental giant has cut its corporate debt by nearly 80% and significantly enhanced its liquidity to fund operations and future growth.

The company has eliminated nearly $5 billion of debt, including all of Hertz Europe’s corporate debt.

In addition, Hertz has emerged with a new $2.8 billion exit credit facility and a $7 billion asset-backed vehicle financing facility.

Hertz filed for Chapter 11 for its US operations in May 2020 following the onset of the pandemic, which had a “severe and dramatic effect” on travel demand.

Hertz’s principal international operating regions including Europe, Australia and New Zealand were not included in the US Chapter 11 proceedings.

Cost cutting generating significant savings, while the fleet across both its US and International businesses has been reduced.

Cost reductions and concessions at certain airport locations have been negotiated while fleet leasing arm Donlen was sold for $891 million.

The completion of the Chapter 11 restructuring process enables Hertz to emerge as a “financially and operationally stronger company that is well-positioned for the future”.

Hertz’s plan of reorganisation was confirmed by a US bankruptcy court in June.

Judge Mary Walrath described the outcome as a “fantastic result” that “surpasses any result that I’ve seen in any Chapter 11 case that I’ve faced in my 20-plus years”.

Henry Keizer, chairman of Hertz’s outgoing board of directors, said: “Faced with the epic and unprecedented challenges presented by the Covid-19 pandemic, and unfazed by early leadership changes, we stayed focused on stabilising the business and seizing opportunities to mitigate losses and create value for our stakeholders.

“When the economy began to show signs of recovery earlier this year, we were perfectly positioned to drive a competitive process that would maximize recoveries.

“The result – paying our nearly $19 billion of creditors in full and returning substantial value to our shareholders – is remarkable.”

In addition, Hertz focused on meeting changing demand through its portfolio of neighborhood rental locations as a complement to its airport business. These efforts, combined with a sharp increase in car rentals in the U.S. and the continued strength in used car sales, are putting the Company on track for strong financial results in 2021.

President and chief executive Paul Stone said: “Today marks a significant milestone in Hertz’s 103-year history.

“Through the relentless efforts of our board and team, we are moving forward in an incredibly strong position with an exciting road ahead of us.

“Now with a solid financial foundation, a leaner, more efficient operating model, and ample liquidity to invest in our business, Hertz has outstanding potential to drive long-term profitable growth.

“Both in the US and around the world, we are poised to capitalize on our industry leadership, deep operational expertise and iconic global brand.

“We look forward to a bright future as a vibrant part of the rebounding travel industry and as a trusted partner for our customers’ mobility needs.”

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