Investors Mount Competing Bids to Buy Hertz Out of Bankruptcy -- 2nd Update
March 30 2021 - 12:36PM
Dow Jones News
By Becky Yerak and Peg Brickley
Rival groups of investors are vying for the right to back the
expected recovery of Hertz Global Holdings Inc.'s car-rental
business and ease a path out of bankruptcy.
One offer was already on the table when a group led by
Centerbridge Partners LP, Warburg Pincus LLC and Dundon Capital
Partners stepped up with a competing funding package meant to lift
the rental car provider out of bankruptcy.
In court papers filed Monday, Hertz said the new offer is
competitive with a proposal the company had previously floated to
emerge from bankruptcy under the control of Knighthead Capital
Management LLC, Certares Management LLC and other co-investors.
"This competitive process remains ongoing," Hertz said, noting
that neither group has fully committed to a final deal.
An early casualty of the travel-deadening effects of the
coronavirus pandemic, Hertz filed for chapter 11 protection in May
2020, its fleets idled and its future prospects uncertain. The
competing offers to shepherd the company out of chapter 11 cap
months of financing and deal maneuvers that kept Hertz going.
Both offers would pay off in full and in cash all senior claims,
including bankruptcy financing and first- and second-lien debts,
court papers said.
Hertz doesn't envision that current shareholders will receive
any compensation, dashing hopes from individual investors that
piled into the company last June, touting the stock online despite
the bankruptcy in an episode that presaged the trading mania around
GameStop Corp.
Hertz said it estimated that unsecured bondholders owed $2.9
billion would recover 80 cents or 75 cents on the dollar under the
Knighthead-led and Centerbridge-led restructuring plans,
respectively.
"Either of these transactions would leave reorganized Hertz with
a strong and sustainable balance sheet," the company said.
Any transaction selected by Hertz would require approval from
the judge overseeing its bankruptcy and subjected to a creditor
vote. The company has said it wants to leave bankruptcy by the end
of June, eager to take advantage of favorable market conditions for
debt financing by riskier borrowers.
Hertz said Centerbridge has experience in the automotive, rental
and travel sectors, including serving as a plan sponsor in the
chapter 11 case of auto-parts maker Garrett Motion Inc. and making
investments in rental and fleet-management platforms.
Vehicle-related investments made by Warburg Pincus include China
Auto Rental, Santander Consumer USA, online used car dealer Uxin,
and auto transaction platform Cango Inc.
Certares and Knighthead formed an investment vehicle last year
to back travel and leisure businesses. During the pandemic,
Knighthead has invested in Chilean airline Latam Airlines Group SA
and, along with Certares, Brazilian airline Azul SA.
Certares has a controlling investment in travel-management giant
American Express Global Business Travel, which signed a letter of
intent with Hertz earlier this month on a potential five-year
business deal, according to court papers. Under the potential deal,
Hertz would be designated a preferred supplier in North America to
Amex GBT, a court filing said.
Hertz said it believes that an agreement with Amex GBT, if
finalized, could generate an extra 6.3 million rental-car days in
2023, boosting the company's valuation by between $680 million and
$882 million.
While Hertz previously said it would exit bankruptcy as a
private company, both plan-sponsor groups are now proposing that it
be publicly listed after leaving chapter 11, according to court
papers.
Hertz entered bankruptcy with roughly $19 billion in debt when
lockdown orders and fear of contagion curbed air and ground travel
for business and leisure, sending Hertz's global revenue down 70%
in April 2020 compared with a year earlier. Used-car values, a
pillar of the business, also declined.
To reduce costs, Hertz consolidated rental locations, negotiated
with airports to defer payments and laid off roughly 11,000 U.S.
employees, most of whom were previously furloughed.
Hertz's push to leave bankruptcy comes after the rental-car
industry experienced a rebound at the end of last year as more
travelers chose to take road trips and used-vehicle values
increased due to tighter supplies.
Hertz, which also owns the Thrifty and Dollar brands, has
projected that revenue will rise from nearly $6.1 billion this year
to $8.6 billion in 2023 as more individuals get vaccinated against
Covid-19 and travel picks back up.
Write to Becky Yerak at becky.yerak@wsj.com and Peg Brickley at
peg.brickley@wsj.com
(END) Dow Jones Newswires
March 30, 2021 12:21 ET (16:21 GMT)
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