Hertz Global Holdings selected and approved a $6 billion funding proposal from affiliates of Knighthead Capital Management, Certares Opportunities and Apollo Capital Management, the car rental company announced Wednesday.
The proposal from the collectively named KCHA Group will provide equity capital to fund Hertz’s revised reorganization plan and Chapter 11 exit, which the car rental company hopes to complete by June 30, 2021. Hertz chose KHCA Group’s proposal over a competing proposal provided by Centerbridge Partners, Warburg Pincus, and Dundon Capital Partners.
The proposed agreements with the KHCA Group, as well as any modifications to the plan and solicitation procedures, are subject to the approval of the bankruptcy court at a hearing scheduled for May 14, 2021.
Under the selected proposal, Hertz’s Chapter 11 plan will be funded through direct common stock investments from the KHCA Group and certain co-investors aggregating $2.781 billion, the issuance of $1.5 billion of new preferred stock to Apollo and a fully backstopped rights offering to Hertz’s existing shareholder to buy $1.635 billion of additional common stock.
The proposal would eliminate $5 billion of corporate debt, including the complete elimination of all corporate debt on Hertz’s European business, and provide the company with over $2.2 billion of global liquidity. “Now, we look forward to implementing our Chapter 11 plan, which will substantially strengthen our financial structure by eliminating 79 percent of our corporate debt,” said Stone in a statement.
A court hearing to confirm Hertz’s plan of reorganization is scheduled for June 10.
Leisure Rebound Drives Hertz’s Q1
Meanwhile, Hertz on May 7 released first-quarter performance figures, boosted by leisure demand.
“This quarter we realized the first effects of the leisure travel rebound and capitalized on strong demand-driven pricing in destination markets that exceeded 2019 levels,” Stone said in a statement. “We’re continuing to see improved demand and are optimistic about a sustained recovery.”
Like Avis Budget, Hertz has continued to maintain fleet availability amid ongoing worries about rental car shortages. “We’re actively replenishing our fleet, despite the constraints of the global semiconductor shortage and its impact on the automotive supply chain,” Stone said. “Most importantly, I’m exceptionally proud of our employees who are working tirelessly to serve our customers as they’re ready to be on the road again.”
Hertz reported first-quarter revenue of $1.3 billion, compared with $1.9 billion in the same period last year. First-quarter net income amounted to $190 million, compared with a net loss of $356 million in the same period last year. Liquidity reached $1.1 billion.
Also in the first quarter, the car rental company closed on the sale of all assets of its Donlen vehicle leasing and fleet management business to Athene Holding Ltd for $891 million in cash proceeds.