ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On May 4, 2020, Hertz Global Holdings, Inc. and The Hertz Corporation
(collectively, "Hertz" or the "Company") entered into forbearances and limited
waivers with certain of the Company's corporate lenders and holders of the
Company's asset-backed vehicle debt. The forbearances and waivers, described
below, provide Hertz with additional time through May 22, 2020 to engage in
discussions with its key stakeholders with the goal to develop a financing
strategy and structure that better reflects the economic impact of the COVID-19
global pandemic and Hertz' ongoing operating and financing requirements.
As a result of the COVID-19 global pandemic, Hertz and its subsidiaries have
experienced a rapid, sudden and dramatic negative impact on their businesses.
While Hertz has taken aggressive action to eliminate costs, it faces significant
ongoing operating expenses, including monthly payments under its Amended and
Restated Master Motor Vehicle Operating Lease and Servicing Agreement
(Series 2013-G1) with Hertz Vehicle Financing LLC (the "Operating Lease"),
pursuant to which Hertz leases vehicles used in its United States rental car
operations. As previously reported, on April 27, 2020, Hertz did not make
certain payments in accordance with the Operating Lease. This caused the
occurrence of an amortization event on May 1, 2020 under the terms of a series
of debt instruments pursuant to which Hertz and its vehicle finance subsidiaries
acquire the leased vehicles.
On May 4, 2020, Hertz, Hertz Vehicle Financing LLC ("HVF"), Hertz Vehicle
Financing II LP ("HVF II") and DTG Operations, Inc. entered into a forbearance
agreement (the "Forbearance Agreement"). HVF II is a special purpose financing
subsidiary that issues asset-backed notes to finance the acquisition of
vehicles, which HVF then leases to Hertz pursuant to the Operating Lease. Hertz
entered into the Forbearance Agreement with holders (the "VFN Noteholders") of
notes (the "Series 2013-A Notes") issued by HVF II representing approximately
60% in aggregate principal amount of the Series 2013-A Notes. Pursuant to the
Forbearance Agreement, the VFN Noteholders agreed to forbear from exercising
rights to direct a liquidation of vehicles which serve as collateral supporting
the Series 2013-A Notes. The agreement with the VFN Noteholders will expire on
May 22, 2020 or, if sooner, the date on which Hertz fails to comply with certain
agreements contained in the forbearance agreement or another amortization event
occurs. As a result of the amortization event that occurred on May 1, 2020, and
notwithstanding the Forbearance Agreement, proceeds of the sales of vehicles
that collateralize the Series 2013-A Notes must be applied to the payment of
principal and interest and will not be available to finance new vehicle
acquisitions for Hertz. However, in light of the impact of the COVID-19 global
pandemic on the travel industry, Hertz believes it will not need to acquire new
vehicles for its fleet through the remainder of 2020.
Concurrently with entering into the Forbearance Agreement, on May 4, 2020, Hertz
entered into limited waiver agreements (collectively, the "Waiver Agreements")
with certain of the lenders (the "Senior Lenders") under its (i) senior term
loan facility, (ii) letter of credit facility, (iii) alternate letter of credit
facility and (iv) U.S. vehicle revolving credit facility (collectively, the
"Senior Facilities"), pursuant to which the Senior Lenders agreed to (a) waive
any default or event of default that could have resulted from the above
referenced missed payment under the Operating Lease, (b) waive any default or
event of default that has arisen as a result of Hertz's failure to deliver its
2020 operating budget on a timely basis in accordance with the Senior Facilities
and (c) extend the grace period to cure a default with respect to Hertz's
obligation to reimburse drawings that occur under letters of credit during the
waiver period. The Waiver Agreements are effective across the Senior Facilities
and will expire on May 22, 2020 or, if sooner, the date on which Hertz fails to
comply with certain agreements contained in the Waiver Agreements, which include
certain limitations on the company's ability to make certain restricted
payments, investments and prepayments of indebtedness during the waiver period
and a requirement to deliver certain financial information to the Senior Lenders
during the waiver period. There can be no assurances that Hertz will be able to
successfully negotiate any further forbearance or waivers extending relief past
May 22, 2020.
The foregoing descriptions of the Forbearance Agreement and Waiver Agreements do
not purport to be complete and are subject to, and qualified in their entirety
by reference to, the full text of the Forbearance Agreement or Waiver
Agreements, as applicable, copies of which are filed in Exhibits 10.1, 10.2,
10.3, 10.4 and 10.5 to this current report on Form 8-K and are incorporated by
reference herein.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
The information contained in Item 1.01 regarding the Forbearance Agreement and
Waiver Agreements is incorporated by reference herein.
ITEM 7.01 REGULATION FD DISCLOSURE.
In light of the magnitude of the effort that has already been undertaken and
will continue to be necessary from critical employees to operate with reduced
resources, the Company restored the base salaries of those employees who had
voluntarily reduced their salaries as a proactive measure to reduce costs in
response to COVID-19's impact on travel demand, as initially reported in the
Company's Current Report on Form 8-K furnished on March 26, 2020. Effective
May 11, 2020, the base salaries of senior leaders will be restored to
pre-voluntary reduction levels except that the Company's Chief Executive
Officer, Kathryn V. Marinello, who had previously voluntarily forgone her entire
base salary, has voluntarily agreed to a 10% salary reduction going forward.
The information contained in this Item 7.01 shall not be deemed to be "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and shall not be incorporated by reference into any
filings under the Securities Act of 1933, as amended, or the Exchange Act,
except as may be expressly set forth by specific reference in such filing.
ITEM 9.01 EXHIBITS.
(d) Exhibits
Exhibit Number Title
10.1 Forbearance Agreement, dated as of May 4, 2020, by and among The
Hertz Corporation, a Delaware corporation, Hertz Vehicle Financing
LLC, Hertz Vehicle Financing II LP, a Delaware special purpose limited
partnership, whose general partner is HVF II GP Corp., a Delaware
special purpose corporation, and whose limited partner is Hertz, DTG
Operations, Inc., an Oklahoma corporation, Deutsche Bank AG, New York
Branch, as administrative agent, and the several financial
institutions that serve as committed note purchasers, the several
commercial paper conduits, and certain funding agents for the investor
groups, in each case, party thereto.
10.2 Limited Waiver, Forbearance and Fourth Amendment, dated as of May 4,
2020, in connection with that certain Credit Agreement, dated as of
June 30, 2016 (as amended by the First Amendment, dated as of
February 3 2017, the Second Amendment, dated as of February 15, 2017,
and the Third Amendment, dated as of November 2, 2017, by and among
The Hertz Corporation, the other loan parties party thereto, the
several banks and other financial institutions parties thereto as
lenders and administrative agent.
10.3 Limited Waiver, Forbearance and First Amendment, dated as of May 4,
2020, in connection with that certain Credit Agreement, dated as of
December 13, 2019, by and among The Hertz Corporation, the other loan
parties party thereto, the several banks and other financial
institutions parties thereto as lenders, the issuing lender and
administrative agent.
10.4 Limited Waiver, Forbearance and First Amendment, dated as of May 4,
2020, in connection with that certain Letter of Credit Agreement,
dated as of November 2, 2017, by and among The Hertz Corporation, the
other credit parties party thereto, the several banks and other
financial institutions parties thereto as lenders and administrative
agent.
10.5 Limited Waiver and First Amendment, dated as of May 4, 2020, in
connection with that certain Credit Agreement, dated as of June 30,
2016, by and among The Hertz Corporation, the other loan parties party
thereto, the several banks and other financial institutions parties
thereto as lenders and administrative agent.
101.1 Pursuant to Rule 406 of Regulation S-T, the cover page to this Current
Report on Form 8-K is formatted in Inline XBRL
104.1 Cover Page Interactive Data File (Embedded within the Inline XBRL
document and included in Exhibit 101.1)
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K contains "forward-looking statements" within the
meaning of federal securities laws, including statements related to our
liquidity and fleet financing expectations and the expected effects on our
business, financial condition and results of operations due to the spread of the
COVID-19 virus. 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 those in our
risk factors that we identify in our most recent annual report on Form 10-K for
the year ended December 31, 2019, as filed with the Securities and Exchange
Commission on February 25, 2020. We caution you not to place undue reliance on
our forward-looking statements, which speak only as of the date of this filing,
and we undertake no obligation to update this information.
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