HERTZ GLOBAL Item 7.01 Regulation FD Disclosure.
On
The Debtors filed with the
The information contained in this Item 7.01shall 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 8.01 Other Events.
As previously disclosed, on the Petition Date, the Debtors filed voluntary
petitions for relief under Chapter 11 of the United States Code in the
The Disclosure Statement describes, among other things, the events leading to
the Chapter 11 Cases; the Debtors' contemplated financial restructuring (the
"Restructuring"); the Proposed Plan; certain events that have occurred or are
anticipated to occur during the Chapter 11 Cases, including the solicitation of
votes to approve the Proposed Plan from certain of the Debtors' stakeholders;
certain risk factors related to the Proposed Plan; certain tax considerations;
and certain other aspects of the Restructuring. The Disclosure Statement and
solicitation procedures with respect to the Proposed Plan were approved by the
Under the Proposed Plan,
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The Proposed Plan is supported by the Supporting Noteholders, which comprise the
vast majority of creditors in the largest class of claims that are voting on the
Proposed Plan, and the
· As set forth in the Transaction Documents, the Proposed Plan will raise
approximately $3.873 billion in cash proceeds, comprised of:
o $565 million from the purchase of common stock in the reorganized Company
by the Plan Sponsors at a per share price based on a 6.7% discount to the
Proposed Plan equity value of approximately $4.525 billion ("Proposed
Plan Equity Value");
o $1.623 billion from the purchase of common stock (at the same purchase
price for the common stock to be purchased by the Plan Sponsors, i.e. a
6.7% discount to Proposed Plan Equity Value) pursuant to the rights
offering contemplated by the Plan, which the Plan Sponsors have committed
to ensure is fully funded pursuant to the terms of the EPCA;
o $385 million from the purchase of convertible preferred stock by Plan
Sponsors Centerbridge Partners, L.P. and Warburg Pincus LLC
§ the preferred stock compounds quarterly at 4% per annum for the
first three years after issuance, payable in kind, and without
interest thereafter, has a conversion price based on a
pre-conversion equity valuation of $4.826 billion , cannot be
redeemed for the first three years (except in connection with
certain change of control transactions), generally votes on an
as-converted basis with shares of common stock, and is mandatorily
convertible after the first anniversary of issuance based on a
volume weighted average trading price formula; and
o $1.3 billion in proceeds from the anticipated new exit term loan
facility.· Such cash proceeds will be used, in part, to provide the following
distributions to the Company's stakeholders pursuant to the terms of the
Proposed Plan:
o administrative, priority and secured claims will be paid in cash in full;
o the holders of the Company's €725 million European Vehicle Notes will be
paid in cash in full;
o the holders of claims with respect to the unsecured Senior Notes and
holders of claims with respect to the letter of credit facility provided
pursuant to the ALOC Credit Agreement, dated as of December 13, 2019 , by
and among Hertz , the lenders party thereto, and Goldman Sachs Mortgage
Company , as administrative agent and issuing lender, (together with the
Senior Notes, the "Unsecured Funded Debt") will receive approximately
48.2% of the common stock in the reorganized Company and subscription
rights to purchase an additional $1.623 billion of common stock in the
reorganized entity;
o the holders of general unsecured claims will receive cash payments of not
more than $550 million in the aggregate, which the Company estimates will
provide a recovery of approximately 100 percent on account of the
anticipated amount of allowed general unsecured claims; and
o the Company's existing equity will be cancelled and existing equity
holders will receive their pro rata share of new six-year warrants to
purchase, in the aggregate, 4% of the reorganized Company's common
stock, subject to certain conditions, with an exercise price to be
determined based on an equity value of the Company of $6.1 billion (the
"Proposed Warrants").
The shares of common stock to be issued pursuant to the Proposed Plan described above, will be subject to dilution from, among other things, (1) the issuance of shares upon the conversion of the preferred stock, (2) the issuance of shares pursuant to the Proposed Warrants, and (3) shares that may be issued pursuant to a management incentive plan for at least 5% of the common stock of the reorganized Company.
In light of continuing interest from an alternative potential plan sponsorship
group, consisting of
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On
· As set forth in the Alternative Transaction Documents, the Alternative Plan
will raise approximately $7.089 billion in cash proceeds, comprised of:
o $2.929 billion from the purchase of common stock in the reorganized
Company by the Alternative Sponsor Group and other third parties;
o $1.500 billion from the purchase of preferred stock arranged by Apollo;
o $1.360 billion from the purchase of common stock pursuant to a rights
offering which the Alternative Sponsor Group and certain third parties
have committed to ensure is fully funded pursuant to the Transaction
Documents; and
o
distributions to the Company's stakeholders:
o administrative, priority and secured claims will be paid in cash in
full;
o the holders of the Company's €725 million European Vehicle Notes will be
paid in cash in full;
o holders of Unsecured Funded Debt Claims will be paid in cash in full and
eligible holders of such claims will have the right to purchase their
pro rata share of the unsubscribed shares in the rights offering with an
exercise price that is the same as the purchase price for the common
stock to be purchased by the Alternative Sponsor Group ;
o the holders of general unsecured claims will receive cash payments of
not more than $550 million in the aggregate, which the Company estimates
will provide a recovery of approximately 100 percent on account of the
anticipated amount of allowed general unsecured claims; and
o the Company's existing equity will be cancelled and existing equity
holders will receive cash in an amount equal to $0.50 per share of their
existing interest and their pro rata share of either (1) 10-year
warrants for an aggregate of 10% of the reorganized Company, subject to
certain conditions, with an exercise price to be determined based on an
equity value of the Company of $6.5 billion (the "Alternative
Warrants"), or (2) for eligible existing equity holders, the right to
purchase shares of common stock in the rights offering with an exercise
price that is the same as the purchase price for the common stock to be
purchased by the Alternative Sponsor Group .
The subscription rights proposed to be provided pursuant to the Alternative Plan
Proposal would offer eligible existing equity holders and, to the extent there
are unsubscribed shares after the exercise of such rights by eligible existing
equity holders, unsecured funded debt holders the right to purchase common stock
at a per share price based on an Alternative Plan Proposal equity value of
approximately
The shares of common stock to be issued pursuant to the Alternative Plan Proposal described above will be subject to dilution from, among other things, (1) the issuance of shares pursuant to the Alternative Warrants and (2) shares that may be issued pursuant to a management incentive plan for at least 5% of the common stock of the reorganized Company.
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The preferred stock to be issued and purchased pursuant to the Alternative Plan Proposal would be issued at a 2% discount to stated value. Dividends on the preferred stock would be paid in cash as and if declared by the board of directors of the reorganized Company. Any portion of the dividends not paid in cash would automatically accrete to and increase the stated value of the preferred stock. Any failure to pay dividends in cash after the 42 month anniversary of issuance would be a "non-compliance event" subject to the provisions described below. The applicable dividend rate would be as follows:
· prior to the second anniversary of issuance, 9% per annum; · after the second anniversary of issuance and on or prior to the third
anniversary of issuance, for any portion paid in cash, 7% per annum and for
any portion paid in kind, 9% per annum;
· after the third anniversary of issuance and on or prior to the 42 month
anniversary of issuance, for any portion paid in cash, 8% per annum and for
any portion paid in kind, 10% per annum;
· after the 42 month anniversary of issuance and on or prior to the four year
anniversary of issuance, 9% per annum;
· after the fourth anniversary of issuance and on or prior to the 54 month
anniversary of issuance, for 10% per annum;
· after the 54 month anniversary of issuance and on or prior to the five year
anniversary of issuance, 11% per annum; and
· after the fifth anniversary of issuance an amount equal to the sum of (a)
13% per annum and (b) the product of (x) 2% per annum multiplied by (y) the
number of whole years elapsed since the fifth anniversary of issuance.
The preferred stock would be redeemable by the reorganized Company at any time at the greater of 100% of its accrued value and an amount necessary to generate a 1.3 times multiple on invested capital.
The preferred stock would include certain protective covenants related to, among other things, the reorganized Company's capital structure and financial covenants that are consistent with the financial covenants included in the proposed exit term loan facility. If the reorganized Company fails to comply with such protective provisions, a "non-compliance event" would occur, which would trigger certain consequences set forth more fully in the terms of the preferred stock. This description of the terms of the preferred stock is not complete and is qualified in its entirety by reference to the term sheet for the preferred stock attached to this Form 8-K as Exhibit 99.1.
At a meeting of the board held on
This Current Report on Form 8-K is not a solicitation of votes to accept or reject the Proposed Plan or the Alternative Plan Proposal. Information contained in the Proposed Plan, the Disclosure Statement, or described in this Current Report on Form 8-K is subject to change, whether as a result of additional amendments or supplements to the Proposed Plan or Disclosure Statement or otherwise. The documents and other information available via website or elsewhere are not part of this Current Report on Form 8-K and shall not be deemed incorporated herein.
Cautionary Statement Concerning Forward-Looking Statements
This Current Report contains "forward-looking statements" within the meaning of
federal securities laws. Words such as "expect" and "intend" and similar
expressions identify forward-looking statements, which include but are not
limited to statements related to our liquidity and potential financing sources;
the bankruptcy process; our ability to obtain approval from the
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Item 9.01 Exhibits.
(d) Exhibits
Exhibit
Number Title
99.1 Preferred Stock Term Sheet
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)
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