Business Context and Reporting Period
This Form 8-K filing by Hertz Global Holdings, Inc. (the "Company") reports on events occurring on December 16, 2010, with the report filed on December 22, 2010. The filing details the entry into a material definitive agreement involving Hertz Vehicle Financing LLC ("HVF"), a bankruptcy-remote special purpose entity wholly-owned by The Hertz Corporation.
Key Financial Metrics and Debt Structure
The filing focuses on debt financing activities rather than operating performance metrics such as revenue or profit.
- New Facility: Established the Series 2010-2 Variable Funding Rental Car Asset Backed Notes with an aggregate principal amount of $200,000,000.
- Facility Status: The facility is available on a revolving basis but was not funded on the closing date.
- Interest Rates: Variable rates based on commercial paper rates or 30-day LIBOR plus a borrowing spread. The spread is approximately 150 basis points lower than the pre-amended Series 2009-1 Notes.
- Maturity: Expected final maturity is March 25, 2013; legal final maturity is March 25, 2014.
- Collateral: Secured by a portion of the U.S. car rental fleet, manufacturer receivables, lease rights, and cash collateral accounts.
Material Changes Versus Prior Period
The Company executed amendments and restatements to its Series 2009-1 Variable Funding Rental Car Asset Backed Notes to align with the new facility:
- Principal Reduction: Reduced the aggregate principal amount of Series 2009-1 Notes from $2,138,072,750 to $1,938,072,755. The reduction was substantially replaced by the new Series 2010-2 facility.
- Cost Reduction: Reduced the borrowing spread on Series 2009-1 Notes by approximately 160 basis points.
- Maturity Extension: Extended the expected final maturity of Series 2009-1 Notes from January 25, 2012, to March 25, 2013, and the legal final maturity from January 25, 2013, to March 25, 2014.
- Covenant Modification: Eliminated the provision that would increase the borrowing spread if Moody's Investors Service downgraded the rating of the Series 2009-1 Notes.
Outlook, Risks, and Contingencies
The filing outlines specific risks associated with the new and amended debt instruments:
- Events of Default: Includes non-payment, covenant violations, material inaccuracies in representations, failure to maintain enhancement levels, failure to maintain interest rate hedges, and insolvency.
- Amortization Events: Occurrence of an amortization event or default could trigger rapid amortization of the notes and potential liquidation of the secured U.S. car rental fleet.
- Covenants: HVF is subject to restrictive covenants regarding liens, indebtedness, mergers, asset dispositions, and dividends.
- Rating Status: The Series 2010-2 Notes are not rated by any nationally recognized statistical rating organization.
Investor Verification Checklist
- Verify the actual funding status of the $200 million Series 2010-2 facility, as it was unfunded at closing.
- Confirm the current interest rate spread applied to the Series 2009-1 Notes following the 160 basis point reduction.
- Monitor compliance with the restrictive covenants and enhancement levels to avoid amortization events.
- Review the composition of the collateral pool (U.S. fleet and receivables) securing the new notes.
- Assess the impact of the extended maturity dates on the Company's long-term liquidity profile.