Hertz has put a new private equity team in the driver’s seat
Hertz has selected a new group of private equity firms to come out of bankruptcy, as a recovery expected on trips around the world began the bidding war of the failed American car rental group in May 2020.
Hertz said a recent proposal by Centerbridge Partners, Warburg Pincus and Dundon Capital Partners would invest $ 2.5 billion in the group’s reorganized group “the company is maximizing the opportunity to get its current market finance ahead of its business and on time from Chapter 11 and to get out effectively ”.
In early March, Hertz selected a bid from private equity firms Knighthead Capital and Certares Opportunities LLC, and the companies agreed to have a similar $ 1 million investment in the Florida company.
Last week the Centerbridge-led team unveiled details of its rival’s restructuring plan. The two bidding groups agreed to pay the creditors in cash, leaving the holders with a nearly $ 3 billion debt-free bond when they stopped winning constituencies.
According to documents filed in bankruptcy court last week, the holders of unsecured depositors in the Centerbridge plan estimated that they would recover 75 cents on their terms, five cents less than what the Knighthead plan offered.
However, Centerbridge’s offer was to provide at least 48% of the new Hertz’s capital to Hertz bondholders, a higher proportion than Knighthead’s offer, and to increase the top-down option that bondholders may have. According to court documents, the largest financiers are Fidelity, JPMorgan and Canso Investment Advisors of Canada.
Hertz’s unsecured bonds rose from less than 10 cents on the dollar at the time of the bankruptcy in May to about 100 cents.
Hertz said on Saturday that 85 percent of groups of unsecured bailiffs supported the Centerbridge plan, saying that “the level of support from creditors for the Sponsor Group’s proposal gives it a clear advantage.”
Hertz went bankrupt last spring by plunging into the prices of used cars in a deep pandemic, forcing it to pay money to lenders backed by assets based on the purchase of vehicles. However, as travel has slowly resumed and vaccination has increased, so have the opportunities for travel and hospitality companies. Rival Avis Hertz has seen it raise more than $ 70 from about $ 10 a year ago.
The Centbridge and Knighthead plans called on the current shareholders to eliminate their shares. Last summer, Hertz tried to sell new shares to help fund its failure as retailers who used the Robinhood trading app opted for the company. The bankruptcy court approved the sale of the shares, but the Securities and Exchange Commission’s concerns eventually worried Hertz from moving forward.
Representatives from Hertz, Knighthead and Centerbridge did not immediately respond to the request for comment.
Hertz’s market capitalization remains at about $ 300 million. A group of hedge fund owners announced this week that they have formed a committee to file shareholder claims. According to one person who knew his intentions, the committee wanted to make a restructuring proposal because Hertz believed the publicly shared financial forecasts would have enough future value for current shareholders to cancel in a restructuring.
If the bankruptcy court approves the Centerbridge plan, the creditors will vote to approve it. Hertz said he hopes to come out of bankruptcy in June.