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Hertz shareholders win the bankruptcy auction

Hertz shareholders win the bankruptcy auction

Hertz shareholders want to recoup hundreds of millions of dollars after the car rental company asked for a private capital consortium to withdraw from bankruptcy protection a year ago.

Hertz said a group of Knighthead Capital, Certares Opportunities and Apollo Global Management prevailed over another private equity consortium in a court auction in Delaware court this week.

Hertz he failed As the May 2020 pandemic weighed on demand for business and leisure travel and the fall in the price of used cars forced it to send cash to its vehicle lenders.

The winning bid is valued at about $ 7 billion by the Hertz company. The Knighthead team signed in early March to acquire Hertz for less than $ 5 billion. This started the turn of the counterparts of a competing team that included Centerbridge Partners, Warburg Pincus and Dundon Capital.

The agreement will pay off all of Hertz’s creditors, as the company will raise more than $ 7 billion in new debt and equity. Overall, the reorganized Hertz will have less than $ 1 billion in net debt.

Current shareholders will receive about $ 1.50 in cash per share, along with a small portion of the newly reorganized Hertz capital, as well as the opportunity to obtain guarantees or purchase shares there.

One person involved in the process said the value of that package could approach $ 8 per share. However, this figure is based on the views on the overall value of the reorganized Hertz and the technical assessment of the guarantees.

Hertz’s shares were traded at more than $ 5 on Wednesday, which meant a market capitalization of $ 800 million.

Both bidding groups proposed the removal of the existing shareholders, a custom that is common in bankruptcy. Last June, the company tried sell shares to partially fund the bankruptcy, as retailers using the Robinhood app raised the share price of Hertz by more than $ 5.

After the U.S. Securities and Exchange Commission expressed concern about the sale of securities approved by the company, Hertz rejected the offer.

A group of hedge funds accumulated shares of Hertz earlier this year, arguing that the company had a positive equity value. These investors eventually partnered with the Knighthead team to provide some of the equity funding proposed in the winning bid.

The astonishing rise in Hertz’s valuation reflects optimism about the strong recovery in the U.S. economy and a rapid turnaround in leisure travel.

Interested Hertz groups now plan to vote on the plan, which will also have to be confirmed by the bankruptcy court at its June 10 session. The company expects to go bankrupt by the end of June, the beginning of the peak travel season.

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