Hertz has received a $4.2bn rescue offer from a group of travel industry investors that aims bring the car rental company — which has been battered by the pandemic — out of bankruptcy.
The proposal from investment firms Knighthead Capital Management and Certares Management, which set up a fund last year with affiliates to buy travel sector assets negatively affected by Covid-19, is contingent on how other debtors in Hertz plan to contribute to the deal’s financing.
Under the terms of the plan, the investors proposed an equity investment for about $2.3bn of Hertz’s reorganised common stock and will make a rights offering worth $1.9bn to all unsecured creditors.
The plan also includes injecting $1bn in first-lien financing and an additional $1.5bn revolving credit facility, along with an unspecified new asset-backed securitisation facility to help Hertz revamp its fleet of vehicles in the US.
The plan needs to be approved by a bankruptcy court. A hearing has been scheduled for April 16.
The Florida-based company, which was backed by activist Carl Icahn before it filed for bankruptcy in May last year, was forced to throw in the towel after travel restrictions imposed by governments to contain the spread of coronavirus brought its business to a standstill.
The recent ramp-up in the rollout of Covid-19 vaccines across the globe has boosted the hopes of recovery across industries, including the travel sector. That is likely to give companies such as Hertz a boost when people start flying and moving once again for holidays and work.
“We’ve been making excellent progress on our financial and operational initiatives and repositioning our business as we prepare for increased travel demand as the pandemic subsides,” said Paul Stone, Hertz’s president and chief executive.
“Based on actions we’ve taken during the restructuring process, we believe Hertz will be well-positioned to resume growth and secure the long-term success of our iconic brand,” he added.
Before Hertz filed for Chapter 11 protection, it was sitting on about $19bn in debt, which it had been attempting to restructure for years before Covid-19 knocked it out of business.
The company cut 10,000 jobs last April in a desperate move to reduce costs and mitigate the economic impact of the pandemic, but the extreme measures failed to pay off.
In June, the month after filing for bankruptcy, Hertz tried to raise $500m through a share sale, following a burst in enthusiasm for the company’s stock after its bankruptcy filing, which pushed up its market value. However, the capital-raising effort was later abandoned after receiving pushback from regulators, who warned that any stock sale would be worthless and harmful for investors.