March 2, 2021 – Following the settlement of Knighthead Capital Administration, LLC and its associates (“Knighthead”) and Certares Alternatives LLC and its associates (“Certares”) to function plan sponsors (rising from a site of three severe candidates), the debtors have filed a reorganization plan and associated disclosure doc. The adequacy of the assertion is anticipated to be thought of at a listening to on April 16 and the debtors intention to emerge this summer time.
- $ 2.3 billion direct funding by plan sponsors Knighthead and Certares
- Knighthead and Certares again $ 1.9 billion rights provide
- No traditional purchasing, plus a breakout payment of 3-5% (based mostly on direct funding and help dedication)
- 70% estimated restoration for common unsecured collectors and funded unsecured collectors
- $ 1.0 billion in exit funding
- Emergence from early to mid-summer
In a single Press release Saying the “key milestone,” the debtors commented, “The proposed plan supplies that Knighthead Capital Administration, LLC and its associates (“ Knighthead ”) and Certares Alternatives LLC and its associates (“ Certares ”) will function promoters of the plan and decide to investing as much as $ 4.2 billion to purchase as much as 100% (however not lower than the bulk) of the widespread shares of the reorganized Hertz firm. This proposed funding, if accomplished, shall be mixed with new $ 1 billion senior financing, a brand new $ 1.5 billion revolving credit score facility and a brand new asset-backed securitization facility to fund Hertz’s fleet of American autos, present the premise for the proposed plan and the mandatory funding for Hertz to full its monetary restructuring and exit Chapter 11 in early and mid-summer. The fairness funding will take the type of a direct buy of as much as roughly $ 2.3 billion of bizarre shares of the reorganized Hertz firm, in addition to a dedication to help a rights providing for a most of about $ 1.9 billion of widespread inventory in reorganized Hertz, which shall be made obtainable to unsecured collectors as a part of the plan.
The proposed plan would offer for a brand new sustainable capital construction that might considerably cut back Hertz’s company debt and supply for a much less leveraged car debt construction. If confirmed, the proposed plan would offer for the money cost of all of Hertz’s first and second lien debt and all administrative and senior claims, together with obligations owed below the debtor facility. in possession of $ 1.65 billion from Hertz. Affirmation of the proposed plan would additionally lead to a 70% money restoration from common unsecured collectors (together with the assure of the Euronote facility of EUR 725 million issued by Hertz’s subsidiary, HHN), topic to the rights of the holders. of unsecured receivables financed to elect to participate of their restoration as fairness within the reorganized Hertz firm. As well as, it’s envisaged that sure obligations of Hertz’s worldwide operations, which aren’t included in Chapter 11, shall be restructured on a consensual foundation. “
The debtors have filed a security internet engagement phrases sheet and the Knighthead / Certares engagement letter and as Reveals B and C, respectively to the plan.
The disclosure assertion states: “Particular efforts in the direction of a plan started in November 2020, when the corporate held a collection of conferences with numerous plan constituents and promoters to provoke a aggressive course of. The corporate additionally arrange a knowledge room and hosted a collection of due diligence conferences with a number of potential plan sponsors. In the end, the corporate acquired three credible eating regimen proposals. The Firm has entered into vigorous negotiations with every of the three teams of potential sponsors.. The negotiations included the alternate of varied situation sheets and different paperwork and quite a few digital conferences between the Firm, potential plan sponsors and their respective representatives. In the end, the corporate decided that the proposal set out within the plan and supported by the plan sponsors was essentially the most favorable proposed transaction. The debtors have filed the plan after acquiring sure commitments from the plan’s promoters, which stay topic to sure procedures, paperwork and different circumstances.
The plan entails a complete enterprise worth of round $ 4.846 billion, ensuing within the issuance of recent senior debt and the sale of recent widespread shares of Hertz International Holdings, Inc., the dad or mum firm of the debtors. The brand new bizarre share of Hertz Mother or father is referred to within the Plan because the Hertz reorganized dad or mum firm stake. As a part of the plan, the present fairness of Hertz Mother or father shall be extinguished and the plan sponsors will purchase at the very least 51% of the pursuits of the reorganized dad or mum firm of Hertz by combining a direct funding and the train of the subscription rights below the plan. of the Plan rights provide. The remaining holdings of the reorganized dad or mum firm of Hertz shall be made obtainable to holders of unsecured debt funded in accordance with the rights providing below sure procedures topic to chapter court docket approval. The rights providing shall be totally supported by the backstop events, which embody the plan sponsors, no backstop charges however topic to breakage charges [3-5% of combined direct investment and rights offering backstop] . The plan additionally supplies for debtors to acquire exit funding to fund plan distributions and dealing capital.
Transactions set out within the plan will elevate roughly $ 5.253 billion in money proceed as follows:
- $ 2.283 billion, topic to sure changes, from the acquisition of the reorganized dad or mum firm Hertz by the plan sponsors by a direct funding;
- $1.970 billion, topic to sure changes, a Rights provide with respect to the pursuits of the reorganized dad or mum firm of Hertz. The rights providing shall be supplied to holders of unsecured debt financed topic to sure underwriting procedures and shall be totally supported by Backstop Events; and
- $ 1,000 billion from exit financing within the type of a secured time period mortgage.
The funds generated from these transactions shall be used, partly, to offer distributions to collectors as follows:
- Full cost of administrative claims, together with all quantities due below debtor DIP financing, restore prices arising from the idea of enforceable contracts and unexpired leases, and accrued and unpaid skilled charges;
- Full cost of claims arising from debtors first lien prepayment amenities;
- Full cost of claims arising from debtors’ preparatory second lien notes;
- Full cost of different secured claims and claims entitled to precedence below Article 503 (b) (9) of the Chapter Code; and
- Distributions to Holders of funded unsecured receivables (together with the assure of debtors of the HHN Notes) and common unsecured receivables with an estimated money cost of roughly 70% of the licensed quantity of such receivables.
The next is a abstract of the classes, claims, voting rights and anticipated recoveries (outlined phrases are as outlined within the disclosure plan and / or assertion; see additionally the liquidation evaluation under) :
NB: Every class applies to every debtor besides (i) lessons 3, 4 and 5 which apply to Hertz Corp., the subsidiary guarantors and Rental Automobile Intermediate Holdings, LLC; and (ii) Class 11 which applies solely to Hertz Mother or father. Collections are additionally based mostly on a complete enterprise worth of $ 4.846 billion for debtors, in addition to their non-debtor subsidiaries.
- Class 1 (“different precedence claims”) is unbroken, presumed accepted and never allowed to vote on the plan.
- Class 2 (“different assured claims”) is unbroken, presumed accepted and never allowed to vote on the plan.
- Class 3 (“First lien claims”) is unbroken, presumed accepted and never allowed to vote on the plan.
- Class 4 (“Second Privilege Ticket Claims”) is unbroken, presumed accepted and never permitted to vote on the plan.
- Class 5 (“Funded Unsecured Debt Claims”) is impaired and has the suitable to vote on the Plan. The estimated claims are $ 3.49 billion (plus the quantity of letters of credit score drawn below the ALOC facility on the efficient date) and the estimated restoration is 70%. Every holder of a certified unsecured funded declare towards Hertz Corp. and the subsidiary guarantors will obtain its professional rata share of: (i) the money quantity of the unsecured funded debt; and (ii) Subscription rights.
- Class 6 (“Unsecured Basic Claims”) is deprecated and has the suitable to vote on the plan. The estimated claims are $ 545 million and the estimated restoration is 70%. Every holder of a certified common unsecured declare towards a debtor will obtain, topic to the selection of elective unsecured common declare, its professional rata share of the quantity of the overall unsecured restoration widespread money, whatever the explicit debtor. towards which such a declare is permitted.
- Class 7 (“Basic unsecured elective complaints”) is unbroken, presumed to just accept and has no proper to vote on the plan.
- Class 8 (“Pre-petition Intercorporate Claims”) is unbroken / altered, deemed to just accept / reject and isn’t eligible to vote on the Plan.
- Class 9 (“Part 510 (b) Claims”) is weakened and has the suitable to vote on the plan.
- Class 10 (“Intercorporate Pursuits”) is unbroken, presumed accepted and never eligible to vote on the plan.
- Class 11 (“Present holding of dad or mum firm Hertz”) is impaired and has the suitable to vote on the plan. The estimated licensed quantity is roughly 156 million shares and the estimated restoration is 0%
The next paperwork had been hooked up to the declaration:
- Exhibit A: Plan
- Annex B: Plan help settlement
- Exhibit C: Listing of debtors
- Exhibit D: Organizational construction of debtors
- Exhibit E: Monetary projections
- Exhibit F: Liquidation evaluation (to be submitted)
- Room G: [RESERVED]
- Annex H: Termination Time period Mortgage Facility Phrases Sheet (to be filed)
- Exhibit I: Revolving Credit score Facility Exit Phrases Sheet (to be filed)
As of the date of the petition, the debtors had a complete monetary debt of roughly $ 19.0 billion incurred below numerous financing packages with third events.
Principal shareholders on the time of submitting (from Declaration of power of attorney 2020, besides GAMCO which is from the primary petition)
- Icahn Associates Holdings LLC: 38.9%
- Dimensional Fund Advisors LP: 8.40%
- Renaissance Applied sciences, LLC: 6.79%
- PAR Funding Companions, LP: 6.35%
- GAMCO Buyers, Inc: greater than 5%
- The Vanguard group: 6.34%
- BlackRock, Inc .: 5.37%
- DE Shaw Galvanic Portfolios, LLC: 4.63%
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