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Hertz shareholders will recoup hundreds of millions of dollars after the car rental company accepted an offer from a private equity consortium to remove it from bank protection, which it sought a year ago.
Hertz said a group that includes Knighthead Capital, Certain Opportunities and Apollo Global Management had prevailed over another private equity consortium in a court auction earlier this week in Delaware court.
Hertz filed for bankruptcy in May 2020, as the pandemic weighed on the demand for business and leisure travel and the fall in the price of used cars forced it to send cash to vehicle lenders.
The winning bid values Hertz as a whole at approximately $ 7 billion. The Knighthead group had initially signed an agreement in March to acquire Hertz that valued it at just under $ 5 billion. This kicked off a round of counterpart payments from a rival group that included Centerbridge Partners, Warburg Pincus and Dundon Capital.
The deal will cause all existing Hertz creditors to be paid in full, as the company will raise more than $ 7 billion in debt and equity. In general, the reorganized Hertz will have less than $ 1 billion in net debt.
Current shareholders will get about $ 1.50 per share in cash along with a small portion of Hertz’s reorganized assets, as well as the ability to obtain warrants or buy shares.
One person involved in the process said the value of this package could approach $ 8 per share, although that figure depends on opinions of the overall value of the reorganized Hertz, as well as the contributions in the technical valuation. of the warrants.
Shares of Hertz traded above $ 5 on Wednesday, implying a market capitalization of about $ 800 million.
Both bidding groups had initially proposed eliminating existing shareholders, a common practice in bankruptcy. Last June, the company had tried sell shares to partially fund the bankruptcy, as retailers using the Robinhood app raised the price of Hertz shares behind $ 5.
After the U.S. Securities and Exchange Commission expressed concern about the sale of securities that the company admitted may have no value, Hertz withdrew the offer.
A hedge fund group accumulated shares of Hertz earlier this year, arguing in court that the company had a positive equity value. These investors ultimately partnered with the Knighthead Group to provide some of the proposed own funding to the winning bid.
The surprising increase in Hertz’s valuation reflects optimism about a strong recovery in the US economy and a rapid shift in leisure travel.
Now those interested in Hertz must vote on the plan, which must also be confirmed by the bankruptcy court at a June 10 hearing. The company expects to come out of bankruptcy in late June in time for the start of the high travel season.
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