Hertz has selected a new group of private equity firms to lead its retirement from bankruptcy, as an expected recovery in global travel has sparked a bidding war for the U.S. car rental group that filed for bankruptcy in May 2020.
Hertz said that a recent proposal led by Centrebridge Partners, Warburg Pincus and Dundon Capital Partners in which the group would invest as much as $ 2.5 billion in the reorganized group, ‘took the company’s opportunity to take advantage in the current market conditions. for the financing of his business going forward and to leave Chapter 11 on time and efficiently ”.
In early March, Hertz selected an offer from private equity firms Knighthead Capital and Certares Opportunities LLC in which the companies agreed to lead a similar $ 1 million investment in the company in Florida.
Just last week, the Centerbridge-led group released the details of its competitive restructuring plan. Both bidders have agreed to pay off secured creditors in cash, leaving unsecured mortgage holders with nearly $ 3 billion in current debt as the critical constituency remains.
According to documents filed with the bankruptcy court last week, the Centerbridge plan estimates that uninsured bondholders would recover 75 cents under its terms, five cents lower than the Knighthead plan offered.
However, Centrebridge’s offer included giving at least 48 per cent of the shares in the new Hertz to uninsured Hertz bondholders, a higher percentage than the Knighthead offer, which increases the potential upside opportunity for bondholders. According to court documents, major mortgage holders include Fidelity, JPMorgan and Canada’s Canso Investment Council.
Uninsured bonds of Hertz traded at ten dollars cents by the time the bankruptcy traded to about 100 cents in May.
Hertz said on Saturday that 85 per cent of the uninsured mortgagee group supported the Centerbridge plan, saying: ‘The level of creditors’ support for the Sponsorship Group’s proposal has given it the clear advantage.’
Hertz filed for bankruptcy because the price of used cars plunged into the depths of the pandemic last year, forced to make cash payments to credit providers who relied on assets to purchase vehicles. As travel slowly resumed and vaccine intake increased, the prospects of travel and hospitality businesses rose sharply. Hertz rival Avis saw shares rise more than $ 70 a year ago to now more than $ 70.
Both the Centerbridge and Knighthead plans called for current shareholders to wipe out their shares. Last summer, Hertz attempted to sell new shares to finance its bankruptcy as retailers using the Robinhood trading program bet on the company. The bankruptcy court approved such a share sale, but the Securities & Exchange Commission’s concerns eventually discouraged Hertz from continuing.
Knighthead declined to comment. Representatives from Hertz and Centerbridge did not immediately respond to a request for comment.
Hertz’s market capitalization remains around $ 300 million. A group of hedge fund holders announced this week that they have set up a committee to set up shareholders’ claims. According to one person familiar with their plans, the committee wanted to put together its own restructuring proposal because it believed that the financial predictions that Hertz shared publicly implied that there was enough future value for current shareholders to prevent that it is zeroed in on a restructuring.
If the bankruptcy court approves the Centerbridge plan, then creditors will vote to approve it. Hertz said he expects bankruptcy in June.