Hertz Global Holdings announced this Friday that it has secured commitments for the financing of the debtor in possession (DIP) for 1.65 billion dollars and presented a motion for the approval of the financing by the Bankruptcy Court of the United States to the District of Delaware.
If this loan is approved by the court, the companies that will provide that financing will charge an initial interest rate of 7.25 percentage points above the London interbank offer rate.
The company operates its car rental business globally primarily through the Hertz, Dollar and Thrifty brands from approximately 12,400 corporate and franchised locations in North America, Europe, Latin America, Africa, Asia, Australia, the Caribbean, Middle East and New Zealand, with data at the end of 2019.
Therefore, Hertz is one of the largest car rental companies in the world and its Hertz brand is one of the most recognized worldwide.
The company filed for bankruptcy on May 22, 2020, citing a sharp drop in revenue and future bookings caused by the Covid-19 pandemic.
Company President and CEO Paul Stone said: “This new financing will provide additional financial flexibility as we continue to navigate the effects of the pandemic on the travel industry and take steps to better position our business for the future. We are pleased with our strong interest in pre-petition first lien lenders and appreciate their support of Hertz and our future opportunities as a leader in rental vehicles.”
The proposed DIP financing will support the company as it moves through the next stage of its Chapter 11 process.
Financing must be provided by some of the first lien lenders prior to the company’s request and is expected to be structured as a deferred term loan debtor line of credit. According to the company, up to $ 1 billion can be used to provide capital for the acquisition of vehicles in the United States and Canada.
Up to $ 800 million can be used for working capital and general corporate purposes.
Funding is subject to final documentation completion, Court approval, and other customary conditions, and a hearing is scheduled for October 29, 2020.
Moelis & Co. is serving as an investment banker, FTI Consulting is serving as financial advisor, and White & Case LLP is serving as legal advisor.