A group of unsecured lenders to Hertz Global Holdings Inc. are proposing an alternative reorganization of the rental car company that would take it public, a move that counters a plan to sell the company to two investment funds for as much as $4.2 billion.
The lenders want to convert their holdings in the bankrupt company into shares of the reorganized company, which could be traded publicly, the people said. If Hertz’s board were to accept that plan, it would supersede a bid from Knighthead Capital Management and Certares Management to buy the company.
The group believes the Knighthead bid, which values Hertz at $4.85 billion, is too low, according to the people. Its members think Hertz has an enterprise value of $5 billion and would fetch more under their plan, one of the people said. The lenders have not submitted a formal proposal to Hertz and terms are still in flux, the people said.
In one scenario being discussed, Hertz’s shares would become public upon emergence from bankruptcy, the people said.
Members of the creditor group include Alliance Bernstein, Bank of America, Invesco, Fir Tree Partners, and JPMorgan Asset Management, according to court filings. Representatives for the lenders didn’t immediately respond to a request for comment.
Competing plans
Hertz’s board is in the early stages of evaluating proposals and will take the best bid, one of the people said. Discussions are preliminary and plans could fall apart in the coming days, the people said. Any plan would need approval in bankruptcy court.
The New York Post earlier reported the discussions on the alternative proposal.
The company started negotiating with creditors and potential buyers in November, according to court documents. After talking with three bidders, Hertz settled on Knighthead and Certares, who jointly have a travel-focused investment fund.
After decades of mismanagement, Hertz filed for bankruptcy in May, unable to weather the blows from the pandemic that peers Enterprise Holdings Inc. and Avis Budget Group Inc. also experienced. One former top executive summed up the car rental company’s plight as a slow-moving train wreck.
As COVID-19 vaccinations roll out across the globe and confidence builds that travel will soon start to rebound, shares of Avis have soared more than 670 percent to $60.06 since bottoming nearly a year ago at less than $8. Hertz’s existing shares, which traded at 66 cents on Thursday, are slated to be wiped out as part of the bankruptcy reorganization.
Knighthead and Certares’s position would include a direct investment, a rights offering participation and buying Hertz’s existing unsecured debt. The investors would own at least 51% of the common stock under the proposal, according to court documents. A hearing to approve the terms of the plan is scheduled for April 16.
