Hertz Global Holdings Inc. said improved reorganization plans it’s weighing offer shareholders a chance to own a slice of the car renter once it exits bankruptcy protection.
The company asked a U.S. bankruptcy judge in Wilmington, Del., to let it start the process of getting final approval for a revised bankruptcy plan backed by Centerbridge Partners while it considers accepting a competing bid from Knighthead Capital Management and Certares Management.
“We’re trying to get to an approach where we can have our cake and eat it too,” Hertz’s lead bankruptcy attorney Tom Lauria said in a virtual court hearing Wednesday.
Under new terms presented by Hertz in court, existing shareholders would get warrants worth $90 million to $100 million, giving them a recovery of 60 to 70 cents a share, Laura said. That would be a “material return to equity,” he said. The warrants could be exercised at a roughly $6 billion enterprise value.
The tentative recovery would be well below the nearly $2 price where Hertz shares have recently traded. Meanwhile, Hertz lenders including some of Wall Street’s most active distressed investors, would be paid in full after collecting fees and interest payments for financing Hertz through its reorganization.
Hertz became a popular stock among retail day traders, who sent shares of the company soaring as high as $5.53 in June after the company filed for bankruptcy. Shareholders are typically wiped out in Chapter 11 proceedings, and earlier reorganization plans Hertz considered would have rendered its existing stock worthless.
Hertz wants U.S. Bankruptcy Judge Mary Walrath to allow the Centerbridge exit plan to go to a creditor vote and to approve a more than $70 million breakup fee if the Knighthead bid is picked later on. The courtroom maneuvering comes after Knighthead and Certares for a second time sweetened their proposal to buy Hertz out of bankruptcy, according to people with knowledge of the matter.
The improved proposals are “good news for the shareholders” and show “the process is ongoing,” Andrew Glenn, a lawyer for a group of shareholders, said at the hearing. The Knighthead and Certaras investor group is prepared to move forward with its plan without a breakup fee and is also willing to provide financing for Hertz’s European business, he said.
Ongoing process
Hertz received a sweetened Knighthead offer which the company’s board is “entertaining as an alternative proposal” that could “lead to a superior” plan, Lauria said on behalf of the company. Hertz is still backing the Centerbridge option in part because Knighthead doesn’t have committed financing, he added.
The battle over ownership of Hertz is heating up as the company seeks to exit bankruptcy by the end of June. Leaving court protection then would allow the reorganized Hertz to take advantage of surging demand for summer travel and sell older vehicles into a hot used-car market. Competitor Avis Budget Group Inc. has seen its stock double this year.
For Hertz to leave bankruptcy by June 30, the company wants creditors to vote on the Centerbridge plan by June 1. Should Knighthead’s plan replace the Centerbridge proposal, creditors would not be harmed because recoveries would be higher, not lower, Lauria told Walrath.
The company earlier this month picked a plan from Centerbridge, Warburg Pincus and Dundon Capital Partners that outbid an earlier version of the Knighthead deal. That proposal would swap unsecured funded debt claims for 48.2 percent of the equity in the reorganized company and the right to purchase an additional $1.6 billion of equity.
The Centerbridge plan is backed by the official committee of unsecured creditors as well as nearly all the major creditors. Knighthead is supported by a group of shareholders, including Discovery Capital Management, Glenview Capital Management and Hampton Road Capital Management, who are represented by Glenn.
In a court hearing last week, Walrath delayed approval of a creditor vote on the Centerbridge-backed reorganization to give Hertz time to weigh an updated Knighthead proposal.
