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Rental car company Hertz emerges from bankruptcy, with changes to board
Hertz files for bankruptcyHertz, whose car-rental bands also include Dollar and Thrifty, lost almost all their revenue when travel shut down due to the coronavirus this year.USA TODAY, WochitHertz has emerged from bankruptcy.The Florida-based rental car company in business for more than 100 years announced its anticipated successful exit from Chapter 11 bankruptcy late Wednesday afternoon. In a news release, Hertz Global Holdings, parent of The Hertz Corp., said it had “emerged as a financially and operationally stronger company that is well-positioned for the future.” Delaware Bankruptcy Judge Mary Walrath, who handled the case, confirmed Hertz’s plan of reorganization on June 10, paving the way for its comeback. In approving the plan, Walrath described the outcome as “fantastic,” saying it surpassed “any result that I’ve seen in any Chapter 11 case that I’ve faced in my 20-plus years.”Recalls: Car recalls for May 27-June 3USPS will use Ford engines: US Postal Service delivery trucks to have Ford engines, transmissions in new fleetWith more than $5.9 billion of new equity provided by a new investor group, Hertz said it has reduced its corporate debt by nearly 80% and “significantly enhanced its liquidity to fund operations and future growth.”The investment group is made up of Knighthead Capital Management LLC, Certares Opportunities LLC and Apollo Capital Management LP. The trio fought hard for the investment opportunity, beating out another group after a drawn-out bidding war.With the new infusion of money, Hertz said it has eliminated nearly $5 billion of debt, including all of its European arm’s corporate debt.In addition, Hertz said it has emerged with $2.8 billion in exit credit and $7 billion in asset-backed vehicle financing under terms it describes as “extremely favorable.”The aggregate interest rate on the new vehicle financing is less than 2%.Hertz announces changes to board of directorsWith its exit, Hertz also announced changes to its board of directors. In a statement, Henry Keizer, outgoing board chairman, said: “Faced with the epic and unprecedented challenges presented by the COVID-19 pandemic, and unfazed by early leadership changes, we stayed focused on stabilizing the business and seizing opportunities to mitigate losses and create value for our stakeholders.”As a result of those efforts, shareholders will get a payout, which is highly unusual in a Chapter 11 case. “When the economy began to show signs of recovery earlier this year, we were perfectly positioned to drive a competitive process that would maximize recoveries. The result — paying our nearly $19 billion of creditors in full and returning substantial value to our shareholders — is remarkable,” Keizer said.In tandem with its financial restructuring, Hertz said it has undertaken a series of operational steps to create a more focused and profitable enterprise. That includes slashing costs and right-sizing its fleet. Another important move in bankruptcy? Hertz sold its Donlen fleet leasing business for $891 million in cash.Looking ahead, Hertz said it’s “on track for strong financial results in 2021,” in large part due to a sharp increase in car rentals in the United States, driven by a decline in new COVID cases and rise in vaccinations nationally that has fueled more travel.In a statement, Paul Stone, Hertz’s president and CEO, described the exit from bankruptcy as “a significant milestone in Hertz’s 103-year history.””Through the relentless efforts of our board and team, we are moving forward in an incredibly strong position with an exciting road ahead of us. Now with a solid financial foundation, a leaner, more efficient operating model, and ample liquidity to invest in our business, Hertz has outstanding potential to drive long-term profitable growth,” he said.In the United States and abroad, Stone said, the company is now “poised to capitalize on our industry leadership, deep operational expertise and iconic global brand.””We look forward to a bright future as a vibrant part of the rebounding travel industry and as a trusted partner for our customers’ mobility needs,” he said. The company’s new board will initially include eight members. Another three could be named in the future.The initial board members include Certares founder Michael Gregory O’Hara as chairman, Knighthead Capital co-founder Thomas Wagner as vice chairman, Certares senior managing director Colin Farmer, Knighthead partner Andrew Shannahan, Apollo partner Christopher Lahoud, and TPG Capital senior adviser and former Ford Motor Co. CEO Mark Fields.Stone and Vincent Intrieri, CEO and founder of VDA Capital Management LLC, will remain on the board.