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The car rental company accepted a bid from a private equity consortium to get rid of the bankruptcy protection sought a year ago, after which Hertz shareholders could recover hundreds of millions of dollars.
Hertz said that in an in-court auction held in a Delaware court earlier this week, one group including Knighthead Capital, Certares Opportunities and Apollo Global Management outperformed another private equity consortium.
hertz File for bankruptcy By May 2020, the flu pandemic has suppressed demand for business and leisure travel, and the decline in used car prices has forced the company to deposit cash with its car lenders.
The winning of the bid brings the total value of the Hertz company to approximately US$7 billion. The Knighthead Group initially signed an acquisition agreement in March to acquire Hertz for approximately $5 billion. This triggered a round of counterattacks from competitors including Centerbridge Partners, Warburg Pincus and Dundon Capital.
The transaction will clear all of Hertz’s existing creditors as the company will raise more than $7 billion in new debt and equity. Overall, the net debt of the reorganized Hertz company will be less than $1 billion.
Current shareholders will receive approximately $1.50 per share in cash, as well as a small portion of the restructured Hertz stock, as well as the opportunity to obtain warrants or purchase shares.
A person involved in the process stated that the value of the package may be close to $8 per share, although this number depends on the overall value of the reorganized Hertz and the technical valuation of the warrants.
Hertz’s stock trading price on Wednesday exceeded $5, which means that the market value is about $800 million.
Both bidding groups initially proposed to eliminate existing shareholders, which is a common practice in bankruptcy.Last June, the company tried Sell shares To partly fund the bankruptcy, because retail dealers using the Robinhood app pushed Hertz’s stock price above $5.
After the U.S. Securities and Exchange Commission expressed concern about the sale of potentially worthless securities the company recognized, Hertz withdrew the offering.
A group of hedge funds accumulated Hertz’s stock earlier this year, arguing in court that the company has positive equity value. These investors eventually cooperated with the Knighthead Group and provided some proposed equity financing in the winning bid.
The amazing growth of Hertz’s market value reflects people’s optimism about the strong recovery of the US economy and the rapid recovery of leisure tourism.
Hertz stakeholders will now vote on the plan, and the bankruptcy court must also confirm the plan at a hearing on June 10. The company hopes to withdraw from bankruptcy protection at the end of June in time before the peak travel season begins.
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