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Hertz Global Holdings proposes a shareholders payout in its Chapter 11 bankruptcy exit plan

By Pavankumar on Apr 22, 2021 | 03:32 AM IST


Hertz Global Holdings Inc [HTZ] announced its decision that it has agreed to provide some value to equity holders when it leaves chapter 11. This vindicated the individual traders who have insisted the company is worth something despite its bankruptcy filing.

On Wednesday, Hertz released its chapter 11 exit plan. Here, the company proposed that current stockholders would receive warrants to purchase up to 4% of the restructured business. This is termed to be the first time the company has said it is worth enough to distribute some value to its owners.

Hertz lawyer Thomas Lauria said during a court hearing on Wednesday, “The shareholder distribution would amount to a recovery of 60 to 70 cents per share, being a material return to equity.” The company needs to get approval from the US Bankruptcy court. If approved by the U.S. Bankruptcy Court in Wilmington, Del., that outcome would make Hertz a relative rarity in corporate bankruptcies, in which equity ranks behind debt and most often is wiped out. Hertz shares closed at $1.74 on Wednesday, down 8.4% on the day but up 36% year to date.

The company said its proposed distribution to equity is part of a restructuring proposal put forth by Dundon Capital Partners LLC, Centerbridge Partners LP, and Warburg Pincus LLC. These companies were selected by Hertz earlier this month after a competitive process to finance the company’s exit from chapter 11.

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