Hertz share: the bankrupt company turns out to be an extraordinary exception.


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Bankruptcies usually mean shareholders are devastated.

Hertz Global Holdings

turns out to be an extraordinary exception.

Periods of vacuum in the rental car industry led to a bidding war for the company in bankruptcy court. The result: creditors are paid in full and shareholders can really expect a significant payment.

Shares of Hertz (ticker: HTZGQ) rose more than 50%, to $ 6, after a group of investors led by Knighthead Capital Management, Certares Opportunities and funds managed by

Global management of Apollo

(APO) won an auction last month for the company which will likely see Hertz exit Chapter 11 by the end of June. Hertz stock could see further gains as the company is valued at a lower price than its rival

Budget Opinion Group

(CAR), whose shares have risen more than 100% this year, to $ 85.

Avis has a market value of $ 6 billion. A similarly sized Hertz, with projected net debt of $ 1 billion or less, will come out of bankruptcy with a better record than Avis, which has approximately $ 3 billion in debt.

Car rental companies are expected to thrive this summer – and beyond – as a shortage of vehicles drives up prices. Higher prices for used cars mean less depreciation when rental companies sell their cars. The industry stands to benefit as an oligopoly dominated by Hertz, which also owns the Dollar and Thrifty brands, Avis Budget and the private company.

Hertz shareholders will receive a package consisting of approximately $ 1.50 per share in cash, a 3% stake in the reorganized company and warrants for 18% of the company with a rare 30-year term. Warrants represent most of the value. The long maturity (most warrants have a term of 10 years or less) should make them valuable once they start trading.

Hertz financial advisers valued the package at $ 7.36 a share, but it could ultimately be worth more.

“The complexity of bankruptcy and its emergence has created an opportunity for current and potential shareholders,” said Andy Taylor, managing director of Carronade Capital, an investment firm in Darien, Connecticut, which has been actively involved throughout. along the restructuring. “If the revamped Hertz closes the valuation gap to Avis, HTZGQ holders are expected to make $ 10 or more.”

Hertz investors can be reassured that the Knighthead / Certares investor group is investing around $ 3 billion to buy new shares in Hertz.

Investors passionate about the car rental industry have focused on Avis because many are unable or unwilling to own shares in a bankrupt company. That should change when Hertz emerges with a potential value of around $ 6.5 billion.

Write to Andrew Bary at [email protected]

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