Hertz: Another Instance of Vote Rigging:
- Last week, Hertz was in the market with $500 million of add-on notes under its existing 1L indenture.
- Concurrently, Hertz launched a solicitation of consents for amendments to the 1L indenture.
- The Company is rigging the vote by having the new add-on notes be deemed to consent to the amendments.
- We explain the proposed amendments, explain how the vote rigging works, and consider whether the proposed amendments may not actually be allowed under the Indenture.
- Traditionally, bondholders have expected to be protected by indenture covenants unless those protections are amended or waived with consent from a majority of existing holders, but Hertz’ vote-rigging move raises the possibility that other issuers may follow suit, eroding these expectations.
Overview
Earlier this year, The Hertz Corporation (the “Company”) issued $750 million of 12.625% First Lien Senior Secured Notes due 2029 (the “Initial Notes”) under a June 28, 2024 Indenture (as supplemented by a July 19, 2024 First Supplemental Indenture, the “Indenture”). Last week, the Company marketed $500 million of add- on notes under the Indenture (the “Additional Notes” and, together with the Initial Notes, the “Notes”). The Additional Notes were marketed via a December 5, 2024 Preliminary Offering Memorandum (the “Preliminary OM”).
Concurrently with the Additional Notes offering, the Company commenced a consent solicitation with respect to certain proposed amendments to the Indenture (the “Proposed Amendments”). The most interesting feature of this consent solicitation is that the Company is rigging the vote by having the Additional Notes be deemed to consent. Due to this vote rigging, the Company has already locked in sufficient votes to ensure that the Proposed Amendments are approved. We explain the Proposed Amendments, explain how the vote rigging works, and consider whether the Proposed Amendments may not actually be allowed under the Indenture.
Disclosures
This report is the product of Covenant Review. Covenant Review is an affiliate of Fitch Group, which also owns Fitch Ratings. Covenant Review is solely responsible for the content of this report, which was produced independently from Fitch Ratings.
All content is copyright 2024 by Covenant Review, LLC. The recipient of this report may not redistribute or republish any of the information contained herein, in part or whole, without the express written permission of Covenant Review, LLC and we will criminally and civilly prosecute copyright violations against firms and individuals who unlawfully distribute our work. The use of this report is further limited as described in the subscription agreement between Covenant Review, LLC and the subscriber. The information contained in this report is intended to generally describe certain covenant features. This report is not comprehensive, is not confidential to any person or entity, and should not be treated as a substitute for professional advice in any specific situation. Covenant Review, LLC makes no warranty, express or implied, as to the fitness of the information in this report for any particular purpose. If you require legal or other expert advice, you should seek the services of a qualified attorney or investment professional. Covenant Review, LLC does not render, and nothing in this report constitutes, legal or investment advice, and recipients of this report will not be treated or considered by Covenant Review, LLC as clients or customers except as described in the subscription agreement between Covenant Review, LLC and the subscriber. Any covenants discussed herein may be based on those contained in the preliminary offering memorandum or draft credit agreement distributed by the issuer or borrower in connection with the issuance of the bonds or loans, and the covenants published in the final offering memorandum or contained in the final indenture or credit agreement may differ from those presented herein. The reader should be aware that the final interpretation of any bond indenture, credit agreement, security or guarantee agreement, or other bond or loan documents, will generally be determined by the issuer or its counsel, or in certain circumstances, by a court or administrative body.
US Insight: The opaque side of BDCs, private credit’s most transparent market
Dive into the intriguing complexities and valuation challenges within the most transparent segment of the private credit market: the Business Development Companies (BDCs).
US Private Credit Quarterly Insight: Q3 brings private credit client base, BDC valuations, BSL repricings into focus
Explore the latest trends and insights from Q3 in the private credit market, including the expansion of the private credit client base, BDC valuation complexities, and notable BSL repricings.
