Hertz Global Holdings Announces $250 Million Exchangeable Senior Notes Offering
Hertz Global Holdings, Inc. (NASDAQ: HTZ), a leading global provider of vehicle rental services, today announced that its wholly-owned indirect subsidiary, The Hertz Corporation (“Hertz Corp.”), intends to launch a private offering of exchangeable senior notes. The offering, subject to market and other conditions, will consist of $250 million in aggregate principal amount of Exchangeable Senior Notes due 2030 (the “Notes”). This private placement will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).
Hertz Corp. also anticipates granting the initial purchasers of the Notes an option to acquire, for settlement within 13 days following the date the Notes are first issued, up to an additional $37.5 million in aggregate principal amount of the Notes. This option provides the company flexibility to expand the offering depending on investor demand and prevailing market conditions.
Use of Proceeds
The proceeds from the issuance of the Notes will be allocated to multiple strategic purposes. A portion of the net proceeds will fund the cost of entering into capped call transactions, designed to manage potential dilution arising from the exchangeable nature of the Notes. The remainder of the net proceeds will be applied toward the partial redemption or repurchase of Hertz Corp.’s outstanding Senior Notes due 2026, which is targeted for completion on or before December 31, 2025.
Should the initial purchasers exercise their option to purchase additional Notes, Hertz Corp. intends to allocate part of the additional net proceeds to fund further capped call transactions, with the remaining funds applied to the partial redemption or repurchase of the Senior Notes due 2026. These steps are intended to strengthen the company’s balance sheet and manage debt maturities efficiently.
Terms of the Notes
The Notes will bear interest, payable semi-annually in arrears on April 1 and October 1 each year, beginning April 1, 2026. Specific terms of the Notes, including the interest rate and the exchange rate, will be determined through negotiations between Hertz Corp. and the initial purchasers. The Notes are set to mature on October 1, 2030, unless they are repurchased, redeemed, or exchanged prior to maturity according to the terms outlined in the indenture governing the Notes.
Initially, the Notes will be exchangeable only upon satisfaction of certain conditions and during specified periods prior to July 1, 2030. After this date, holders may exchange the Notes at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. The exchangeable feature allows Hertz Corp. to deliver, at its discretion, cash, shares of common stock of the Company (“Common Stock”), or a combination of both upon exchange.
Repurchase and Redemption Rights
Holders of the Notes will have the right to require Hertz Corp. to repurchase all or a portion of their Notes at 100% of the principal amount plus accrued and unpaid interest, in the event of certain corporate events that constitute a “fundamental change” as defined in the governing indenture.
Hertz Corp. will not be permitted to redeem the Notes before October 6, 2028. Between October 6, 2028, and the 26th scheduled trading day prior to maturity, Hertz Corp. may redeem all or a portion of the Notes under certain conditions, including if the last reported sale price per share of Common Stock reaches at least 130% of the exchange price for a specified period. Any redemption would occur at a cash price equal to the principal amount plus accrued and unpaid interest to, but excluding, the redemption date.
Guarantees
The Notes are expected to be guaranteed by Hertz Global Holdings, Inc., Hertz Corp.’s direct parent company Rental Car Intermediate Holdings, LLC, and each of Hertz Corp.’s existing domestic subsidiaries. Future subsidiaries that guarantee indebtedness under Hertz Corp.’s first lien credit facilities or other specified debt obligations are also expected to provide guarantees. These guarantees enhance the security of the Notes and strengthen investor confidence.
Derivative Transactions and Market Considerations
Hertz Corp. has been informed that an affiliate of Pershing Square Capital Management, L.P., a major investor, intends to enter into privately negotiated cash-settled total return swap transactions (the “Swap Transactions”) with a swap counterparty affiliated with one of the initial purchasers. Through these swaps, Pershing Square will obtain long economic exposure to approximately $100 million notional amount of Common Stock. The Swap Transactions have a fixed term of 36 months, although the counterparty may terminate them under certain conditions. Hertz Corp. and the Company are not parties to these transactions.
The Swap Transactions are designed to facilitate derivative transactions between the counterparty and investors in the Notes, allowing investors to hedge their exposure. These transactions may influence the market price of Common Stock concurrently with or shortly after the pricing of the Notes, potentially affecting the initial exchange price of the Notes.
Additionally, the swap counterparty or its affiliates may adjust their hedge positions through derivative transactions or secondary market trading of Common Stock or other securities of the Company. Such activities could influence the market price of the Common Stock or Notes, which may affect holders’ ability to exchange the Notes and the value received upon exchange.
Participation by CK Amarillo LP
Certain limited partners of CK Amarillo LP (“CK Amarillo”) have expressed an indication of interest to purchase up to $25 million aggregate principal amount of the Notes. Any purchase would occur on the same terms as for other investors. However, these indications of interest are non-binding, and there is no assurance that CK Amarillo will be allocated Notes in the offering.
Capped Call Transactions
Hertz Corp. and the Company intend to enter into privately negotiated cash-settled capped call transactions with one or more initial purchasers or financial institutions. These transactions are structured to offset potential dilution of Common Stock upon any exchange of Notes and manage any excess cash payments Hertz Corp. may be obligated to make beyond the principal amount of exchanged Notes.
In connection with establishing initial hedges, the option counterparties or their affiliates may engage in derivative transactions or purchase Common Stock around the pricing date of the Notes. These activities may influence the market price of Common Stock or Notes. Post-pricing, the counterparties may modify hedge positions or engage in additional market activity to manage exposure, which could affect the market value of both Common Stock and Notes and the consideration received by holders upon exchange.
Unlike standard exchangeable debt offerings paired with capped calls, Hertz’s Notes can be settled entirely in cash, stock, or a combination. Consequently, hedge activities by counterparties immediately preceding expiration or early termination of capped call transactions may reduce or prevent increases in the market price of Common Stock, potentially impacting holders’ exchange outcomes.
Offering and Regulatory Considerations
The Notes and guarantees will only be offered to qualified institutional buyers under Rule 144A of the Securities Act. The Notes, guarantees, and any Common Stock issuable upon exchange have not been registered under the Securities Act or other securities laws and may not be offered or sold absent applicable registration exemptions.
Hertz’s announcement emphasizes that this press release is not an offer to sell or purchase Notes or Common Stock. It does not constitute a solicitation in any jurisdiction where such activity would be unlawful.
