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Hertz Just Filed Their Ch.11 Reorganization Plan Which Will Wipe Out Shareholders

Mar. 02, 2021 11:02 AM ETHertz Global Holdings, Inc. (HTZ)102 Comments
WYCO Researcher profile picture
WYCO Researcher


  • Hertz Global filed their Ch.11 reorganization plan and disclosure statement on very early on March 2.
  • As expected, shareholders to receive no recovery under the plan, and the shares will be cancelled on the plan effective date.
  • Unsecured noteholders are getting either 70% cash recovery or for qualified institutional investors, new equity via a rights offer.
  • Hertz wants to exit bankruptcy by August.
  • Hertz lost $11.44 per share last year.

Hertz Global Holdings (HTZGQ) (NASDAQ:HTZ) filed their reorganization plan (docket 2912) and disclosure statement (docket 2913) early on March 2. The plan will wipeout current Hertz shareholders. Knighthead Capital and their co-investors have made up to $4.2529 billion new equity commitment, including their rights offer backstop. Hertz continues to lose millions of dollars per month and it will be interesting to see if they can create a smaller viable business model post bankruptcy.

Ch.11 Reorganization Plan

The Ch.11 reorganization plan includes a $1.9698 billion rights offer and a total of $4.2529 billion equity commitment from Knighthead/co-investors, including their backstop commitment. The plan also includes having a $1.5 billion credit facility, plus a $1.0 billion secured loan when they exit bankruptcy. There is a hearing scheduled for April 16 to approve the disclosure statement. Under the metrics in the recently approved Key Employee Incentive Plan (docket 2539), Hertz is expecting to exit bankruptcy before August 1. (The disclosure statement docket is 2913, but it has not been actually filed at the time of writing this article.)

Recoveries Under The Reorganization Plan

*Shareholders (Class 11)

No recovery under the plan. The company warned investors in various filings that there most likely would be no recovery, including when Hertz sold about 14 million shares at an average price of $2.09 to gullible investors last June-they bought effectively worthless stock. As per the plan: "Existing Hertz Parent Interests shall be cancelled and released without any distribution on account of such Interests". HTZGQ shares will continue to trade until the plan effective date, which is expected in August. They shares will be cancelled on the effective date.

*Unsecured Noteholders (Class 5)

Unsecured note claims will receive either receive a 70& cash recovery or "Reorganized Hertz Parent Interests pursuant to the exercise of its Pro Rata share of

This article was written by

WYCO Researcher profile picture
B.A. in Economics; M.S. in Finance. I usually write about distressed companies and companies in Ch.11 bankruptcy. I am semi-retired after spending decades in investments.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (102)

Nice call. Shares up 446% since the article was published. Congrats!
SeattleGoldMiner profile picture
At the time the article was written what he said was 100% accurate. This outcome is an aberration from what takes place in most Chapter 11 situations, and I would highly recommend that you not use this as a "model" for your future investing.

Wyco is someone who not only has the background to appraise these situations, but also puts in the legwork, time, effort and energy required to bring "frontline" information to SA readers. Once again, when this was written it was a correct interpretation of what had transpired in the court.
kbaba profile picture
Company chooses a BK plan in which the common shares go to zero
via Bloomburg

"The supporting noteholders have agreed to support the exchange of the unsecured funded debt claims against Hertz for about 48.2% of the equity in the reorganized company and the right to purchase an additional $1.6 billion of equity. They have also committed to purchase, or otherwise backstop, the full $1.6 billion of equity being offered to the holders of Hertz’s unsecured funded debt.

Holders of 725 million euros ($852 million) of European vehicle notes will be paid in cash in full under the plan, while creditors of general unsecured claims will get about 75 cents on the dollar, it said. Hertz’s existing equity will be canceled and receive no distribution."
Nobody can explain why unsecured is trading at par?
kbaba profile picture
@Jasonlipiner because the unsecured will also get shares in the new company which will make up for the cash they won't get
03 Apr. 2021
Bonds getting paid at par, GUCs getting paid in full, and Avis trading at a level where stock is worth over $10. How does Walrath ignore recovery for equity. No reason why equity value should go to bonds.
kbaba profile picture
@zabi0 Unsecured bonds getting either 70% or 80% and the rest comes from giving bonds new equity
kbaba profile picture
Company issues a press release today stating that each of competing bankruptcy plans call for the current common shares to be cancelled to zero.  

Common shares rally on the news 10%, having tripled since the original bad news of proposing the common would go to zero was announced.

Completely insane and I can't believe millions are shares are still available to short

I mean, if some company announced it was being bought out in 6 months for double the share price, the shares would obviously soar but when a company announces their shares will go to zero until all circumstances, it's as if nothing happened. I know this is the way BK stocks trade in these times but just can't grok the dynamics of how this happens and wonder if it's even legal if the facts of manipulation were known


"Additionally, the holders of the Company's unsecured funded debt would receive common equity in the reorganized company. The Company's existing common shares would be cancelled."
@kbaba ad hoc equity committee is forming.
kbaba profile picture
@Stoussi Seems way too late for that. Got a link or any form of proof?
kbaba profile picture
@Stoussi even if true, means nothing as Ad Hoc means unofficial. Common shareholders are already assumed to be voting "no" on all proposed plans by the court at this time
I hope you all took advantage of the big dip and rose almost 200% since early March
Why is unsecured trading for 95c?
I own $1 puts. How much time will they give between the announced date of cancellation & the actual date of cancellation. I need to buy stock in order to exercise?
kbaba profile picture
@desspb45 actual date of cancelation could be as late as August (or even later if any wrench were to happen. It's unlikely they will announce the actual effective date (which shares are actually cancelled in the April 16th meeting.
Thanks for the article. I am a bondholder of the 7.00% due 2028. It is a small bond issue(27 million remaining) and not specifically mentioned in the court dockets. Do you know what class of creditor I am? In the original plan announced, Senior bondholders are getting 100.00%. Subs are getting 70.00 or the equity option. The 7.00% bondholders are not specifically categorized as either. With all of your research, can you ascertain which class these specific bonds fall under?
Henrik Alex profile picture

Not sure what you mean. Apparently you are owning the company's 7.000% Unsecured Promissory Notes due 2028 which means you will get 70% of face value.
Where is the bailout in the stimulus bill? Airlines get theirs. Guess enough politicians didn’t own hertz.
kbaba profile picture
@craigwhaler6 Hertz is in Bankruptcy. That is itself a bailout, except for common shareholders
The bonds are around 80 per par right now. It is higher than the proposed price. Is there any reason for that?
Henrik Alex profile picture

Yes, certain bond investors will be able to exchange their bond holdings into common equity which apparently looks attractive to some bond investors.
kbaba profile picture
@Henrik Alex Not attractive enough to shine a glimmer of hope to common shareholding bag holders hoping for a miracle here though
WYCO Researcher profile picture
The "efficient market" theory assumes "rational" investors. Clearly trading in HTZGQ shows the market is full of irrational investors.
kbaba profile picture
@WYCO Researcher I wonder if we really have any idea what's happening with the trading of these BK stocks that manage to pump 40% in a day in the face of eventual doom?
Do the shares get bought up by manipulators that can move the price around regardless of their worthlessness? Or are retail traders really that stupid and powerful at the same time?

Basically WTF??!!
WYCO Researcher profile picture
@kbaba Retail is that STUPID. Sometimes I read these foolish statements on various websites. I always think that people are not that stupid and the statements are just a joke-but then I read SA articles that assert Sears is worth $17 per share-how can this garbage get approved by editors.

They also assert the judge will throw them "something"-what fairytales do they read?
WYCO Researcher profile picture
@kbaba Many of the Q stocks are up today
So what should I do if I’m an unsecured note holder? Right now the market is trading these around 80c. If the best option is to sell them in the open market how much time do I have to do so before they are converted into cash?
Anyone here thinks there's no money to be made here?
Im so confused is HTZGQ a good investment or not
Henrik Alex profile picture

What exactly you did not understand in "Hertz Just Filed Their Ch.11 Reorganization Plan Which Will Wipe Out Shareholders"?
@stockguymatt No it is not, the company is going bankrupt, so invest in anything else.
@stockguymatt lets see what reddit thinks.
Anyone betting this company would be a long term win for retail needs to sit in penalty box for a bit. I never short but heavy on long dated put options here was an easy choice. Good Luck
Retail bondholders always get the short end. They are going to be forced to take 70 while the institutional holders are going to be allowed to participate in a rights offering for the stock. The fact that the bonds are selling for about 80 today indicates that the institutions know the stock will be worth more.
I thought this was the fairy dust market where shareholders get rich owning bankrupt companies.
@WYCO Researcher another phenomenal write up! In my experience I’ve seen material changes between plan being published and going live (eg public vs private, convenience claims treatment etc). Given you’re vastly more experienced at this than me what odds would you give on the 70 cash and qualified participation bar sticking through to confirmation? Tks!
JC PENNEY filed bankruptcy as well but I think stockholder shares were not wiped out.
All depends on the judge and court...
Henrik Alex profile picture

Shareholders were wiped out and it doesn't really depend on the judge / court. It depends on the approved plan of reorganization which in 98 out of hundred cases will be confirmed by the court.
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