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A New Hertz Chapter 11 Bankruptcy Plan Still Gives Shareholders Nothing

Apr. 05, 2021 9:22 AM ETHertz Global Holdings, Inc. (HTZ)43 Comments
WYCO Researcher profile picture
WYCO Researcher


  • Hertz filed a second amended Chapter 11 reorganization plan on April 3.
  • Current Hertz shareholders still get no recovery under the amended plan.
  • Unsecured noteholders get 48.2% of the new Hertz stock and can participate in a rights offer to buy 38.4% of the new stock.
  • Dunlan, Centerbridge, and Warburg Pincus are the new plan sponsors replacing Certares and Knighthead.
  • Disclosure hearing is currently set for April 16.

Hertz Car Rental Company Close To Bankruptcy According To News Reports
Photo by Justin Sullivan/Getty Images News via Getty Images

A second amended Ch.11 reorganization plan was filed by Hertz Global Holdings (OTCPK:HTZGQ) on April 3 (docket 3598) that has major changes for some claim holders, such as

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 am/we are short BTU. 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 (43)

Steve Moore profile picture
Just an FYI for anyone reading this article and the comments.

LOTS has changed since it was written. HTZGQ is expected to emerge from bankruptcy approximately 6/30/21.

Existing HTZGQ common shareholders are expected to get three things: 1) $1.53 in cash; 2) approximately 1 share of the new Hertz for every share they currently own; and 3) approximately 2 warrants for every 3 common shares they own. The warrants will have a 30-year life.

Also, the warrants will be worth far more than the cash that is being paid.
kbaba profile picture
@Steve Moore " 2) approximately 1 share of the new Hertz for every share they currently own; and 3) approximately 2 warrants for every 3 common shares they own. The warrants will have a 30-year life."

These ratios aren't remotely true, not even close. More like 1 new share of Hertz for every 11 hertz shares they already own etc
chris_dress profile picture
Wyco: while it is true Htz proposed selling shares, they ultimately didn’t.
Henrik Alex profile picture

They did. From the 10-K:

Open Market Sale Agreement

In June 2020, subsequent to approval from the Bankruptcy Court and pursuant to a prospectus supplement to the Registration Statement, Hertz Global entered into an open market sale agreement under which it may offer and sell, from time to time, shares of its common stock, par value $0.01 per share, having an aggregate offering price of up to $500 million. Prior to its suspension on June 15, 2020 and ultimate termination on June 18, 2020, Hertz Global issued 13,912,368 shares under the ATM Program for net proceeds of approximately $28 million, which is included in non-vehicle restricted cash in the accompanying consolidated balance sheet as of December 31, 2020.
Excellent article. Question - what happens to a put option when an OTC stock is "extinguished"?
Expect more aggressive bids to come. Can’t imagine 6.2 bn will be the last bid.. this will shoot up very soon
kbaba profile picture
@pats12 Company has been in BK for 11 months. The last minute wrangling shouldn't be the time for these games but here we are
@kbaba agree but this seems to be how it’s playing out and the business outlook is very rosy as cars have been sold off and now it’s worth more than the debt especially in this environment. Try booking a rental car and see the prices if you can even get one.
saephan1 profile picture
@pats12 completely agree with you
Librarian Capital profile picture
From the Financial Times:

Robinhood traders might have had a point on Hertz
Car rental company’s value rises as bidding war breaks out during restructuring

"All changed late on Thursday ... In a new salvo, Knighthead/Certares made a proposal that values Hertz at $6.2bn, and pays off all current debtholders at par ... Also part of the financing equation is the chance for current shareholders to buy $750m of new Hertz equity. Hertz shares jumped 40 per cent on Friday to $1.73 on investor hopes that they have a future value."
xerty profile picture
Fitch on HTZ debt structures and their creditworthiness. Worth a read if you’re wondering about the risks of an equity recovery and such.

SeattleGoldMiner profile picture
Jay Yoon profile picture
Good article and agree with the conclusions. Bonds are trading above par, AVIS is trading at a huge multiple, and the rental car sector should see a sharp increase in demand over the coming months, all of which could lead to some recovery for the equity. Likely a toss-up whether or not the equity is a zero, so I don't like it above $1, but if the price gets to around $0.20 or less then the risk-reward gets compelling. Probably won't get there before April 16th, so I'll likely be watching this play out from the sidelines.
Thank you for your update! I still own Hertz bonds. Does that mean if the plans approves, I will get stocks from the new company instead of cash as the previous plan indicated?
Henrik Alex profile picture

Unless you are an an accredited investor or qualified institutional buyer you will still be paid in cash.
@Henrik Alex I just read the docket 3601. What the author mentioned is on page 24. It mentioned that only QIB is eligible for the rights offer, but it didn't say that individual bond holder is excluded from the stock offer. Could you clarify where you saw this cash offer?
Henrik Alex profile picture

If only accredited investors are eligible for the rights offering, retail bondholders apparently won't.
James Angel, CFA profile picture
Thank you for a very thoughtful and well-researched article! I hope that you update your analysis when the valuation appendix to the disclosure document is released. It would be useful to see your analysis of that.
Henrik Alex profile picture
Thanks for updating investors on the new plan.
Librarian Capital profile picture
Thanks for writing this; the conclusion makes sense.

I am short $500 of this (via a spreadbet) as a joke with a friend so, unusually for me on this site, I have done no research on something that I am writing a comment on.

Just one question I hope you don't mind answering - when will the stock become incontrovertibly worthless so that my broker pays out?
kbaba profile picture
@Librarian Capital Nobody knows the date for sure. If things go as the company expects and is projecting, stock will be zero sometime in June although delays happen in BK with legal tangles so hard to be really sure
Librarian Capital profile picture
@kbaba Thanks.
kbaba profile picture
"I would normally would consider HTZGQ a strong sell based on the Ch.11 reorganization plan. Because of the very, very irrational market and because I do not have a good handle on how Judge Mary Walrath views rights offers and equity valuations"

Given that the stock still sells for $1.40 and there are plenty of shares to short at at 28% borrow, how much recovery would be remotely possible in the rare case the judge determines the unsecured are getting too rich a payout? (seems unlikely given that the judge had already disallowed an equity committee and company has collected enough votes to confirm their BK plan from all the creditors )
Hi WYCO the very recent ruling in the Chesapeake Chapter 11 case basically upheld the ruling in the BTU case. ‘New money investments gains do not count towards claims recoveries, gains only represent the return on new investments.
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