Hertz 2007 Annual Report Download - page 106

We believe that cash generated from operations, together with amounts available under the Senior
Credit Facilities, asset-backed financing and other available financing arrangements will be adequate to
permit us to meet our debt service obligations, ongoing costs of operations, working capital needs and
capital expenditure requirements for the foreseeable future. Our future financial and operating
performance, ability to service or refinance our debt and ability to comply with covenants and restrictions
contained in our debt agreements will be subject to future economic conditions and to financial,
business and other factors, many of which are beyond our control. Recent turmoil in the credit markets
and the financial instability of insurance companies providing financial guarantees for asset-backed
securities has reduced the availability of debt financing, which may result in increases in the interest
rates at which lenders are willing to make debt financing available to us. The impact of such an increase
would be more significant than it would be for some other companies because of our substantial debt.
See ‘‘Cautionary Note Regarding Forward-Looking Statements’’ and ‘‘Item 1A—Risk Factors.’’
Financing
Senior Credit Facilities
Senior Term Facility. In connection with the Acquisition, Hertz entered into a credit agreement, dated
December 21, 2005, with respect to its Senior Term Facility with Deutsche Bank AG, New York Branch as
administrative agent and collateral agent, Lehman Commercial Paper Inc. as syndication agent, Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated as documentation agent, and the other
financial institutions party thereto from time to time. The facility consisted of a $2,000.0 million secured
term loan facility (which was decreased in February 2007 to $1,400.0 million) providing for loans
denominated in U.S. dollars, which included a delayed draw facility of $293.0 million (which was utilized
in 2006). In addition, there is a pre-funded synthetic letter of credit facility in an aggregate principal
amount of $250.0 million. On the Closing Date, Hertz utilized $1,707.0 million of the Senior Term Facility
and $182.2 million in letters of credit. As of December 31, 2007, we had $1,362.7 million in borrowings
outstanding under this facility, which is net of a discount of $23.4 million and had issued $242.7 million in
letters of credit. The term loan facility and the synthetic letter of credit facility will mature in December
2012.
Senior ABL Facility. Hertz, Hertz Equipment Rental Corporation and certain other subsidiaries of Hertz
entered into a credit agreement, dated December 21, 2005, with respect to the Senior ABL Facility with
Deutsche Bank AG, New York Branch as administrative agent, Lehman Commercial Paper Inc. as
syndication agent, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated as
documentation agent and the financial institutions party thereto from time to time. This facility provided
(subject to availability under a borrowing base) for aggregate maximum borrowings of $1,600.0 million
(which was increased in February 2007 to $1,800.0 million) under a revolving loan facility providing for
loans denominated in U.S. dollars, Canadian dollars, euros and pounds sterling. Up to $200.0 million of
the revolving loan facility is available for the issuance of letters of credit. On the Closing Date, Hertz
borrowed $206 million under this facility and Matthews Equipment Limited, or ‘‘Matthews,’’ one of
Hertz’s Canadian subsidiaries, borrowed CAN$225 million under this facility, in each case to finance a
portion of the Transactions. Hertz and Hertz Equipment Rental Corporation are the U.S. borrowers under
the Senior ABL Facility and Matthews and its subsidiaries Western Shut-Down (1995) Ltd. and Hertz
Canada Equipment Rental Partnership are the Canadian borrowers under the Senior ABL Facility. At
December 31, 2007, net of a discount of $19.1 million, Hertz and Matthews Equipment Limited
collectively had $191.8 million in borrowings outstanding under this facility and issued $21.4 million in
letters of credit. The Senior ABL Facility will mature in February 2012.
Hertz’s obligations under the Senior Term Facility and the Senior ABL Facility are guaranteed by Hertz
Investors, Inc., its immediate parent and most of its direct and indirect domestic subsidiaries (subject to
certain exceptions, including for subsidiaries involved in the U.S. Fleet Debt facility and similar special
purpose financings), though HERC does not guarantee Hertz’s obligations under the Senior ABL Facility
because it is a borrower under that facility. In addition, the obligations of the Canadian borrowers under
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