Hertz 2007 Annual Report Download - page 107

the Senior ABL Facility are guaranteed by their respective subsidiaries, if any, subject to limited
exceptions. The lenders under each of the Senior Term Facility and the Senior ABL Facility have received
a security interest in substantially all of the tangible and intangible assets of the borrowers and
guarantors under those facilities, including pledges of the stock of certain of their respective
subsidiaries, subject in each case to certain exceptions (including in respect of the U.S. Fleet Debt, the
International Fleet Debt and, in the case of the Senior ABL Facility, other secured fleet financing).
Consequently, these assets will not be available to satisfy the claims of our general creditors.
The Senior Credit Facilities contain a number of covenants that, among other things, limit or restrict the
ability of the borrowers and the guarantors to dispose of assets, incur additional indebtedness, incur
guarantee obligations, prepay other indebtedness, make dividends and other restricted payments,
create liens, make investments, make acquisitions, engage in mergers, change the nature of their
business, make capital expenditures, or engage in certain transactions with affiliates. Under the Senior
Term Facility, the borrowers are subject to financial covenants, including a requirement to maintain a
specified leverage ratio and a specified interest coverage ratio for specified periods (the requirements for
both of these ratios vary throughout the term of the Senior Term Facility). Also, under the Senior ABL
Facility, if the borrowers fail to maintain a specified minimum level of borrowing capacity, they will then be
subject to financial covenants under such facility, including a specified leverage ratio (the ratio varies
throughout the term of the Senior ABL Facility) and a specified fixed charges coverage ratio of one to
one. Failure to comply with the financial covenants under the Senior Credit Facilities would result in a
default under the credit agreements governing the Senior Credit Facilities and, absent a waiver or an
amendment from the lenders, permit the acceleration of all outstanding borrowings under the Senior
Credit Facilities. As of December 31, 2007, Hertz was in compliance with such financial covenants. The
Senior Credit Facilities are subject to certain mandatory prepayment requirements and provide for
customary events of default.
On June 30, 2006, Hertz entered into amendments to each of its Senior Term Facility and Senior ABL
Facility. The amendments provide, among other things, for additional capacity under the covenants in
these credit facilities to enter into certain sale and leaseback transactions, to pay cash dividends and
make loans to Hertz Holdings that would, among other things, provide Hertz Holdings with cash for the
payment of interest on Hertz Holdings’ indebtedness (including, but not limited to, the Hertz Holdings
Loan Facility) and, in the case of the amendment to the Senior Term Facility, to make investments. The
ability of Hertz to pay cash dividends and make loans to Hertz Holdings remains subject to Hertz’s
meeting specified financial tests, as described above, as well as requirements imposed by applicable
Delaware law. The amendment to the Senior Term Facility also permits Hertz to use proceeds of the
$293 million Delayed Draw Term Loan to repay borrowings outstanding under the Senior ABL Facility, in
addition to repaying certain other outstanding indebtedness of Hertz. On May 15, 2006, Hertz borrowed
approximately $84.9 million under the Delayed Draw Term Loan and used the proceeds thereof to repay
its 6.5% Senior Notes due 2006. Hertz borrowed the remaining portion of the Delayed Draw Term Loan
on July 10, 2006, and applied the proceeds thereof to repay borrowings outstanding under the Senior
ABL Facility.
On February 9, 2007, Hertz entered into an amendment to its Senior Term Facility. The amendment was
entered into for the purpose of (i) lowering the interest rates payable on the Senior Term Facility by up to
50 basis points from the interest rates previously payable thereunder, and revising financial ratio
requirements for specific interest rate levels; (ii) eliminating certain mandatory prepayment
requirements; (iii) increasing the amounts of certain other types of indebtedness that Hertz and its
subsidiaries may incur outside of the Senior Term Facility; (iv) permitting certain additional asset
dispositions and sale and leaseback transactions; and (v) effecting certain technical and administrative
changes to the Senior Term Facility. During the year ended December 31, 2007, Hertz recorded an
expense of $14.0 million, in its consolidated statement of operations, in ‘‘Interest, net of interest income,’’
associated with the write-off of debt costs in connection with the amendment of the Senior Term Facility.
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