Hertz 2007 Annual Report Download - page 112

In May 2006, in connection with the forecasted issuance of the permanent take-out international asset-
based facilities, HIL purchased two swaptions for e3.3 million, to protect itself from interest rate
increases. These swaptions gave HIL the right, but not the obligation, to enter into three year interest rate
swaps, based on a total notional amount of e600 million at an interest rate of 4.155%. The swaptions
were renewed twice in 2007, prior to their scheduled expiration dates of March 15, 2007 and
September 5, 2007, at a total cost of e2.7 million, and now expire on June 5, 2008. As of December 31,
2007 and December 31, 2006, the fair value of the swaptions was e6.2 million (or $9.2 million) and
e1.3 million (or $1.7 million), respectively, which is reflected in our consolidated balance sheet in
‘‘Prepaid expenses and other assets.’’ During the years ended December 31, 2007 and 2006, the fair
value adjustment related to these swaptions was a gain of $3.9 million and a loss of $2.5 million,
respectively, which was recorded in our consolidated statement of operations in ‘‘Selling, general and
administrative’’ expenses. Additionally, as of December 31, 2007, we have incurred $40.4 million of
financing costs related to the anticipated take-out international asset-based facilities, which are recorded
on our consolidated balance sheet in ‘‘Prepaid expenses and other assets.’’ We expect to enter into
these take-out international asset-based facilities upon completion of the structuring and amortize the
costs over the term of the facility.
On December 21, 2007, HIL, certain of its subsidiaries (all of which are organized outside the United
States), Hertz Europe Limited, as Coordinator, BNP Paribas and The Royal Bank of Scotland plc, as
Mandated Lead Arrangers, Calyon, as Co-Arranger, BNP Paribas, The Royal Bank of Scotland plc, and
Calyon, as Joint Bookrunners, BNP Paribas, as Facility Agent, BNP Paribas, as Security Agent, BNP
Paribas, as Global Coordinator, and the financial institutions named therein, entered into an amendment
agreement, or the ‘‘Amendment Agreement,’’ amending the revolving bridge loan facilities agreement,
dated December 21, 2005 and amended as of March 21, 2007 (as further amended by the Amendment
Agreement, or the ‘‘SBFA’’). The Amendment Agreement, which became effective on December 21,
2007, was entered into for the purpose of (i) amending certain terms affecting the margins on the
revolving bridge loan facilities established by the SBFA, and (ii) effecting certain technical and
administrative changes to the terms of the facilities. Additionally, the intercreditor deed pertaining to the
International Fleet Debt facilities was amended to, among other things, remove the Brazilian facility.
Fleet Financing Facility. On September 29, 2006, Hertz and Puerto Ricancars, Inc., a Puerto Rican
corporation and wholly-owned indirect subsidiary of Hertz, or ‘‘PR Cars,’’ entered into a credit
agreement to finance the acquisition of Hertz’s and/or PR Cars’ fleet in Hawaii, Kansas, Puerto Rico and
St. Thomas, the U.S. Virgin Islands, dated as of September 29, 2006, or the ‘‘Fleet Financing Facility,’’
with the several banks and other financial institutions from time to time party thereto as lenders, Gelco
Corporation d.b.a. GE Fleet Services, or the ‘‘Fleet Financing Agent,’’ as administrative agent, as
collateral agent for collateral owned by Hertz and as collateral agent for collateral owned by PR Cars.
Affiliates of Merrill Lynch & Co. are lenders under the Fleet Financing Facility.
The Fleet Financing Facility provides (subject to availability under a borrowing base) a revolving credit
facility of up to $275 million to Hertz and PR Cars. On September 29, 2006, Hertz borrowed $124 million
under this facility to refinance other debt. As of December 31, 2007, Hertz and PR Cars had
$150.4 million (net of a $1.6 million discount) and $20.0 million, respectively, of borrowings outstanding
under this facility. The borrowing base formula is subject to downward adjustment upon the occurrence
of certain events and (in certain other instances) at the permitted discretion of the Fleet Financing Agent.
The Fleet Financing Facility will mature in December 2011 but Hertz and PR Cars may terminate or
reduce the commitments of the lenders thereunder at any time. The Fleet Financing Facility is subject to
mandatory prepayment in the amount by which outstanding extensions of credit to Hertz or PR Cars
exceed the lesser of the Hertz or PR Cars borrowing base, as applicable, and the commitments then in
effect.
The obligations of each of the borrowers under the Fleet Financing Facility are guaranteed by each of
Hertz’s direct and indirect domestic subsidiaries (other than subsidiaries whose only material assets
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