Hertz 2007 Annual Report Download - page 146

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2007, $2,131.4 million and $600.0 million in borrowings were outstanding under the
Senior Notes and Senior Subordinated Notes, respectively. Prior to October 1, 2006, our Senior Euro
Notes were not designated as a net investment hedge of our Euro-denominated net investments in our
foreign operations. For the nine months ended September 30, 2006, we incurred unrealized exchange
transaction losses of $19.2 million resulting from the translation of these Euro-denominated notes into
the U.S. dollar, which are recorded in our consolidated statement of operations in ‘‘Selling, general and
administrative’’ expenses. On October 1, 2006, we designated our Senior Euro Notes as an effective net
investment hedge of our Euro-denominated net investment in our foreign operations. As a result of this
net investment hedge designation, as of December 31, 2007, $27.8 million of losses, which is net of tax
of $18.3 million, attributable to the translation of our Senior Euro Notes into the U.S. dollar, are recorded
in our consolidated balance sheet in ‘‘Accumulated other comprehensive income (loss).’’ The Senior
Notes will mature in January 2014, and the Senior Subordinated Notes will mature in January 2016. The
Senior Dollar Notes bear interest at a rate per annum of 8.875%, the Senior Euro Notes bear interest at a
rate per annum of 7.875% and the Senior Subordinated Notes bear interest at a rate per annum of 10.5%.
Hertz’s obligations under the indentures are guaranteed by each of its direct and indirect domestic
subsidiaries that is a guarantor under the Senior Term Facility.
Both the indenture for the Senior Notes and the indenture for the Senior Subordinated Notes contain
covenants that, among other things, limit the ability of Hertz and its restricted subsidiaries, described in
the respective indentures, to incur more debt, pay dividends, redeem stock or make other distributions,
make investments, create liens, transfer or sell assets, merge or consolidate and enter into certain
transactions with Hertz’s affiliates. The indenture for the Senior Subordinated Notes also contains
subordination provisions and limitations on the types of senior subordinated debt that may be incurred.
The indentures also contain certain mandatory and optional prepayment or redemption provisions and
provide for customary events of default.
The restrictive covenants in the indentures governing the Senior Notes and the Senior Subordinated
Notes permit Hertz to make loans, advances, dividends or distributions to Hertz Holdings in an amount
determined by reference to consolidated net income for the period from October 1, 2005 to the end of
the most recently ended fiscal quarter for which consolidated financial statements of Hertz are available,
so long as Hertz’s consolidated coverage ratio remains greater than or equal to 2.00:1.00 after giving pro
forma effect to such restricted payments. Hertz is also permitted to make restricted payments to Hertz
Holdings in an amount not exceeding the greater of a specified minimum amount and 1% of
consolidated tangible assets (which payments are deducted in determining the amount available as
described in the preceding sentence), and in an amount equal to certain equity contributions to Hertz.
Hertz is also permitted to make restricted payments to its parent company in an amount not to exceed in
any fiscal year 6% of the aggregate gross proceeds received by Hertz through a contribution to equity
capital from such offering to enable the public parent company to pay dividends to its stockholders.
On January 12, 2007, Hertz completed exchange offers for its outstanding Senior Notes and Senior
Subordinated Notes whereby over 99% of the outstanding notes were exchanged for a like principal
amount of new notes with identical terms that were registered under the Securities Act of 1933 pursuant
to a registration statement on Form S-4.
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