Hertz 2007 Annual Report Download - page 148

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
to protect the counterparties to the HVF swaps in the event of an ‘‘amortization event’’ under the asset-
backed notes agreements. In the event of an amortization event, the amount by which the principal
balance on the floating rate portion of the U.S. Fleet Debt is reduced, exclusive of the originally
scheduled amortization, becomes the notional amount of the differential swaps, and is transferred to
Hertz. See Note 13—Financial Instruments.
HVF is subject to numerous restrictive covenants under the ABS Indenture and the other agreements
governing the U.S. Fleet Debt, including restrictive covenants with respect to liens, indebtedness, benefit
plans, mergers, disposition of assets, acquisition of assets, dividends, officers’ compensation,
investments, agreements, the types of business it may conduct and other customary covenants for a
bankruptcy-remote special purpose entity. The U.S. Fleet Debt is subject to events of default and
amortization events that are customary in nature for U.S. rental car asset-backed securitizations of this
type. The occurrence of an amortization event or event of default could result in the acceleration of
principal of the notes and a liquidation of the U.S. car rental fleet.
International Fleet Debt. In connection with the Acquisition, Hertz International, Ltd., or ‘‘HIL,’’ a
Delaware corporation organized as a foreign subsidiary holding company and a direct subsidiary of
Hertz, and certain of its subsidiaries (all of which are organized outside the United States), together with
certain bankruptcy-remote special purpose entities (whether organized as HIL’s subsidiaries or as
non-affiliated ‘‘orphan’’ companies), or ‘‘SPEs,’’ entered into revolving bridge loan facilities providing
commitments to lend, in various currencies an aggregate amount equivalent to approximately
$2,768.9 million (calculated as of December 31, 2007), subject to borrowing bases comprised of rental
vehicles and related assets of certain of HIL’s subsidiaries (all of which are organized outside the United
States) or one or more SPEs, as the case may be, and rental equipment and related assets of certain of
HIL’s subsidiaries organized outside North America or one or more SPEs, as the case may be. As of the
closing date of the Acquisition, the foreign currency equivalent of $1,781 million of indebtedness under
the International Fleet Debt facilities was issued and outstanding under these facilities. At closing, Hertz
utilized the proceeds from these financings to finance a portion of the Transactions. As of December 31,
2007, the foreign currency equivalent of $1,881.6 million in borrowings was outstanding under these
facilities, net of a $0.3 million discount. These facilities are referred to collectively as the ‘‘International
Fleet Debt facilities.’’
The International Fleet Debt facilities consist of four revolving loan tranches (Tranches A1, A2, B and C),
each subject to borrowing bases comprising the revenue earning equipment and related assets of each
applicable borrower or the corresponding fleet owned entity. A portion of the Tranche C loan is available
for the issuance of letters of credit.
The obligations of the borrowers under the International Fleet Debt facilities are guaranteed by HIL, and
by the other borrowers and certain related entities under the applicable tranche, in each case subject to
certain legal, tax, cost and other structuring considerations. The obligations and the guarantees of the
obligations of the Tranche A borrowers under the Tranche A2 loans are subordinated to the obligations
and the guarantees of the obligations of such borrowers under the Tranche A1 loans. Subject to legal,
tax, cost and other structuring considerations and to certain exceptions, the International Fleet Debt
facilities are secured by a material part of the assets of each borrower, certain related entities and each
guarantor, including pledges of the capital stock of each borrower and certain related entities. The
obligations of the Tranche A borrowers under the Tranche A2 loans and the guarantees thereof are
secured on a junior second priority basis by any assets securing the obligations of the Tranche A
borrowers under the Tranche A1 loans and the guarantees thereof. That guarantee is secured equally
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