Hertz 2007 Annual Report Download - page 64

We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to
permit us to pay the principal, premium, if any, and interest on our indebtedness.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be
forced to reduce or delay capital expenditures, sell assets, seek to obtain additional equity capital or
restructure our indebtedness. In the future, our cash flows and capital resources may not be sufficient for
payments of interest on and principal of our debt, and such alternative measures may not be successful
and may not permit us to meet scheduled debt service obligations. We also cannot assure you that we
will be able to refinance any of our indebtedness or obtain additional financing, particularly because of
our high levels of debt and the debt incurrence restrictions imposed by the agreements governing our
debt, as well as prevailing market conditions. In the absence of such operating results and resources, we
could face substantial liquidity problems and might be required to dispose of material assets or
operations to meet our debt service and other obligations. The instruments governing our indebtedness
restrict our ability to dispose of assets and restrict the use of proceeds from any such dispositions. We
cannot assure you we will be able to consummate those sales, or, if we do, what the timing of the sales
will be or whether the proceeds that we realize will be adequate to meet debt service obligations when
due.
A significant portion of our outstanding indebtedness is secured by substantially all of our
consolidated assets. As a result of these security interests, such assets would only be available to
satisfy claims of our general creditors or to holders of our equity securities if we were to become
insolvent to the extent the value of such assets exceeded the amount of our indebtedness and
other obligations. In addition, the existence of these security interests may adversely affect our
financial flexibility.
Indebtedness under our Senior Credit Facilities is secured by a lien on substantially all our assets (other
than assets of foreign subsidiaries), including pledges of all or a portion of the capital stock of certain of
our subsidiaries. Our Senior Notes and Senior Subordinated Notes are unsecured and therefore do not
have the benefit of such collateral. Accordingly, if an event of default were to occur under our Senior
Credit Facilities, the senior secured lenders under such facilities would have a prior right to our assets, to
the exclusion of our general creditors, including the holders of our Senior Notes and Senior
Subordinated Notes. In that event, our assets would first be used to repay in full all indebtedness and
other obligations secured by them (including all amounts outstanding under our Senior Credit Facilities),
resulting in all or a portion of our assets being unavailable to satisfy the claims of our unsecured
indebtedness. Furthermore, many of the subsidiaries that hold our U.S. and international car rental fleets
in connection with our asset-backed financing programs are intended to be bankruptcy remote and the
assets held by them may not be available to our general creditors in a bankruptcy unless and until they
are transferred to a non-bankruptcy remote entity. As of December 31, 2007, substantially all of our
consolidated assets, including our car and equipment rental fleets, have been pledged for the benefit of
the lenders under our Senior Credit Facilities or are subject to securitization facilities in connection with
our U.S. Fleet Debt and International Fleet Debt facilities. As a result, the lenders under these facilities
would have a prior claim on such assets in the event of our bankruptcy, insolvency, liquidation or
reorganization, and we may not have sufficient funds to pay all of our creditors and holders of our
unsecured indebtedness may receive less, ratably, than the holders of our senior debt, and may not be
fully paid, or may not be paid at all, even when other creditors receive full payment for their claims. In that
event, holders of our equity securities would not be entitled to receive any of our assets or the proceeds
therefrom. As discussed below, the pledge of these assets and other restrictions may limit our flexibility
in raising capital for other purposes. Because substantially all of our assets are pledged under these
financing arrangements, our ability to incur additional secured indebtedness or to sell or dispose of
assets to raise capital may be impaired, which could have an adverse effect on our financial flexibility.
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