Hertz 2008 Annual Report Download - page 120

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
determined by reference to, among other things, 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 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, in
each case, less certain investments and other restricted payments.
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.
Fleet Financing Facilities
U.S. Fleet Debt. In connection with the Acquisition, HVF entered into an amended and restated base
indenture, dated as of December 21, 2005, with BNY Midwest Trust Company as trustee, or the ‘‘ABS
Indenture,’’ and a number of related supplements to the ABS Indenture, each dated as of December 21,
2005, with BNY Midwest Trust Company as trustee and securities intermediary, or, collectively, the ‘‘ABS
Supplement.’’ On the Closing Date, HVF, as issuer, issued approximately $4,300 million of new medium
term asset-backed notes consisting of 11 classes of notes in two series under the ABS Supplement, the
net proceeds of which were used to finance the purchase of vehicles from related entities and the
repayment or cancellation of existing debt. HVF also issued approximately $1,500 million of variable
funding notes in two series, none of which were funded at closing. As of December 31, 2008,
$3,683.3 million were outstanding in the form of these medium term notes and $430.2 million were
outstanding in the form of variable funding notes.
Each class of notes has an expected final payment date approximately three, four or five years from the
Closing Date. The variable funding notes will be funded through the bank multi seller commercial paper
market. The assets of HVF, including the U.S. car rental fleet owned by HVF and certain related assets,
collateralize the U.S. Fleet Debt and Pre-Acquisition ABS Notes. Consequently, these assets will not be
available to satisfy the claims of our general creditors.
The various series of U.S. Fleet Debt have either fixed or floating rates of interest. The interest rate per
annum applicable to any floating rate notes (other than any variable funding asset-backed debt) is based
on a fluctuating rate of interest measured by reference to one-month LIBOR plus a spread, although HVF
intends to maintain hedging transactions so that it will not be required to pay a rate in excess of 4.87%
per annum in order to receive the LIBOR amounts due from time to time on such floating rate notes. The
interest rate per annum applicable to any variable funding asset-backed debt is either the blended
average commercial paper rate, if funded through the commercial paper market, or if commercial paper
is not being issued, the greater of the prime rate or the federal funds rate, or if requisite notice is
provided, the Eurodollar rate plus a spread.
On October 24, 2007, supplements to the ABS Indenture were amended to increase the maximum
non-eligible vehicle amount from 65% to 85% of the adjusted aggregate asset amount, thus effectively
increasing the amount of vehicles which are not subject to manufacturer repurchase programs that can
be included in the borrowing base under the ABS Program.
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