Hertz 2008 Annual Report Download - page 122

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
scheduled amortization, becomes the notional amount of the differential swaps and is transferred to
Hertz. There was no payment associated with these differential swaps and their notional amounts are
and will continue to be zero unless (1) there is an amortization event, which causes the amortization of
the loan balance, or (2) the debt is prepaid.
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.
Series 2008-1 Notes. On September 12, 2008, HVF completed the closing of a new variable funding
note facility referred to as the Series 2008-1 Notes. This series is not subject to any financial guarantee.
The aggregate principal amount of such facility is not to exceed $825.0 million and such facility is
available to HVF on a revolving basis, subject to borrowing base availability. The Series 2008-1 Notes
were not funded on the closing date.
The Series 2008-1 Notes are secured primarily by, among other things, a pledge in (i) collateral owned
by HVF, including substantially all of the U.S. car rental fleet that Hertz uses in its daily rental operations, a
portion of which is subject to repurchase programs with vehicle manufacturers, (ii) the related
manufacturer receivables, (iii) all rights of HVF under a lease agreement between Hertz and HVF relating
to such U.S. car rental fleet, and (iv) all monies on deposit from time to time in certain collection and cash
collateral accounts and all proceeds thereof. The assets of HVF, including the U.S. car rental fleet owned
by HVF, will not be available to satisfy the claims of our general creditors.
The expected final maturity date of the Series 2008-1 Notes is August 2010. The Series 2008-1 Notes
bear interest at variable rates partially based upon their rating. The Series 2008-1 Notes are currently
rated ‘‘A’’ by Standard & Poor’s Ratings Services and ‘‘A3’’ by Moody’s Investors Service.
Pursuant to a note purchase agreement, HVF sold the Series 2008-1 Notes to each of Deutsche Bank
AG, New York Branch, Nantucket Funding Corp. LLC, (an affiliate of Deutsche Bank AG, New York
Branch), Sheffield Receivables Corporation (an affiliate of Barclays Bank PLC), and Merrill Lynch
Mortgage Capital Inc. The Series 2008-1 Notes were issued pursuant to a series supplement to HVF’s
indenture, or the ‘‘Indenture,’’ with The Bank of New York Mellon Trust Company, N.A., as trustee.
The Series 2008-1 Notes are subject to events of default and amortization events that are customary in
nature for U.S. rental car asset-backed securitizations of this type, including non-payment of principal or
interest, violation of covenants, material inaccuracy of representations or warranties, failure to maintain
certain enhancement levels and insolvency or certain bankruptcy events. The occurrence of an
amortization event or event of default could result in the acceleration of principal of the Series 2008-1
Notes and the liquidation of vehicles in the U.S. car rental fleet.
HVF is subject to numerous restrictive covenants under the Indenture and related agreements, 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.
102