Hertz 2008 Annual Report Download - page 123

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
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 North America), 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
$1,565.0 million (calculated as of December 31, 2008), subject to borrowing bases comprised of rental
vehicles and related assets of certain of HIL’s subsidiaries (all of which are organized outside North
America) 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,
2008, the foreign currency equivalent of $1,027.1 million in borrowings was outstanding under these
facilities, net of a $6.5 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. The assets that collateralize the
International Fleet Debt facilities will not be available to satisfy the claims of Hertz’s general creditors.
The facilities under each of the tranches mature five years from the Closing Date of the Acquisition.
Subject to certain exceptions, the loans are subject to mandatory prepayment and reduction in
commitment amounts equal to the net proceeds of specified types of take-out financing transactions
and asset sales.
The interest rates per annum applicable to loans under the International Fleet Debt facilities are based on
fluctuating rates of interest measured by reference to one-month LIBOR, Euro inter-bank offered rates, or
‘‘EURIBOR,’’ or their equivalents for local currencies as appropriate (in the case of the Tranche A1 and
A2 loans); relevant local currency base rates (in the case of Tranche B loans); or one-month EURIBOR
(in the case of the Tranche C loans), in each case plus a borrowing margin. In addition, the borrowers
under each of Tranche A1, Tranche A2, Tranche B and Tranche C of the International Fleet Debt facilities
will pay fees on the unused commitments of the lenders under the applicable tranche, and other
customary fees and expenses in respect of such facilities, and the Tranche A1 and A2 borrowing margins
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