Hertz 2008 Annual Report Download - page 159

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Hertz, Hertz Equipment Rental Corporation and certain other subsidiaries of Hertz entered into a credit
agreement, dated December 21, 2005, with respect to the Senior ABL Facility with Deutsche Bank AG,
New York Branch as administrative agent, Lehman Commercial Paper Inc. as syndication agent, Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated as documentation agent and the
financial institutions party thereto from time to time. This facility provided (subject to availability under a
borrowing base) for aggregate maximum borrowings of $1,600.0 million (which was increased in
February 2007 to $1,800.0 million) under a revolving loan facility providing for loans denominated in U.S.
dollars, Canadian dollars, euros and pounds sterling. Up to $200.0 million of the revolving loan facility is
available for the issuance of letters of credit. On the Closing Date, Hertz borrowed $206 million under this
facility and Matthews Equipment Limited, or ‘‘Matthews,’’ one of Hertz’s Canadian subsidiaries,
borrowed CAD$225 million under this facility, in each case to finance a portion of the Transactions. Hertz
and Hertz Equipment Rental Corporation are the U.S. borrowers under the Senior ABL Facility and
Matthews and its subsidiaries Western Shut-Down (1995) Ltd. and Hertz Canada Equipment Rental
Partnership are the Canadian borrowers under the Senior ABL Facility. At December 31, 2008, net of a
discount of $13.3 million, Hertz and Matthews Equipment Limited collectively had no borrowings
outstanding under this facility and issued $115.2 million in letters of credit. The Senior ABL Facility will
mature in February 2012. At the borrower’s election, the interest rates per annum applicable to the loans
under the Senior ABL Facility will be based on a fluctuating rate of interest measured by reference to
either (1) adjusted LIBOR plus a borrowing margin or (2) an alternate base rate plus a borrowing margin.
The borrower will pay customary commitment and other fees in respect of the Senior ABL Facility.
Hertz’s obligations under the Senior Term Facility and the Senior ABL Facility are guaranteed by Hertz
Investors, Inc., its immediate parent and most of its direct and indirect domestic subsidiaries (subject to
certain exceptions, including for subsidiaries involved in the U.S. Fleet Debt facility and similar special
purpose financings), though HERC does not guarantee Hertz’s obligations under the Senior ABL Facility
because it is a borrower under that facility. In addition, the obligations of the Canadian borrowers under
the Senior ABL Facility are guaranteed by their respective subsidiaries, if any, subject to limited
exceptions. The lenders under each of the Senior Term Facility and the Senior ABL Facility have received
a security interest in substantially all of the tangible and intangible assets of the borrowers and
guarantors under those facilities, including pledges of the stock of certain of their respective
subsidiaries, subject in each case to certain exceptions (including in respect of the U.S. Fleet Debt, the
International Fleet Debt and, certain other secured fleet financing). Consequently, these assets will not
be available to satisfy the claims of our general creditors.
The Senior Credit Facilities contain a number of covenants that, among other things, limit or restrict the
ability of the borrowers and the guarantors to dispose of assets, incur additional indebtedness, incur
guarantee obligations, prepay other indebtedness, make dividends and other restricted payments,
create liens, make investments, make acquisitions, engage in mergers, change the nature of their
business, make capital expenditures, or engage in certain transactions with affiliates. Under the Senior
Term Facility, the borrowers are subject to financial covenants, including a requirement to maintain a
specified leverage ratio and a specified interest coverage ratio for specified periods. Also, under the
Senior ABL Facility, if the borrowers fail to maintain a specified minimum level of borrowing capacity, they
will then be subject to financial covenants under such facility, including a specified leverage ratio and a
specified fixed charge coverage ratio of one to one. Failure to comply with the financial covenants under
the Senior Credit Facilities would result in a default under the credit agreements governing the Senior
Credit Facilities and, absent a waiver or an amendment from the lenders, permit the acceleration of all
outstanding borrowings under the Senior Credit Facilities. As of December 31, 2008, Hertz was in
compliance with such financial covenants. The Senior Credit Facilities are subject to certain mandatory
prepayment requirements and provide for customary events of default.
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