Hertz 2008 Annual Report Download - page 67

ITEM 1A. RISK FACTORS (Continued)
Despite our current indebtedness levels, we and our subsidiaries may be able to incur substantially
more debt.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The
terms of the instruments governing our indebtedness do not prohibit us or fully prohibit our subsidiaries
from doing so. As of December 31, 2008, our Senior Credit Facilities provided us commitments for
additional aggregate borrowings (subject to borrowing base limitations) of approximately
$1,669.8 million, and permitted additional borrowings beyond those commitments under certain
circumstances. For a detailed description of the amounts we have available under our debt facilities, see
‘‘Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—
Liquidity and Capital Resources—Credit Facilities.’’ As of December 31, 2008, our U.S. Fleet Debt
facilities, our Fleet Financing Facility, our International Fleet Debt facilities, our International ABS Fleet
Financing Facility and our other fleet debt facilities (related to Brazil, Canada, Belgium and the United
Kingdom) provided us commitments for additional aggregate borrowings of approximately
$1,609.8 million, $125.7 million, the foreign currency equivalent of $531.4 million, $326.8 million and
$302.1 million, respectively, subject to borrowing base limitations. If new debt is added to our current
debt levels, the related risks that we now face would increase. In addition, the instruments governing our
indebtedness do not prevent us or our subsidiaries from incurring obligations that do not constitute
indebtedness. On June 30, 2006, Hertz Holdings entered into a $1.0 billion loan facility in order to
finance the payment of a special cash dividend of $4.32 per share to its stockholders on June 30, 2006.
Although this facility was repaid in full with the proceeds from our initial public offering, we cannot assure
you that Hertz Holdings will not enter into similar transactions in the future.
The third-party insurance companies that provide credit enhancements in the form of financial
guarantees of our U.S. Fleet Debt could face financial instability due to factors beyond our control.
MBIA Insurance Corporation, or ‘‘MBIA,’’ and Ambac Assurance Corporation, or ‘‘Ambac,’’ provide
credit enhancements in the form of financial guaranties for our U.S. Fleet Debt, with each providing
guaranties for approximately half of the $4.1 billion in principal amount of the notes that was outstanding
as of December 31, 2008 under our ABS Program. The Series 2008-1 Notes included in our U.S. Fleet
Debt are not subject to any financial guarantee. Each of MBIA and Ambac has been downgraded and is
on review for further credit downgrade or under developing outlook by one or more credit ratings
agencies. We may be required to utilize alternate sources of funding as our outstanding ABS notes
mature, which may not be available on terms as favorable or in amounts comparable to those available
to us under our existing ABS Program, if at all.
An ‘‘event of bankruptcy’’ (as defined in the indentures governing the U.S. Fleet Debt) with respect to
MBIA or Ambac would result in an amortization event under the portion of the U.S. Fleet Debt facilities
guaranteed by the affected insurer. In that event, we would also be required to apply a proportional
amount, or substantially all in the case of insolvency of both insurers, of all rental payments by Hertz to its
special purpose leasing subsidiary and all car disposal proceeds under the applicable facility or series,
or under substantially all U.S. Fleet Debt facilities in the case of insolvency of both insurers, to pay down
the amounts owed under the affected facility or series instead of applying those proceeds to purchase
additional cars and/or for working capital purposes. An insurer ‘‘event of bankruptcy’’ could lead to
consequences that have a material adverse effect on our liquidity if we were unable to negotiate mutually
acceptable new terms with our U.S. Fleet Debt lenders or if alternate funding were not available to us.
After 30 days, an insurer event of bankruptcy would constitute a limited liquidation event of default under
the applicable indenture supplement governing the U.S. Fleet Debt insured by the bankrupt insurer. At
that point, noteholders for the affected series of notes would have the right to instruct the trustee to
exercise all remedies available to secured creditors, including the termination of the master lease under
which Hertz leases its U.S. vehicle fleet and foreclosure of the vehicle fleet, provided that the exercise of
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