Hertz 2008 Annual Report Download - page 69

ITEM 1A. RISK FACTORS (Continued)
notes, or the ‘‘Series 2008-1 Notes.’’ The Series 2008-1 Notes are not subject to any financial guarantee.
Consequently, if our access to asset-backed financing were reduced or were to become significantly
more expensive for any reason, including as a result of the deterioration in the markets for asset-backed
securities or as a result of deterioration in the credit ratings or the insolvency of the financial guarantors,
we cannot assure you that we would be able to refinance or replace our existing asset-backed financing
or continue to finance new car acquisitions through asset-backed financing on favorable terms, or at all.
Our asset-backed financing capacity could be decreased, our financing costs and interest rates could
be increased, or our future access to the financial markets could be limited, as a result of risks and
contingencies, many of which are beyond our control, including, without limitation:
• the acceptance by credit markets of the structures and structural risks associated with our asset-
backed financing programs, particularly in light of recent developments in the markets for
mortgage-backed securities;
• rating agencies that provide credit ratings for our asset-backed indebtedness, MBIA and Ambac,
or other third parties requiring changes in the terms and structure of our asset-backed financing,
including increased credit enhancement (i) in connection with the incurrence of additional or
refinancing of existing asset-backed debt, (ii) upon the occurrence of external events, such as
changes in general economic and market conditions or further deterioration in the credit ratings
of our principal car manufacturers, or (iii) or otherwise;
• the terms, availability and credit market acceptance of third party credit enhancement at the time
of the incurrence of additional or refinancing of existing asset-backed debt or the amount of cash
collateral required in addition to or instead of such guaranties;
• the insolvency of one or more of the third-party credit enhancers that insure our asset-backed
indebtedness, or downgrading of their credit ratings;
• the insolvency or deterioration of the financial condition of one or more of our principal car
manufacturers; or
• changes in law that negatively impact our asset-backed financing structure.
The occurrence of certain of the events listed above could result, among other things, in the occurrence
of an amortization event pursuant to which the proceeds of sales of cars that collateralize the affected
facility or series of asset-backed notes would be required to be applied to the payment of principal and
interest on the affected facility or series, rather than being reinvested in our car rental fleet. The
continuation of an amortization event for 30 days, as well as, certain other events, including defaults by
Hertz and its affiliates in the performance of covenants set forth in the agreements governing the U.S.
Fleet Debt, could result in the occurrence of a liquidation event pursuant to which the trustee or holders
of asset-backed notes of the affected series would be permitted to require the sale of the assets
collateralizing that series. If such an event were to occur, we would not be able to effect short-term
borrowings under the variable funding notes issued at the closing of the Acquisition, although we might,
depending on the circumstances be able to borrow on a short-term basis under the Series 2008-1 Notes,
subject to borrowing base availability. Any of these consequences could affect our liquidity and our
ability to maintain sufficient fleet levels to meet customer demands and could trigger cross defaults
under certain of our other debt instruments.
In addition to the consequences described above, a bankruptcy event with respect to a car manufacturer
that supplies cars for our fleet could have other consequences under our asset-backed financing
program. The program cars manufactured by any such company would need to be removed from our
fleet or re-designated as non-program vehicles, which would require us to furnish additional collateral
enhancement associated with these program vehicles. In the event that any of these car manufacturers,
including Ford or General Motors, were to commence bankruptcy reorganization proceedings, under
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