Hertz 2008 Annual Report Download - page 70

ITEM 1A. RISK FACTORS (Continued)
the current terms of our asset-backed financing facilities, we may be required to materially increase the
enhancement levels regarding the fleet vehicles provided by such bankrupt manufacturer. The actual
enhancement level that we would be required to provide would be dependent on a number of factors,
and could be almost all of the net book value, of the portion of our fleet vehicles then provided by such
bankrupt manufacturer. Accordingly, as we decrease the number of General Motors vehicles in our fleet,
this exposure as it relates to General Motors is expected to be reduced throughout 2009. If we were
required to provide this additional enhancement following a bankruptcy of a car manufacturer, including
Ford or General Motors, we believe that we would be able to satisfy such obligations with a combination
of our available cash, our availability under our Senior ABL Facility or any existing over-enhancement
that we may then have under our Fleet Financing Facilities. However, in the case of Ford or General
Motors, such use would materially reduce our liquidity available for operations or the refinancing of
maturing debt. See ‘‘—Risks Related to Our Business—We could be harmed by a further decline in the
results of operations or financial condition of the manufacturers of our cars.’’
Any disruption in our ability to refinance or replace our existing asset-backed financing or to continue to
finance new car acquisitions through asset-backed financing, or any negative development in the terms
of the asset-backed financing available to us, could cause our cost of financing to increase significantly
and have a material adverse effect on our liquidity, financial condition and results of operations. The
assets that collateralize our asset-backed financing will not be available to satisfy the claims of our
general creditors.
The terms of our Senior Credit Facilities permit us to finance or refinance new car acquisitions through
other means, including secured financing that is not limited to the assets of special purpose entity
subsidiaries. We may seek in the future to finance or refinance new car acquisitions, including cars
excluded from the ABS Program, through such other means. No assurances can be given, however, as
to whether such financing will be available, or as to whether the terms of such financing will be
comparable to the debt issued under the ABS Program. In addition, the borrowing capacity under our
Senior ABL Facility is based upon the value of the assets securing such facility; therefore in periods
where the value of the assets securing this facility decline or we sell such assets without replacing them,
the availability of funds under the Senior ABL Facility will be reduced and we will have fewer funds
available to purchase new cars or equipment.
We may not be able to generate sufficient cash to service all of our debt or refinance our
obligations and may be forced to take other actions to satisfy our obligations under such
indebtedness, which may not be successful.
Our ability to make scheduled payments on our indebtedness, or to refinance our obligations under our
debt agreements, will depend on the financial and operating performance of us and our subsidiaries,
which, in turn, will be subject to prevailing economic and competitive conditions and to the financial and
business risk factors, many of which may be beyond our control, as described under ‘‘—Risks Related to
Our Business’’ above. We cannot assure you that we will maintain a level of cash flows from operating
activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be
forced to reduce or delay capital expenditures, sell assets, seek to obtain additional equity capital or
restructure our indebtedness. In the future, our cash flows and capital resources may not be sufficient for
payments of interest on and principal of our debt, and such alternative measures may not be successful
and may not permit us to meet scheduled debt service obligations. In addition, the recent worldwide
credit crisis will likely make it more difficult for us to refinance our indebtedness on favorable terms, or at
all and we cannot assure you that we will be able to refinance our indebtedness or obtain additional
financing, particularly because of our high levels of debt and the debt incurrence restrictions imposed by
the agreements governing our debt, as well as prevailing market conditions. In the absence of such
50