Hertz 2008 Annual Report Download - page 72

ITEM 1A. RISK FACTORS (Continued)
• incur additional indebtedness;
• incur guarantee obligations;
• prepay other indebtedness or amend other debt instruments;
• pay dividends;
• create liens on assets;
• enter into sale and leaseback transactions;
• make investments, loans or advances;
• make acquisitions;
• engage in mergers or consolidations;
• change the business conducted by us; and
• engage in certain transactions with affiliates.
In addition, under our Senior Credit Facilities, we are required to comply with financial covenants. If we
fail to maintain a specified minimum level of borrowing capacity under our Senior ABL Facility, we will
then be subject to financial covenants under that facility, including covenants that will obligate us to
maintain a specified debt to Corporate EBITDA leverage ratio and a specified Corporate EBITDA to fixed
charges coverage ratio. The financial covenants in our Senior Term Facility include obligations to
maintain a specified debt to Corporate EBITDA leverage ratio and a specified Corporate EBITDA to
interest expense coverage ratio for specified periods. Both our Senior ABL Facility and our Senior Term
Facility also impose limitations on the amount of our capital expenditures. Our ability to comply with
these covenants in future periods will depend on our ongoing financial and operating performance,
which in turn will be subject to economic conditions and to financial, market and competitive factors,
many of which are beyond our control. Our ability to comply with these covenants in future periods will
also depend substantially on the pricing of our products and services, our success at implementing cost
reduction initiatives and our ability to successfully implement our overall business strategy. Our ability to
comply with the covenants and restrictions contained in our Senior Credit Facilities and the indentures
for our Senior Notes and Senior Subordinated Notes may be affected by economic, financial and
industry conditions beyond our control. The breach of any of these covenants or restrictions could result
in a default under either our Senior Credit Facilities or the indentures that would permit the applicable
lenders or holders of the Senior Notes and Senior Subordinated Notes, as the case may be, to declare all
amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. In
any such case, we may be unable to make borrowings under the Senior Credit Facilities and may not be
able to repay the amounts due under the Senior Credit Facilities and the Senior Notes and Senior
Subordinated Notes. This could have serious consequences to our financial condition and results of
operations and could cause us to become bankrupt or insolvent.
We are also subject to operational limitations under the terms of our ABS Program. For example, there
are contractual limitations with respect to the cars that secure our ABS Program. These limitations are
based on the identity or credit ratings of the cars’ manufacturers, the existence of satisfactory
repurchase or guaranteed depreciation arrangements for the cars or the physical characteristics of the
cars. As a result, we may be required to limit the percentage of cars from any one manufacturer or
increase the credit enhancement related to the program and may not be able to take advantage of
certain cost savings that might otherwise be available through manufacturers. If these limitations
prevented us from purchasing, or retaining in our fleet, cars on terms that we would otherwise find
advantageous, our results of operations could be adversely affected.
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