Hertz 2009 Annual Report Download - page 100

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
cancellation in full of the Terminated VFNs. The Terminated VFNs had expected final maturity dates
ranging from November 2009 to November 2010 and we had an aggregate of approximately $2.0 billion
of total capacity (prior to borrowing base or other limitations) under the Terminated VFNs. In effect we
replaced the $2.0 billion of total capacity under the Terminated VFNs with the $2.1 billion of capacity that
we have under the Series 2009-1 Notes while extending the expected final maturity date to January 2012.
In October 2009 HVF issued $1.2 billion in aggregate principal amount of new medium term notes (3 and
5 year) Series 2009-2 rental car asset backed notes, or the ‘‘Series 2009-2 Notes.’’ The 3 year notes carry
a 4.26% coupon (4.30% yield) and the 5 year notes carry a 5.29% coupon (5.35% yield) with expected
final maturities in 2013 and 2015, respectively. The advance rate on the notes is approximately 66%. In
general, we expect to use the Series 2009-2 Notes to replace the Series 2005-1 and Series 2005-2 rental
car asset backed notes, or the ‘‘2005 Notes,’’ as they mature in 2010.
Based on all that we have been able to accomplish in 2009, our current availability under our various
credit facilities and our business plan, we believe we have sufficient liquidity to meet our 2010 debt
maturities. We still need to refinance approximately $1.2 billion of our international fleet debt that
matures in December 2010 and we are currently in discussions with banks and lenders to review our
refinancing options; however there can be no assurance that we will be able to refinance this
indebtedness on terms comparable to our recent refinancings, or at all.
A significant number of cars that we purchase are subject to repurchase by car manufacturers under
contractual repurchase or guaranteed depreciation programs. Under these programs, car
manufacturers agree to repurchase cars at a specified price or guarantee the depreciation rate on the
cars during a specified time period, typically subject to certain car condition and mileage requirements.
We use this specified price or guaranteed depreciation rate to calculate our asset-backed financing
capacity. If any manufacturer of our cars fails to fulfill its repurchase or guaranteed depreciation
obligations, due to bankruptcy or otherwise, our asset-backed financing capacity could be decreased,
or we may be required to materially increase the credit enhancement levels relating to the financing of
the fleet vehicles provided by such bankrupt manufacturer under certain of our Fleet Financing Facilities.
For a discussion of the risks associated with a manufacturer’s bankruptcy or our reliance on asset-
backed financing, see ‘‘Item 1A—Risk Factors—Risks Related to Our Business—The failure of a
manufacturer of cars that we own to fulfill its obligations under a repurchase or guaranteed depreciation
program could expose us to loss on those cars and adversely impact our outstanding asset-backed
financing facilities, which could in turn adversely affect our liquidity and results of operations’’ and ‘‘Risks
Related to Our Substantial Indebtedness—Our reliance on asset-backed financing to purchase cars
subjects us to a number of risks, many of which are beyond our control.’’
We rely significantly on asset-backed financing to purchase cars for our domestic and international car
rental fleet. For further information concerning our asset-backed financing programs, see ‘‘Financing’’
below. The amount of financing available to us pursuant to these programs depends on a number of
factors, many of which are outside our control. In the past several years, Ford and Old General Motors
(as defined below), which are the significant suppliers of cars to us on both a program and non-program
basis, have experienced deterioration in their operating results and significant declines in their credit
ratings.
Immediately prior to Chrysler LLC’s bankruptcy, less than 1% of our fleet was comprised of Chrysler LLC
vehicles, so its bankruptcy filing has not had a material impact on our business, financial condition or
results of operations.
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