Hertz 2009 Annual Report Download - page 101

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
General Motors Corporation filed for bankruptcy in June 2009, which we will refer to as ‘‘Old General
Motors,’’ however, we do not believe that this will have a material long-term impact on our business,
financial condition or results of operations, because:
•Old General Motors paid us, and New General Motors, as defined below, continues to pay us, all
of the amounts owed under our repurchase programs;
•With the approval of the bankruptcy court, Old General Motors assumed the vehicle repurchase
programs it has with us and assigned the repurchase programs to a newly formed company,
General Motors Company referred to as ‘‘New General Motors’’;
•New General Motors purchased the assets of Old General Motors from bankruptcy quickly; and
•The resale value of vehicles manufactured by Old General Motors has not declined following its
filing.
In the event of a bankruptcy of a car manufacturer, our liquidity would be impacted by several factors
including reductions in fleet residual values, as discussed above, and the risk that we would be unable to
collect outstanding receivables due to us from such bankrupt manufacturer. In addition, 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. 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 have a significant amount of debt that will mature over the next several years. The aggregate
amounts of maturities of debt for each of the twelve-month periods ending December 31 (in millions of
dollars) are as follows: 2010, $4,574.6 (including $1,598.9 of other short-term borrowings); 2011, $122.4;
2012, $1,785.6; 2013, $250.8; 2014, $2,900.6; after 2014, $896.4. For a discussion of these maturities,
see ‘‘Contractual Obligations.’’ The $1,598.9 million of short-term borrowings included in the 2010
maturity are revolving in nature and do not expire in 2010. As a result of our successful refinancing efforts
in 2009 and the strategic cost reduction actions taken in 2008 and 2009 as well as those planned for
2010, we believe that we will remain in compliance with our debt covenants and that cash generated
from operations, together with amounts available under various liquidity facilities will be adequate to
permit us to meet our debt service obligations, ongoing costs of operations, working capital needs and
capital expenditure requirements for the next twelve months. Our future financial and operating
performance, ability to service or refinance our debt and ability to comply with covenants and restrictions
contained in our debt agreements will be subject to future economic conditions and to financial,
business and other factors, many of which are beyond our control.
MBIA and Ambac provide credit enhancements in the form of financial guaranties for our 2005 Notes,
with each providing guaranties for approximately half of the $2,871.6 million in principal amount of the
2005 Notes that was outstanding as of December 31, 2009, all of which matures in 2010.
An event of bankruptcy with respect to MBIA or Ambac between now and November 2010 would result in
an amortization event under the portion of the 2005 Notes guaranteed by the affected insurer. In
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