Hertz 2009 Annual Report Download - page 136

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the Acquisition at an average interest rate of 7.3%. These pre-Acquisition promissory notes currently
have maturities ranging from June 2010 to January 2028.
Convertible Senior Notes
In May and June 2009, we issued $474.8 million in aggregate principal amount of 5.25% convertible
senior notes due January 2014. Our Convertible Senior Notes may be convertible by holders into shares
of our common stock, cash or a combination of cash and shares of our common stock, as elected by us,
initially at a conversion rate of 120.6637 shares per $1,000 principal amount of notes, subject to
adjustment. However, we have a policy of settling the conversion of our Convertible Senior Notes using a
combination settlement, which calls for settling the fixed dollar amount per $1,000 in principal amount in
cash and settling in shares, the excess conversion value, if any. Proceeds from the Convertible Debt
Offering were allocated between ‘‘Debt’’ and ‘‘Additional paid-in capital.’’ The value assigned to the debt
component was the estimated fair value, as of the issuance date, of a similar debt instrument without the
conversion feature, and the difference between the proceeds for the Convertible Senior Notes and the
amount reflected as a debt liability was recorded as ‘‘Additional paid-in capital.’’ As a result, the debt was
recorded at a discount of $117.9 million reflecting its below market coupon interest rate. The debt is
subsequently accreted to its par value over its expected life, with the rate of interest that reflects the
market rate at issuance being reflected in the consolidated statements of operations.
On December 1, 2009, Hertz Holdings made the first semi-annual interest payment of $12.8 million on
the convertible notes. Hertz Holdings made this payment with a combination of cash on hand and
proceeds from the repayment of an inter-company loan from Hertz.
In the future, if our cash on hand and proceeds from the repayment of inter-company loans from Hertz is
not sufficient to pay the semi-annual interest payment, we would need to receive a dividend, loan or
advance from our subsidiaries. However, none of our subsidiaries are obligated to make funds available
to us and certain of Hertz’s credit facilities have requirements that must be met prior to it making
dividends, loans or advances to us. In addition, Delaware law imposes requirements that may restrict
Hertz’s ability to make funds available to Hertz Holdings.
U.S. Fleet Debt
Our ‘‘U.S. Fleet Debt’’ is comprised of the following facilities:
Series 2005 Notes. Hertz Vehicle Financing LLC, or ‘‘HVF,’’ a bankruptcy-remote special purpose entity
wholly-owned by Hertz, entered into an amended and restated base indenture, dated as of
December 21, 2005, with BNY Midwest Trust Company as trustee, or the ‘‘ABS Indenture,’’ and a
number of related supplements to the ABS Indenture, each dated as of December 21, 2005, with BNY
Midwest Trust Company as trustee and securities intermediary, or, collectively, the ‘‘ABS Supplement.’’
On the Closing Date, HVF, as issuer, issued approximately $4,300 million of new medium term asset-
backed notes consisting of 11 classes of notes in two series under the ABS Supplement, the net
proceeds of which were used to finance the purchase of vehicles from related entities and the repayment
or cancellation of existing debt. HVF also issued approximately $1,500 million of variable funding notes
in two series, none of which were funded at closing. In September 2009, the series supplements and
note purchase agreements for the variable funding notes under the Series 2005 notes were terminated.
As of December 31, 2009, $2,871.6 million in borrowings were outstanding under the Series 2005 notes,
net of a $3.4 million discount, with an average interest rate of 4.6%.
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