Hertz 2009 Annual Report Download - page 58

ITEM 1A. RISK FACTORS (Continued)
•limit our flexibility in planning for, or reacting to, changing conditions in our business and industry;
and
•limit our ability to react to competitive pressures, or make it difficult for us to carry out capital
spending that is necessary or important to our growth strategy and our efforts to improve
operating margins.
Any of the foregoing impacts of our substantial indebtedness could have a material adverse effect on our
business, financial condition and results of operations, our ability to obtain financing in the future and our
ability to react to changes in our business and future opportunities. 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 affected by
prevailing economic and competitive conditions and to the financial and business risk factors, many of
which may be beyond our control, as described 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.
Despite our current indebtedness levels, we and our subsidiaries may incur substantially more
debt.
While the terms of the instruments governing our outstanding indebtedness contain certain restrictions
upon our ability to incur additional indebtedness, they do not fully prohibit us or our subsidiaries from
incurring additional indebtedness in the future and the indebtedness that we and our subsidiaries may
incur may be substantial. In May and June of 2009, we issued an aggregate of $474.8 million in principal
amount of convertible notes in a registered public offering, in September 2009 we issued
$2,138.1 million in the form of the Series 2009-1 Notes and in October 2009 we issued $1,200 million in
aggregate principal amount of Series 2009-2 Notes. As of December 31, 2009, our senior secured credit
facilities provided us commitments for additional aggregate borrowings (subject to borrowing base
limitations) of approximately $1,654.4 million, and permitted additional borrowings beyond those
commitments under certain circumstances. For a detailed description of the amounts we have available
under our debt facilities, see ‘‘Item 7—Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Liquidity and Capital Resources—Credit Facilities,’’ included in this Annual
Report. As of December 31, 2009, the instruments governing our asset-backed fleet debt facilities in the
United States and elsewhere provided commitments for additional aggregate borrowings of up to
$3,932.4 million, subject to borrowing base limitations. If new debt is added to our current debt levels,
the related risks that we now face would increase. In addition, the instruments governing our
indebtedness do not prevent us or our subsidiaries from incurring obligations that do not constitute
indebtedness.
The third-party insurance companies that provide credit enhancements in the form of financial
guarantees of the Series 2005-1 and 2005-2 Rental Car Asset Backed Notes, or the ‘‘2005 Notes,’’
could face financial instability due to factors beyond our control.
MBIA Insurance Corporation, or ‘‘MBIA,’’ and Ambac Corporation, or ‘‘Ambac,’’ provide credit
enhancements in the form of financial guarantees for our 2005 Notes, with each providing guarantees 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. Each of MBIA and Ambac has been downgraded
one or more times and is on review for further credit downgrade or under developing outlook by one or
more credit ratings agencies.
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