Hertz 2009 Annual Report Download - page 60

ITEM 1A. RISK FACTORS (Continued)
below, the pledge of these assets and other restrictive covenants in our debt agreements may limit our
flexibility in raising capital for other purposes. Because substantially all of our assets are pledged under
these financing arrangements, our ability to incur additional secured indebtedness or to sell or dispose
of assets to raise capital may be impaired, which could have an adverse effect on our financial flexibility
and force us to attempt to incur additional unsecured indebtedness, which may not be available to us.
Restrictive covenants in certain of the agreements and instruments governing our indebtedness
may adversely affect our financial flexibility.
Certain of our credit facilities contain covenants that, among other things, restrict Hertz’s and its
subsidiaries’ ability to:
• dispose of assets;
• 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, advances or capital expenditures;
• 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. ‘‘EBITDA’’ means consolidated net income before
net interest expense, consolidated income taxes and consolidated depreciation and amortization and
‘‘Corporate EBITDA’’ means ‘‘EBITDA’’ as that term is defined under Hertz’s senior credit facilities, which
is generally consolidated net income before net interest expense (other than interest expense relating to
certain car rental fleet financing), consolidated income taxes, consolidated depreciation (other than
depreciation related to the car rental fleet) and amortization and before certain other items, in each case
as more fully described in the agreements governing Hertz’s senior credit facilities. 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 other risks identified in this Annual Report. The breach of any of these
covenants or restrictions could result in a default under either our Senior Credit Facilities or the
indentures. 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
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