Hertz 2010 Annual Report Download - page 57

ITEM 1A. RISK FACTORS (Continued)
Our ability to manage these risks depends on financial market conditions as well as our financial and
operating performance, which, in turn, is subject to a wide range of risks, including those described
under ‘‘—Risks Related to Our Business.’’
If our capital resources (including borrowings under the revolving portion of our various credit facilities
and access to other refinancing indebtedness) and operating cash flows are not sufficient to pay our
obligations as they mature or to fund our liquidity needs, we may be forced to do, among other things,
one or more of the following: (i) sell certain of our assets; (ii) reduce the size of our rental fleet; (iii) reduce
the percentage of program cars in our rental fleet; (iv) reduce or delay capital expenditures; (iv) obtain
additional equity capital; (v) forgo business opportunities, including acquisitions and joint ventures; or
(vi) restructure or refinance all or a portion of our debt on or before maturity.
We cannot assure you that we would be able to accomplish any of these alternatives on a timely basis or
on satisfactory terms, if at all. Furthermore, we cannot assure you that we will maintain financing
activities and cash flows sufficient to permit us to pay the principal, premium, if any, and interest on our
indebtedness. If we cannot refinance or otherwise pay our obligations as they mature and fund our
liquidity needs, our business, financial condition, results of operations, cash flows, ability to obtain
financing, and ability to compete in our industry could be materially adversely affected.
Our reliance on asset-backed and asset-based financing arrangements to purchase cars subjects
us to a number of risks, many of which are beyond our control.
We rely significantly on asset-backed and asset-based financing to purchase cars for our domestic and
international car rental fleets. If we are unable to refinance or replace our existing asset-backed and
asset-based financing or continue to finance new car acquisitions through asset-backed or asset-based
financing on favorable terms, on a timely basis, or at all, then our costs of financing could increase
significantly and have a material adverse effect on our liquidity, interest costs, financial condition and
results of operations.
Our asset-backed and asset-based financing capacity could be decreased, our financing costs and
interest rates could be increased, or our future access to the financial markets could be limited, as a
result of risks and contingencies, many of which are beyond our control, including: (i) the acceptance by
credit markets of the structures and structural risks associated with our asset-backed and asset-based
financing arrangements; (ii) the credit ratings provided by credit rating agencies for our asset-backed
indebtedness; (iii) third parties requiring changes in the terms and structure of our asset-backed or
asset-based financing arrangements, including increased credit enhancement or required cash
collateral and/or other liquid reserves; (iv) the insolvency or deterioration of the financial condition of one
or more of our principal car manufacturers; or (v) changes in laws or regulations, including judicial
review of issues of first impression, that negatively impact any of our asset-backed or asset-based
financing arrangements.
Any reduction in the value of our car rental fleet could effectively increase our car rental fleet costs,
adversely impact our profitability and potentially lead to decreased borrowing base availability in our
asset-backed vehicle financing facilities due to the credit enhancement requirements for such facilities,
which effectively increase as market values for vehicles decrease. In addition, if disposal of vehicles in
the used vehicle marketplace were to become severely limited at a time when required collateral levels
were rising and as a result we failed to meet the minimum required collateral levels, the principal under
our asset-backed financing arrangements may be required to be repaid sooner than anticipated with
vehicle disposition proceeds and lease payments we make to our special purpose financing
subsidiaries. If that were to occur, the holders of our asset backed debt may have the ability to exercise
33