Hertz 2012 Annual Report Download - page 143

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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.
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 offering of the Convertible
Senior Notes 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, at issuance the debt was recorded at a discount of $117.9 million reflecting that its coupon was
below the market yield for a similar security without the conversion feature at issuance. The debt is
subsequently accreted to its par value over its expected life, with the market rate of interest at issuance
being reflected in the statements of operations. The effective interest rate on the Convertible Senior
Notes on the issuance date was 12%.
On January 1, 2013, our Convertible Senior Notes became convertible again and will continue to be
convertible until March 31, 2013, and may be convertible thereafter, if one or more of the conversion
conditions specified in the indenture is satisfied during future measurement periods. This conversion
right was triggered because our closing common stock price per share exceeded $10.77 for at least 20
trading days during the 30 consecutive trading day period ending on December 31, 2012.
FLEET DEBT
The governing documents of certain of the fleet debt financing arrangements specified below contain
covenants that, among other things, significantly limit or restrict (or upon certain circumstances may
significantly restrict or prohibit) the ability of the borrowers, and the guarantors if applicable, to make
certain restricted payments (including paying dividends, redeeming stock, making other distributions,
loans or advances) to Hertz Holdings and Hertz, whether directly or indirectly.
HVF U.S. ABS Program
Hertz Vehicle Financing LLC, an insolvency remote, direct, wholly-owned, special purpose subsidiary of
Hertz, or ‘‘HVF,’’ is the issuer under the HVF U.S. ABS Program. HVF has entered into a base indenture
that permits it to issue term and revolving rental car asset-backed securities, the collateral for which
consists primarily of a substantial portion of the rental car fleet used in Hertz’s (and through fleet sharing
arrangements, a portion of the fleet used in Dollar Thrifty’s) domestic car rental operations and
contractual rights related to such vehicles.
References to the ‘‘HVF U.S. ABS Program’’ include HVF’s U.S. Fleet Variable Funding Notes together
with HVF’s U.S. Fleet Medium Term Notes.
HVF U.S. Fleet Variable Funding Notes
References to the ‘‘HVF U.S. Fleet Variable Funding Notes’’ include HVF’s Series 2009-1 Variable
Funding Rental Car Asset Backed Notes, as amended, or the ‘‘Series 2009-1 Notes,’’ Series 2010-2
Variable Funding Rental Car Asset Backed Notes, or the ‘‘Series 2010-2 Notes,’’ and Series 2011-2
Variable Funding Rental Car Asset Backed Notes, or the ‘‘Series 2011-2 Notes,’’ collectively. As of
December 31, 2012, the only U.S. Fleet Variable Funding Notes committed or outstanding were the
Series 2009-1 Notes, which, as of December 31, 2012, permit aggregate maximum borrowings of
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