Hertz 2012 Annual Report Download - page 191

HERTZ GLOBAL HOLDINGS, INC.
NOTES TO PARENT COMPANY FINANCIAL STATEMENTS (Continued)
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.
On June 1 and December 1, 2012 and 2011, Hertz Holdings made semi-annual interest payments of
approximately $12.5 million on the Convertible Senior Notes, respectively. Hertz Holdings made this
payment with a combination of cash on hand and proceeds from the repayment of an inter-company
loan from Hertz, and dividends received Hertz Holdings subsidiaries.
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.
For a discussion of the debt obligations of the indirect subsidiaries of Hertz Holdings, see Note 5 to the
Notes to the consolidated financial statements included in this Annual Report under the caption
‘‘Item 8—Financial Statements and Supplementary Data.’’
Note 3—Commitments and Contingencies
Hertz Holdings has no direct commitments and contingencies, but its indirect subsidiaries do. For a
discussion of the commitments and contingencies of the indirect subsidiaries of Hertz Holdings, see
Notes 10 and 12 to the Notes to the consolidated financial statements included in this Annual Report
under the caption ‘‘Item 8—Financial Statements and Supplementary Data.’’
Note 4—Dividends
During 2012 and 2011, Hertz Holdings received approximately $25 million and $23 million, respectively,
of cash dividends from its subsidiaries, primarily for interest payments on the Convertible Senior Notes.
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