Hertz 2012 Annual Report Download - page 61

ITEM 1A. RISK FACTORS (Continued)
If our capital resources (including borrowings under our revolving 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; (v) obtain additional equity
capital; (vi) forgo business opportunities, including acquisitions and joint ventures; or (vii) 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, liquidity, 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. 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, cash flows 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 certain cars in our fleet could effectively increase our car fleet costs,
adversely impact our profitability and potentially lead to decreased borrowing base availability in our
asset-backed and certain asset-based vehicle financing facilities due to the credit enhancement
requirements for such facilities, which could increase if market values for vehicles decrease below net
book values for those vehicles. 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 and certain asset-
based 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 and certain asset-based debt may have the ability to
exercise their right to direct the trustee or other secured party to foreclose on and sell vehicles to
generate proceeds sufficient to repay such debt.
The occurrence of certain events, including those described in the paragraph above, could result in the
occurrence of an amortization event pursuant to which the proceeds of sales of cars that collateralize the
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