Hertz 2014 Annual Report Download - page 82

Table of Contents
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As of December 31, 2014, there were outstanding standby letters of credit totaling $629 million. Of this amount, $613 million was issued under the
Senior Credit Facilities. As of December 31, 2014, none of these letters of credit have been drawn upon.
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A significant number of cars that we purchase are subject to repurchase by car manufacturers under contractual repurchase or guaranteed
depreciation programs. Under these programs, car manufacturers agree to repurchase cars at a specified price or guarantee the depreciation rate
on the cars during a specified time period, typically subject to certain car condition and mileage requirements. We use values derived from this
specified price or guaranteed depreciation rate to calculate financing capacity under certain asset-backed and asset-based financing
arrangements.
In the event of a bankruptcy of a car manufacturer, our liquidity could be impacted by several factors including reductions in fleet residual values
and the risk that we would be unable to collect outstanding receivables due to us from such bankrupt manufacturer. In addition, the program cars
manufactured by any such company would need to be removed from our financing facilities or re-designated as non-program vehicles, which would
require us to furnish additional credit enhancement associated with these program vehicles. For a discussion of the risks associated with a
manufacturer's bankruptcy or our reliance on asset-backed and asset-based financing, see Item 1A, "Risk Factors" included in this Annual Report.
We rely significantly on asset-backed and asset-based financing arrangements to purchase cars for our U.S. and international car rental fleet. The
amount of financing available to us pursuant to these programs depends on a number of factors, many of which are outside our control, including
recently adopted legislation, proposed and recently adopted SEC (and other federal agency) rules and regulations and other legislative and
administrative developments. In this regard, there has been uncertainty regarding the potential impact of recently adopted SEC rules and
regulations governing the issuance of asset-backed securities and additional requirements contained in the Dodd-Frank Wall Street Reform and
Consumer Protection Act and the Basel III regulatory capital rules, a global regulatory standard on bank capital adequacy, stress testing and
market liquidity risk. While we will continue to monitor these developments and their impact on our ABS program, such rules and regulations may
impact our ability and/or desire to engage in asset-backed financings in the future. For further information concerning our asset-backed financing
programs and our indebtedness, see Note 6, "Debt," to the Notes to our consolidated financial statements included in this Annual Report under the
caption Item 8, "Financial Statements and Supplementary Data." For a discussion of the risks associated with our reliance on asset-backed and
asset-based financing and the significant amount of indebtedness, see Item 1A, "Risk Factors" in this Annual Report.
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We refer to Hertz and its subsidiaries as the Hertz credit group. The indentures for the Senior Notes contain covenants that, among other things,
limit or restrict the ability of the Hertz credit group to incur additional indebtedness, incur guarantee obligations, prepay certain indebtedness, make
certain restricted payments (including paying dividends, redeeming stock or making other distributions to parent entities of Hertz and other persons
outside of the Hertz credit group), make investments, create liens, transfer or sell assets, merge or consolidate, and enter into certain transactions
with Hertz's affiliates that are not members of the Hertz credit group.
Certain of our other debt instruments and credit facilities contain a number of covenants that, among other things, limit or restrict the ability of the
borrowers and the guarantors to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay certain indebtedness, make
certain restricted payments (including paying dividends, redeeming stock or making other distributions), create liens, make investments, make
acquisitions, engage in mergers, fundamentally change the nature of their business, make capital expenditures, or engage in certain transactions
with certain affiliates.
Under the terms of our Senior Term Facility and Senior ABL Facility, we are not subject to ongoing financial maintenance covenants; however,
under the Senior ABL Facility, failure to maintain certain levels of liquidity will subject the Hertz credit group to a contractually specified fixed
charge coverage ratio of not less than 1:1 for the four quarters most recently ended. As of December 31, 2014, we were not subject to the fixed
charge coverage ratio test.
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Source: HERTZ GLOBAL HOLDINGS INC, 10-K, July 16, 2015 Powered by Morningstar® Document Research℠
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