Hertz 2013 Annual Report Download - page 31

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outstanding debt securities and to the lenders under our various credit facilities, resulting in possible defaults on, and acceleration of, such
indebtedness; (ii) be difficult to refinance or borrow additional funds in the future; (iii) require us to dedicate a substantial portion of our cash
flows from operations and investing activities to make payments on our debt, which would reduce our ability to fund working capital, capital
expenditures or other general corporate purposes; (iv) increase our vulnerability to general adverse economic and industry conditions (such
as credit-related disruptions), including interest rate fluctuations, because a portion of our borrowings are at floating rates of interest and are
not hedged against rising interest rates, and the risk that one or more of the financial institutions providing commitments under our revolving
credit facilities fails to fund an extension of credit under any such facility, due to insolvency or otherwise, leaving us with less liquidity than
expected; (v) place us at a competitive disadvantage to our competitors that have proportionately less debt or comparable debt at more
favorable interest rates or on better terms; and (vi) limit our ability to react to competitive pressures, or make it difficult for us to carry out
capital spending that is necessary or important to our growth strategy and our efforts to improve operating margins. While the terms of the
agreements and instruments governing our outstanding indebtedness contain certain restrictions upon our ability to incur additional
indebtedness, they do not fully prohibit us from incurring substantial additional indebtedness and do not prevent us from incurring
obligations that do not constitute indebtedness. If new debt or other obligations are added to our current liability levels without a corresponding
refinancing or redemption of our existing indebtedness and obligations, these risks would increase. For a description of the amounts we have
available under certain of our debt facilities, see “Item 7—Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources—Credit Facilities” included in this annual report for the year ended December 31, 2013 and
“Note 5—Debt” to the consolidated financial statements included in this Annual Report.
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” included in this Annual Report.
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
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Source: HERTZ CORP, 10-K, March 31, 2014 Powered by Morningstar® Document Research℠
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