Hertz picks new front-runners to back exit from bankruptcy

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Hertz Global Holdings Inc. endorsed a bid from Knighthead Capital Management LLC and Certares Management LLC to back the company’s exit from chapter 11, judging their restructuring proposal to be superior to a rival group’s offer, people familiar with the matter said.

Hertz board members decided the restructuring bid from Knighthead and Certares is superior to a competing proposal the rental-car company previously accepted from a rival consortium of private-equity investors, according to people familiar with the matter.

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The decision makes Knighthead, Certares and other investors the front-runners to take control of Hertz out of bankruptcy with the U.S. travel industry on an upswing, thanks to expanding vaccination against Covid-19 and pent-up demand among vacationers.

A Hertz representative didn’t immediately respond to a request for comment Tuesday.

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Despite the selection of Knighthead and Certares as the leading bidders, the competition that has raged for weeks for control of Hertz isn’t over. Dundon Capital Partners LLC, Centerbridge Partners LP and Warburg Pincus LLC, which have also banded together to bid for Hertz and were previously tapped as chapter 11 plan sponsors, have the chance to come back in coming days with a counteroffer.

Any restructuring deal requires Hertz’s support and the approval of the judge overseeing its chapter 11 proceedings in the U.S. Bankruptcy Court in Wilmington, Del.

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Hertz was on the ropes at the start of the pandemic, weighed down with debt, barely in operation due to travel restrictions, and facing an uncertain future.

But hopes for a return to normal conditions, financial maneuvers during the bankruptcy and signs of a rebound in business and leisure travel have Hertz poised to exit chapter 11 protection around the end of June.

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The new leading bid values Hertz at roughly $6.2 billion and provides distributions to current stockholders—a relative rarity in corporate bankruptcies, which usually don’t generate enough value to retire the debt, let alone include a recovery for equity.

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Knighthead and Certares have proposed providing shareholders with warrants to acquire up to 10% of Hertz, or the opportunity to participate in a rights offering to capitalize the company on its way out of chapter 11, according to people familiar with the matter. Hertz shares would also be cashed out at 50 cents each, a result that seemed out of reach as recently as last month, when the company insisted it was insolvent and its equity was worthless, the people said.

—Andrew Scurria contributed to this article.

Write to Becky Yerak at [email protected]

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