Item 1.01 Entry into a Material Definitive Agreement.
HVF III Rental Car Asset Backed Note Offerings
On March 2, 2023, Hertz Vehicle Financing III LLC (“HVF III”), a wholly-owned, special-purpose and bankruptcy-remote subsidiary of The Hertz Corporation (“Hertz”), issued two series of rental car asset backed notes to unaffiliated parties comprised of:
•$460.0 million in aggregate principal amount of Series 2023-1 Rental Car Asset Backed Notes, Class A, Class B, Class C, Class D (collectively, the “Series 2023-1 Notes”), issued pursuant to the Series 2023-1 Supplement (the “Series 2023-1 Supplement”), dated as of March 2, 2023, among HVF III, as issuer, Hertz, as administrator, and The Bank of New York Mellon Trust Company, N.A. (“BNYM”), as trustee, to the Base Indenture (as amended by Amendment No. 1 to the Base Indenture, dated as of June 27, 2022, which was previously filed as Exhibit 10.3 to Hertz’s Quarterly Report on Form 10-Q filed on July 28, 2022, the “Base Indenture”), dated as of June 29, 2021, which was previously filed as Exhibit 10.7 to Hertz’s Current Report on Form 8-K filed on July 7, 2021, and
•$300.0 million in aggregate principal amount of Series 2023-2 Rental Car Asset Backed Notes, Class A, Class B, Class C, Class D (collectively, the “Series 2023-2 Notes” and, together with the Series 2023-1 Notes, the “Series 2023 Notes”) issued pursuant to the Series 2023-2 Supplement (the “Series 2023-2 Supplement”), dated as of March 2, 2023, among HVF III, as issuer, Hertz, as administrator, and BNYM, as trustee, to the Base Indenture.
In addition, HVF III issued an aggregate of $40 million Class D Series 2023-1 Notes that were purchased by Hertz. HVF III will use the net proceeds from the issuance and sale of the Series 2023 Notes to repay amounts outstanding on HVF III’s Series 2021-A Notes that were previously used to purchase vehicles in the preceding 12 months meeting the eligibility criteria established by Hertz. Eligible vehicles include zero-emissions vehicles, including battery electric vehicles and fuel cell electric vehicles running on low-carbon fuels such as hydrogen.
To the extent the net proceeds of the Series 2023 Notes exceed the aggregate purchase price of eligible vehicles purchased by HVF III in the preceding 12 months, the net proceeds in excess of such aggregate purchase price will be used to repay the Series 2021-A Notes, and the capacity made available by such excess net proceeds repayment will be used in the future to purchase eligible vehicles.
Hertz utilizes the HVF III securitization platform to finance its U.S. rental car fleet. Subject to certain conditions, additional notes may be issued in the future under the Base Indenture.
The Series 2023 Notes were issued with the following terms:
| | | | | | | | | | | | | | |
| Notes Issued | Principal | Interest Rate | Expected Final Payment Date | Legal Final Payment Date |
| Series 2023-1 |
| Class A | $ | 337,500,000 | | 5.49 | % | June 2026 | June 2027 |
| Class B | $ | 52,500,000 | | 6.22 | % | June 2026 | June 2027 |
| Class C | $ | 45,000,000 | | 6.91 | % | June 2026 | June 2027 |
| Class D | $ | 65,000,000 | | 9.13 | % | June 2026 | June 2027 |
|
| Series 2023-2 |
| Class A | $ | 202,500,000 | | 5.57 | % | September 2028 | September 2029 |
| Class B | $ | 31,500,000 | | 6.49 | % | September 2028 | September 2029 |
| Class C | $ | 27,000,000 | | 7.13 | % | September 2028 | September 2029 |
| Class D | $ | 39,000,000 | | 9.40 | % | September 2028 | September 2029 |
The Series 2023-1 Class B Notes are subordinated to the Series 2023-1 Class A Notes. The Series 2023-1 Class C Notes are subordinated to the Series 2023-1 Class A Notes and the Series 2023-1 Class B Notes. The Series 2023-1 Class D Notes are subordinated to the Series 2023-1 Class A Notes, the Series 2023-1 Class B Notes, and the Series 2023-1 Class C Notes.
The Series 2023-2 Class B Notes are subordinated to the Series 2023-2 Class A Notes. The Series 2023-2 Class C Notes are subordinated to the Series 2023-2 Class A Notes and the Series 2023-2 Class B Notes. The Series 2023-2 Class D Notes are subordinated to the Series 2023-2 Class A Notes, the Series 2023-2 Class B Notes, and the Series 2023-2 Class C Notes.
Unless an amortization event occurs, HVF III is not required to make any principal payments on (i) the Series 2023-1 Notes until January 2026 and (ii) the Series 2023-2 Notes until April 2028. Beginning in January 2026 for the Series 2023-1 Notes and April 2028 for the Series 2023-2 Notes, HVF III is expected to make a payment of one-sixth of the initial principal amount until
repayment is made in full on the applicable legal final payment date for such series of notes in June 2027 and September 2029, respectively.
The occurrence and continuation of an amortization event related to the Series 2023 Notes may result in HVF III being required to pay principal on the Series 2023 Notes earlier than anticipated. Amortization events include, among other things, the failure to pay principal or interest in a timely manner, the failure to maintain sufficient assets compared to the outstanding amount of debt, the failure to maintain sufficient liquidity in the form of reserve accounts or letters of credit, the presence of certain liens on HVF III’s assets, any misrepresentations by HVF III, any covenant defaults and defaults by either HVF III or THC, as administrator of HVF III under the Administration Agreement, dated as of June 29, 2021, which was previously filed as Exhibit 10.9 to the Current Report on Form 8-K filed on July 7, 2021. In the event that one or more amortization events occurs and is continuing, holders of the Series 2023 Notes may force HVF III or BNYM on their behalf to sell vehicles and, if a default occurs under the Master Motor Vehicle Operating Lease and Servicing Agreement (HVF III) (as amended by Amendment No. 1 to the Master Motor Vehicle Operating Lease and Servicing Agreement, dated as of June 27, 2022, which was previously filed as Exhibit 10.4 to the Quarterly Report on Form 10-Q filed on July 28, 2022, the “Lease”), dated as of June 29, 2021, which was previously filed as Exhibit 10.8 to the Current Report on Form 8-K filed on July 7, 2021, the holders of the Series 2023 Notes may force Hertz and/or DTG Operations, Inc. each as a lessee under the Lease, to return vehicles for sale by HVF III. Proceeds of any such sales made during the enforcement of remedies are required to repay the Series 2023 Notes and any notes issued by HVF III in the future.
The foregoing descriptions of the Series 2023 Notes are qualified in their entirety by reference to the complete terms and conditions of the Series 2023-1 Supplement and the Series 2023-2 Supplement, copies of which are attached hereto as Exhibits 10.1 and 10.2, respectively, which are incorporated by reference herein.
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