Hertz is the rarest outcome in large-cap restructuring: creditors paid in full in cash, and existing shareholders receiving over a billion dollars of value. It is worth studying not because it is typical but because the reasons it happened are unusually legible — and because almost none of them were operational improvement.
The story
Hertz entered 2020 with a fleet of roughly half a million vehicles in the United States, financed largely through asset-backed securitisation rather than corporate debt. The ABS structure carried covenants tied to vehicle values and required payments when the fleet's appraised value fell below thresholds. When COVID collapsed travel demand almost overnight, two things happened at once: operating cash flow disappeared, and the vehicle-value tests came under pressure.
The Q1 2020 10-Q said the company might not be able to repay or refinance facilities before their maturities. Forbearance agreements and waivers expired on 22 May 2020, and Hertz filed in Delaware with 29 affiliates before Judge Mary Walrath. This is a case where the financing structure was as causative as the demand collapse — competitors with different fleet financing did not file.
The case then produced one of the stranger episodes in modern bankruptcy: retail traders bid the equity of a bankrupt company up sharply, and Hertz attempted to sell up to $500mm of new shares into that demand while disclosing they could end up worthless. The SEC objected and the offering was pulled.
Why the value was there
Four things, and it is worth being precise because the temptation is to credit management.
The collateral appreciated during the case. Used vehicle prices spiked sharply through 2020 and 2021. Hertz had sold down a large part of its fleet early in the case to satisfy creditors; the remaining fleet was worth far more by 2021 than the valuation implied at filing. In a business whose principal asset is depreciating vehicles, the asset stopped depreciating and began appreciating mid-case.
Demand recovered faster than anyone underwrote in mid-2020. Travel came back while the case was still running.
Competition among plan sponsors. The board first worked with a consortium including Centerbridge, Warburg Pincus and Dundon, and the court authorised solicitation on that plan in April 2021. A rival group then bid. The existence of a competing bidder — not the merits of either plan — is what drove the recovery up to full creditor payment plus more than $1bn to equity.
Timing. The equity recovery depended on all of this occurring during the case rather than after it. Had the plan been confirmed in late 2020, shareholders would have received nothing.
The outcome, and the sequel
The plan confirmed on 10 June 2021 unimpaired all creditor classes, was approved by more than 97% of voting shareholders, eliminated over $5bn of debt including all of Hertz Europe's corporate debt, and provided more than $2.2bn of liquidity, a $2.8bn exit facility and roughly $7bn of ABS vehicle financing. Hertz emerged 30 June 2021.
The sequel matters as much as the case. Post-emergence, Hertz announced a large purchase of Teslas; the stock spiked, then the EV strategy produced substantial write-downs as used EV values fell and repair costs ran high. Vehicle depreciation and lease charges rose sharply, driving large quarterly losses. Carl Icahn, who had held 39% of the pre-petition equity, sold at roughly $0.72 per share for a loss reported in the billions — an object lesson in the difference between a company that recovers and an investor who was positioned to capture it.
So the honest reading is: the restructuring succeeded, the equity recovery was real, and the post-emergence operating thesis was a separate bet that went badly. Those are three different judgments and the case lets you make all three.
The numbers
At filing. Roughly 500,000 vehicles in the United States, financed largely through ABS rather than corporate debt. As of 31 March 2020 the company had approximately $2.5bn of vehicle debt and $19mm of non-vehicle debt maturing within twelve months, and disclosed in its Q1 2020 10-Q that it might not be able to repay or refinance those facilities. Forbearances and waivers expired 22 May 2020; it filed with 29 affiliates.
At emergence. The plan eliminated over $5bn of debt including all of Hertz Europe’s corporate debt, provided more than $2.2bn of global liquidity, a $2.8bn exit facility (at least $1.3bn of term loans plus a revolver), and roughly $7bn of ABS vehicle financing. Every creditor class was unimpaired and paid in cash in full. Existing shareholders received more than $1bn of value, and more than 97% of voting shareholders approved.
The decomposition. Take the value implied at filing, when the fleet was being marked down and travel had stopped, against the value at confirmation thirteen months later. Nearly all of the difference is attributable to three things that had nothing to do with operating improvement: the used vehicle price spike that revalued the collateral, the travel rebound, and the fact that two sponsor consortia bid against each other. Build that bridge in the waterfall solver by running the same claim stack at both enterprise values — the point at which the residual to equity turns positive is the entire story.
The counter-number. Carl Icahn held roughly 39% of the pre-petition equity and sold at about $0.72 per share, a reported loss in the region of $1.84bn. The company recovered; he did not. Recovery accrues to whoever is holding at the moment the value appears, which in this case was after he had gone.
The documents to pull
Docket free at restructuring.ra.kroll.com/hertz. Pull the first day declaration, the emergency vehicle sale motion from June 2020, the competing plan filings from spring 2021, the disclosure statement with its valuation, and the confirmation order. Then go to EDGAR for the Q1 2020 10-Q language on refinancing risk, and for the post-emergence 10-Ks that document the EV write-downs.
The exercise: build the recovery waterfall using the enterprise value implied at filing, then rebuild it using the value at confirmation, and decompose the difference into fleet value, demand recovery, and sponsor competition. That decomposition is the whole case.