Hertz Global Holdings Inc. shareholders have officially notched an improbable win. If not for U.S. regulators, the victory could have been twice as sweet, Bloomberg News reported. All told, Hertz’s bankruptcy exit plan will repay creditors and return more than $1 billion of value to shareholders, lawyer Tom Lauria said on behalf of the company in a Thursday court hearing. But the deal might have delivered more than twice that if Hertz had succeeded in issuing stock to fund its bankruptcy last year, Lauria said. Hertz was an early favorite of traders on Reddit’s WallStreetBets forum, and the ensuing rally prompted the bankrupt firm to explore selling potentially “worthless” shares to raise cash. Hertz scrapped those efforts after Securities and Exchange Commission officials questioned the unusual approach. Instead, Hertz had to borrow more money to fund operations, ultimately arranging a $1.65 billion debtor-in-possession loan from the likes of Apollo Global Management. Because all creditors have to be repaid before equity can get anything in U.S. bankruptcy, the additional debt weighed on recoveries for stockholders. Still, Hertz’s bankruptcy plan is “a fantastic result,” U.S. Bankruptcy Judge Mary Walrath said in hearing Thursday, noting that payouts to equity are virtually unheard of in chapter 11. The case “surpasses any result that I’ve seen in any chapter 11 case that I’ve faced in my 20-plus years,” Judge Walrath said. Read more.
In related news, Hertz Global Holdings Inc. is concluding a chapter 11 case that generated big gains for shareholders, who are usually an afterthought in corporate bankruptcies, WSJ Pro Bankruptcy reported. Bullish individual investors, in particular, were drawn to Hertz and were rewarded for the risk they took on a bankrupt stock. But many of Hertz’s backers are unfamiliar with the bankruptcy process and with their options to get paid under the company’s exit plan, which was approved by a judge Thursday. WSJ Pro Bankruptcy breaks down the choices facing Hertz shareholders, who have a Friday deadline for some parts of the payout. Read more.
