Debevoise Advises Hertz in Completed Separation of Equipment Rental Business

30 June 2016

Debevoise & Plimpton LLP has advised The Hertz Corporation (“Hertz”) in the separation of its equipment rental business into a separate, publicly traded company, in a transaction that closed today. As a result of the transaction, Hertz’s parent company, Hertz Global Holdings, Inc. (NYSE: HTZ), is receiving proceeds of approximately $2 billion. Following the transaction and the related 5-for-1 spin distribution, Hertz Global expects to begin trading on July 1, 2016, with approximately 85 million common shares issued and outstanding.

The company will use the proceeds to pay down a portion of its corporate debt as it focuses on continuing to strengthen its car rental and related services business. In addition, the Hertz Global Board of Directors has authorized a $395 million share repurchase program as a means to enhance shareholder value.

The separation of the equipment rental business was one aspect of the company's plan to focus on its core rental car business. Hertz Global has also strengthened its liquidity and balance sheet over the past twelve months though several actions. The company sold the majority of its stake in CAR Inc., China's largest rental car company, while extending its commercial agreement to 2023. From these stock sales, Hertz Global received $476 million, which it used to partially fund its previous share repurchase program. In addition, Hertz Global executed a series of debt transactions since the beginning of the year that will significantly reduce the company's interest expense and extend its corporate debt maturity schedule dates. As a result, interest expense is expected to decline by approximately $45 million in the second half of 2016 and approximately $90 million in 2017 related to the debt reduction associated with the spin proceeds and the redemption of its 7.5% Senior Notes due in 2018. In addition, no significant corporate debt maturities are due until 2019.

The Debevoise team was led by partners David A. Brittenham and Gary M. Friedman and included partners Matthew E. Kaplan and Scott B. Selinger, counsel Emilie T. Hsu, Rafael Kariyev and Huey-Fun Lee and associates Ramya S. Tiller, Morgan J. Hayes, Christine Shu Gilleland, Lauren M. Isaacson, Serhat T. Krause, Shawn W.K. Lim, Kamal Nesfield, Daniel Priest, Rebecca Quan, Ann Stillman, Ben Strumeier and Emily Zheshu Xiao.

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