Hertz Faces $188M Warrant Demand Amid $3.4B Buyback

Hertz warrant holders demand $188 million payout after $3.4 billion buyback and $2.2 billion new debt.

By Jack Wilson

6/10, 17:20 EDT
Hertz Global Holdings, Inc

Key Takeaway

  • Hertz warrant holders demand $188 million, claiming a change of control due to $3.4 billion stock buyback and $2.2 billion new debt.
  • Hertz dismisses the demands as frivolous, hiring Davis Polk & Wardwell for legal defense against Paul Hastings' claims.
  • Warrant holders seek redemption at $20.47 per warrant using Black-Scholes model, highlighting potential massive liability for Hertz.

Warrant Holders' Demands

Some holders of Hertz Global Holdings Inc. warrants are demanding a significant payout, arguing that the company's recent financial maneuvers have triggered a change of control event. According to a letter from Paul Hastings, a law firm representing holders of around 11% of the warrants, Hertz's buyback of $3.4 billion in common stock and the borrowing of $2.2 billion in new debt constitute a recapitalization and reorganization of its capital stock. The warrant holders claim this event activates a clause requiring Hertz to redeem the warrants at $20.47 each, based on the Black-Scholes model used for pricing options.

Hertz's Response

Hertz has hired the law firm Davis Polk & Wardwell to address the claims made by the warrant holders. In a statement, Hertz dismissed the demands as "frivolous and not supported by the warrant language or market practice." The company has not provided further details on its legal strategy or potential next steps. Messages left with both Davis Polk and Paul Hastings were not returned, leaving some uncertainty about how the dispute will unfold.

Financial Maneuvers

The letter from Paul Hastings outlines that Hertz bought back 174.8 million shares of its common stock for $3.4 billion in cash from November 2021 through December 31 of the previous year. Concurrently, the company incurred $2.2 billion in new debt capital. The warrant holders used the Black-Scholes model to calculate the redemption price of $20.47 per warrant. Paul Hastings stated that the warrant holders are "amenable to an economic resolution" but are "troubled to learn that the Board apparently has declined even to explore a potential opportunity to resolve a sizable dispute that could yield a massive liability."

Management Quotes

  • Hertz:

    "We view this position as frivolous and not supported by the warrant language or market practice."