With all of the excitement surrounding Hertz’s newly placed order for 100,000 Tesla vehicles, it’s easy to forget that the company only recently emerged from Chapter 11 bankruptcy. But that bankruptcy is not only worth remembering, it’s worth studying further.
The Hertz Chapter 11 bankruptcy case was one of the largest and most successful bankruptcy cases in recent times, a case in which Hertz emerged from bankruptcy with creditors paid in full and more than $1 billion of value for shareholders. I wanted to learn more. So recently, I moderated the “Anatomy of the Hertz Chapter 11" webinar for the American Bankruptcy Institute, sponsored in part by Bloomberg Law. Four key figures in the case discussed their strategies and perspectives with me: Thomas Lauria of White & Case LLP (debtors’ counsel), Amy Caton of Kramer Levin Naftalis & Frankel LLP (creditors’ committee counsel), Bill Derrough of Moelis & Co. (investment banker for the debtors), and Katherine Bologna of Deutsche Bank AG (asset-based securitization lender to the debtors).
Three strategies discussed by the panelists stood out to me as key contributors to the case’s success: establishing a vision for the case resolution, building a cooperative atmosphere, and taking advantage of opportunities for competition.
1. Establishing a Vision for the Case Resolution
Even amidst the uncertainty of the pandemic, debtors’ counsel established a goal of Hertz emerging from bankruptcy no later than June 30, 2021. While many of Hertz’s stakeholders thought this was extremely ambitious, debtors’ counsel took steps to remove obstacles to achieving this goal and ultimately was able to confirm a plan by the intended date.
2. Building a Cooperative Atmosphere
Disputes often arise in a Chapter 11 case between debtors and their various classes of creditors. And Hertz had its share of litigation. However, the professionals in Hertz took pains to confront these disputes at an early stage and build a spirit of cooperation and trust among the stakeholders. The atmosphere promoted by the professionals in this case ultimately fostered support for the debtors’ reorganization vision.
3. Taking Advantage of Opportunities for Competition
Finally, another strategy that contributed to Hertz’s successful reorganization was facilitating competition. Not only did Hertz run a competitive process for its plan sponsor, but it was also able to run competitive processes for debtor-in-possession financing and further ABS financing.
Click here to access the Anatomy of the Hertz Chapter 11 webinar.
Resources for understanding Chapter 11 are available in our Practical Guidance: Voluntary Chapter 11 suite.
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