Travel Investor Certares' Plan to Be Kingmaker in Hertz Reorganization Hits a Snag

Certares, the private equity firm and travel industry powerhouse with controlling interests in American Express Global Business Travel and Travel Leaders Group, was poised to co-lead Hertz's reorganization and bankruptcy exit, but that prospect is getting messier with the emergence of a competing bid.

Hertz, which is still on pace to exit Chapter 11 bankruptcy in June, announced earlier this week that Centerbridge Partners, Warburg Pincus, and Dundon Capital Partners offered an alternative plan to the Certrares-Knighthead Capital Management reorganization plan filed March 1.

A Certares representative declined to comment on the Centerbridge reorganization filing.

There isn't a ton of daylight between the two competing plans, although now there is expected to be intense negotiations and counteroffers to sweeten the pot.

Under both schemes, Hertz would emerge from Chapter 11 with a maximum of $1.3 billion in corporate debt, would have more than  $2 billion in liquidity, would wipe out debt tied to the company's U.S. vehicle fleet, and render Hertz's European business debt-free.

Unsecured debtors under the Certares-Knighthead plan would receive 80 cents on the dollar, or 75 cents on the dollar if the Centerbridge proposal gets adopted.

Although there had been discussion of Hertz, which is a public company, going private under the reorganization, both plans now would have Hertz emerge as a public company with a maximum of 80 percent of its shares owned by the "holders of its U.S. unsecured funded debt obligations," Hertz stated.

One of the interesting things about the Certares strategy is that it has been eager to use its vast portfolio of travel industry investments to benefit stablemates.

For example, Certares founder Greg O'Hara is a Tripadvisor board member, and his Travel Leaders Group, which has changed its named to Internova Travel Group, has contributed wholesale hotel inventory to seed Tripadvisor's new subscription program for consumers.

Similarly, according to the Wall Street Journal, American Express Global Business Travel signed a letter of intent with Hertz in the wake of the Certares-Knighthead Hertz rescue plan to make the car-rental firm a preferred supplier of American Express Global Business Travel in North America.

"Hertz said it believes that an agreement with Amex GBT, if finalized, could generate an extra 6.3 million rental-car days in 2023, boosting the company's valuation by between $680 million and $882 million," the Wall Street Journal reported.

Whether there was indeed a letter of intent or not, Skift has learned that there were indeed discussions involving the two parties about a preferred relationship.

Hertz management is publicly not tipping its hand on which of the proposals, which will  likely be amended during "robust negotiations," it favors, saying both would provide "excellent value for our creditors and stakeholders."

Hertz expects matters to come to a head in a hearing April 16, after which one of the plans would be sent to Hertz's creditors for a vote, and then be subject to court confirmation of the plan.

Neither of the filers of the rival plans is new to the travel industry. Certares and Knighthead during the pandemic invested in Chile's Latam and Brazilian Azul airlines.

Centerbridge and its partners, Hertz said, has a track record in the car rental, automotive, and travel sectors.