Their argument is literally, "There is so much dumb money out there driving up the price this is the cheapest source of debtor financing available."

https://www.zerohedge.com/markets/most-absurd-moment-history-capital-markets-hertz-plans-sell-1-billion-new-bankrupt-stock

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40401386)

Seems like the SEC generally takes the view that dumb retail investors shouldn't be taken advantage of.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40402984)

In general I think SEC paternalism would be misplaced here. If people want to provide free DIP financing (as opposed to just giving money ito random passers by), the SEC should just make sure they have every opportunity to know what they’re doing

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40403410)

Hey dumdum, we're in bankruptcy and you'll probably never see this money again, but fuck it, this is America and FREEDOM.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40405528)

I’m mainly being tongue in cheek here because at least insider traders theoretically communicate real information to the market. Making it easy for dead businesses to finance themselves for free seems value destructive. It’d be funny to see the idiots buying into the offering lose their money, but that’s really all you can say for it

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40402927)

But those disclosures IMO should be like the warnings on a carton of cigarettes, with like pictures of destitute families and stuff

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40406268)

Name Address Shares (%)

Carl C. Icahn

Icahn Associates Holdings LLC

16690 Collins Avenue Sunny Isles, FL 33160.

38.89%

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40402632)

"We're going to dilute existing shareholders and then we're going cancel all shares and give all the money you invested to bank-debt holders, who will be so grateful they will use their new seats on the board to reward current management with large bonuses.

Somehow this is all legal, so yeah, just buy some shares."

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40403890)

Bankruptcy does not necessarily mean that existing stock is canceled. If they can use the capital they raise to weather the COVID travel downturn, then this could be better for everyone (except bondholders).

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40403884)

I'd be happy to be enlightened on this, but it doesn't seem that crazy/dumb/predatory to me...

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40403915)

how would this be *bad* for bondholders? do you manage your own money?

posts like this make lol at xo racism

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40403917)

I've never posted anything racist on this cesspool.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40403970)

I'm not saying it's not 100 percent logical, but it really is phishing for phools.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40403981)

More likely scenario is that, if they can raise enough equity to weather the situation, bondholders get reinstated.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40404010)

If someone thinks things will normalize in 2 years, I can see why they'd want to buy 75% of what was recently a $3B company for $500M

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40404046)

I'm just saying that *someone with a high tolerance for risk and a particular set of views about the near/intermediate future could make a coherent argument that this is a good investment.*

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40404149)

Even if Jefferies/robinhood found another $1 billion of retarded new equity (current market cap is ~$400m), the equity is still almost certainly getting wiped out. And if they recover at all, their equity will be diluted as fuck. The bond prices haven’t budged for a reason.

Lol I actually puked on you because I didn’t realize most of the 20bn debt is held in remote SPVs. But I still think you’re a dumb motherfucker for giving the trustee your money. I think the unsecured creditors would be faaaaaasr happier for the free money than worried about some hypothetical dilution in the event hertz’s valuation 3xs or some shit.

That’s not really a justification for taking the offering seriously at all

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40404477)

The company was solvent and worth $3b 4 months ago.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40405264)

That’s what 5 minutes on capital iq says anyway.

That said sorry for being so histrionic. I still think you’re being nonsensical but quite as much as I thought.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40405603)

I don’t know whether htz business model is fundamentally broken.

I just think that there is a nonzero chance that this could work out and can imagine someone who is both smart and very optimistic about rue post-covid recovery viewing it as a decent albeit speculative bet.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40405701)

Saying that there’s technically a non-0% chance of a recovery (while hand-waving at the actual investment proposition - this is why I *hated* law btw) isn’t saying anything at all. If we polled all the unsecured creditors, including vulture funds and the GSO/Carlyles of the world with an appetite for equity, none of them are losing sleep over a $1 billion cash windfall. Except maybe from laughter.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40409632)

I do think that a reasonable person could buy the argument that the company was worth $3B in February and that it could be worth $3B again 1) if they can weather COVID and 2) if the world resumes to normal a that point. If they can buy almost the entire thing for $1B, then you could imagine that someone might find that risk/reward attractive.

Not saying that I believe that, but I can imagine someone believing it.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40409662)

Jefferies wants to sell people ~62% of the pro forma equity for $1bn. Implying a pre-money *equity* (ie net of the $3bn face value of the bonds) valuation of $1.6bn or so (again, the current market cap is $400m)

I’m being very simplistic here bc I’m not doing a deep dive on hertz, but do you not see what’s wrong with this picture? Even if you wanted to get involved for some reason, why wouldn’t you buy the bonds instead?

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40415574)

I bet the bonds are illiquid. If they’re liquid, then I would probably buy them before I’d buy the equity. I don’t think that has any bearing on my view above.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40417065)

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What does loan to own have to do with new money being injected at the very bottom of the capital structure? The valuation will be the valuation. Given the 19 billion of debt above the equity, I suspect 1bn isn’t going to change the fulcrum

This might be the single most retarded thing I’ve ever read on xo

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40403986)

I'm starting to think you're an idiot...

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40404017)

That's why the 2024 notes are screwed more than 2021 notes in your kumbaya scenario. Their value will never come close to par without a restructuring.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40404095)

----------------------------------------------

Date: June 12th, 2020 1:01 PM

Author: .....,,.....,,.....,,.................,,,

(2024 notes bag holder)

how would this be *bad* for bondholders? do you manage your own money?

posts like this make lol at xo racism

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40403917)

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40404118)

If i proposed investing 1bn of new common equity into a business with billions upon billions of existing unsecured creditors, I’d be fired. If not beaten to death. And rightfully so.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40404047)

If you are a bond holder, you are thrilled that new equity is coming in to finance the case instead of a super-priority priming DIP.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40406239)

Hertz Global Holdings Inc. won a bankruptcy judge’s approval to raise up to $1 billion in new equity from a counterintuitive stock rally, a seemingly unprecedented move for a large bankrupt company eager to capitalize on market anomalies.

Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del., authorized Hertz to seize the opportunity to raise money from a stock market that has shown strong interest in the company’s shares despite its severe financial strain.

With U.S. securities regulators watching, the judge said in a hearing held remotely that Hertz can ask the public to buy shares, supplying money the company needs for its restructuring efforts and won’t have to pay back.

Hertz lawyer Thomas Lauria acknowledged in court the company’s shares “might ultimately be worthless, although it’s impossible to know this as a point of certainty.” As long as the public markets are informed of the risks, Hertz is in compliance with securities laws, he said.

Bankruptcy experts said the planned stock sale raises questions about whether a company under chapter 11 protection can exploit equity markets for financing when the value of its shares, as with nearly all bankrupt issuers, is at significant risk of being wiped out.

“I will give them credit for creativity—trying to turn something potentially worthless into a pot of cash,” said John Penn, a bankruptcy lawyer at Perkins Coie LLP who isn’t involved in the Hertz case.

Hertz has described the planned equity sale as a “unique opportunity” to raise capital on more favorable terms than the strings-attached loans that bankrupt companies more typically receive.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40406253)

*scoops up 10,000 ZIL*

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40406313)

https://www.cnbc.com/2020/06/17/the-sec-told-bankrupt-hertz-it-has-issues-with-its-plan-to-sell-stock-chairman-jay-clayton-says.html

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40434887)

They can proceed once Hertz turns over every e-mail associated with the offering, including ACP.

(http://www.autoadmit.com/thread.php?thread_id=4558559&forum_id=2#40437696)