Hertz Global Holdings (NYSE: HTZ) netted a commitment for a debtor-in-possession financing package of $1.65 billion as a lifeline to help the car rental giant as it reorganizes through the Chapter 11 process.
Shares of Hertz soared more than 150% on Friday. The stock has fallen by 87% in 2020, or by nearly $17 per share.
The deal is pending approval by the U.S. Bankruptcy Court for the District of Delaware. A hearing is scheduled for October 29.
Hertz President and CEO Paul Stone says the new funding will offer “additional financial flexibility as we continue to navigate the pandemic's effects on the travel industry and take steps to best position our business for the future.”
Up to $1 billion of the funding can be leveraged as equity for vehicle acquisition in North America. The company can also use up to $800 million for working capital and general corporate purposes.
As part of the deal, Hertz must file a Chapter 11 reorganization plan by August 1. The loan also matures by the end of 2021.
An interest rate of 7.25% above the London interbank offer rate was set by the company’s first-lien lenders.
Apollo Global, Management, Diameter Capital partner, and Silver Point Capital are among the lenders funding the loan, according to Bloomberg.
“We are pleased with the strong interest from our pre-petition first-lien lenders and appreciate their support of Hertz and our future opportunities as a rental car leader,” Stone says.
The funding will be sorely needed for Hertz, which has been decimated due to the pandemic.
Hertz was drowning in more than $24 billion in debt in March and had about $1 billion in cash at the time. Thousands of workers were let go in the spring and vehicle acquisitions grinded to a halt.
The company filed for bankruptcy protection in May. However, the stock price has been a favorite of new retail investors. These investors caused a 500% spike in the price of the stock over the summer.