Carl Icahn & Hertz Shareholders Stand to Benefit from Bankruptcy Auction

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Photo Credit: Hertz.com

Edited by: JV Staff

Seems like the embattled car rental company Hertz has gained yet another life after experiencing very serious financial challenges. According to a report in the New York Post on Thursday it appears Hertz had garnered a surprising victory when the company was purchased for as much as $8 a share at auction. This news was especially pleasing to the group of small investors who were ridiculed last year for driving up the share prices of the bankrupt company.

The Post reported that the deal that served as vindication for investors known as the Reddit Rally crowd  sent Hertz shares skyrocketing about 68 percent on Wednesday to $6.20 a share before closing at $5.72 a share.

Wednesday’s deal that took place at a Miami based auction prevented the company’s shareholders from really being financially decimated as generally takes place in a bankruptcy case. Now, well heeled Wall Street firms are chomping at the proverbial bit to get behind the proverbial driver’s seat of the car rental company. This comes at a fairly propitious time as pandemic weary Americans are eager to break free of their isolation and get back on the highways again for spring and summer road trips.

The deal that took place on Wednesday was orchestrated by Knighthead Capital Management, Certares Management and Apollo Global Management, according to the NY Post report. It values Hertz at $7.4 billion, including debt.

“During the early days, nobody knew if we were going to survive. Even six months ago, nobody could have predicted this sort of demand for our cars,” Hertz chief financial officer Jamere Jackson said.

The Post reported that “last year’s frenzied trading in Hertz, which presaged GameStop’s meteoric rise, pushed Hertz shares up as much as $6.25 a share in June from the 42-cents-a-share low the stock hit in May after it sought bankruptcy protection.”

Last year the trading going on in Hertz got so heated that then-SEC chairman Jay Clayton went on national television to say the watchdog was concerned about the company’s plans to raise money by selling more potentially worthless stock, as was reported by the NY Post.

In addition to making lenders whole, the buyers have agreed to pay equity investors as much as $8 for each share they own via a $240 million cash payment, as well the chance to participate in either a $1.6 billion rights offering or warrants for about 20 percent of the reorganized company, as was reported by the NY Post.

It was reported by the Post that billionaire business tycoon Carl Icahn could possibly benefit from the deal.  Following Hertz’s bankruptcy, Icahn sold out his 39 percent stake in the company, thus losing $1.8 billion. Sources with knowledge of the deal have told the Post that Icahn is not out of the game as he has come into shares of Hertz and in Wednesday’s auction, he expected to make back some of the money he had lost.   Last year Hertz bonds were trading at 10 cents a share, as was reported by the Post.