Hertz Sells Investors 50% Of Oro's Votes But Only 15.86% Of Its Common Units, For $80.89 Million
Hertz keeps majority economic ownership of Oro Mobility and will lease it vehicles, while buying back part of its second-lien notes at a 60% discount.
Hertz sold a group of investors half the voting units of its Oro Mobility fleet business, but only about 15.86% of the common units, for about $80.89 million in cash, according to an 8-K filed Tuesday. The buyers include Cohen Private Ventures and funds affiliated with Certares and/or Knighthead.
What the 8-K says
The agreements are dated October 16, and the investors paid and received their Class A units on October 19. The filing says the 15.86% economic stake is before dilution from Oro's management incentive plan.
Oro will have a six-person board, with Hertz and the investor group each naming three directors. Before the sale, Hertz moved the Oro business assets it did not already hold into Oro, along with about $60.03 million in cash.
At the same time, Hertz agreed to buy back about $51.1 million of its 8.000% second-lien exchangeable notes due 2029 for about $20.86 million, a 60% discount to par. The sellers are funds affiliated with Certares and/or Knighthead.
The filing says Hertz's independent Audit Committee and other disinterested directors approved each transaction, including the sale of up to $100 million of Oro equity units.
What it changes
Hertz says in its press release it keeps majority economic ownership of Oro and stays on as its fleet and corporate services partner. The release describes the deal as an $80 million strategic equity investment, and says Oro runs about 45,000 vehicles across every major U.S. mobility market.
Hertz will lease or sublease vehicles to Oro under fleet agreements with payments of about $13.7 million per month over an average term of about 4.5 years. Oro will pay Hertz a royalty of 0.5% of new rental customer revenue under one of two trademark licenses; the other is royalty-free.
Hertz CEO Gil West, who is also Oro's executive chairman, said the investment is "validating both Oro's trajectory and Hertz's transformation strategy."
Hertz's shares closed at $1.84 in Monday's session, up 6.36%, before the filing was accepted Tuesday at 7:05 a.m. ET.
What to watch
Under the services agreement, information technology, corporate security and systems support are expected to move to Oro within 12 months. Oro may also, over time, set up its own asset-backed financing facility alongside Hertz's existing one.
The 12-month handover of technology, security and systems support is the next concrete marker of Oro operating on its own.
Sources
- 8-K Filing — HERTZ GLOBAL HOLDINGS, INC (HTZ) — SEC EDGAR
- Exhibit dp255212_ex9901.htm — HERTZ GLOBAL HOLDINGS, INC 8-K exhibit — SEC EDGAR
