Hertz Shares Explode After Selecting a $6B Turnaround Bid

American car rental company Hertz saw its shares skyrocketing on Wednesday. The stock soared over 50% after Wall Street learned that the company had selected a $6 billion turnaround bid.

Shares were rocketing as much as 68% after the move, which will provide a rare payout to its shareholders.

Knighthead Capital Management, Certares Management, and others have won the bid to take over Hertz in its bankruptcy reorganization. The company is hoping to exit the bankruptcy by the end of June.

Hertz was among the largest companies to end up filing for Chapter 11 Bankruptcy last May during the COVID-19 pandemic.

The company had experienced a sudden decline in revenue caused by decrease in travel during the pandemic.

The auction results were first reported by the Wall Street Journal who said the winning bid will pay current shareholders close to an unusual $8 a share. Some of this would be paid in cash with warrants and reorganized equity also accounting for part of the value.

Under the proposal, which will need to be approved by the U.S. Bankruptcy Court, Hertz’s Chapter 11 plan will be funded through direct common stock investments from investors and others aggregating $2.78 billion, the issuance of $1.5 billion of new preferred stock to Apollo and a fully backstopped rights offering to the company’s existing shareholders to purchase about $1.64 billion of additional common stock.

The $6 billion bid will fund Hertz’s Chapter 11 plan through direct stock investments from the group of $2.781 billion, the issuance of $1.5 billion of new preferred stock to Apollo, and a fully backstopped rights offering to the company’s existing shareholders to purchase $1.635 billion of additional common stock, Hertz said in a statement.

“The revised plan would provide for the payment in cash in full of all administrative, priority, secured, and unsecured claims in the Chapter 11 cases and would deliver significant value to the Company’s existing shareholders,” the statement also read.

A rival group including Centerbridge Partners, Warburg Pincus LLC, Dundon Capital Partners, LLC and an ad hoc group of the Company’s unsecured bondholders were also vying to fund Hertz’s exit from bankruptcy.

Hertz shares are now up 343% in the year to date.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.