By Jonathan Stempel
(Reuters) -Hertz Global Holdings on Friday won the dismissal of a lawsuit by warrant holders that could have forced the car rental company to owe hundreds of millions of dollars following a series of financing transactions.
Funds associated with Discovery Capital Management alleged in a complaint last June that Hertz underwent a multi-billion-dollar “recapitalization” between November 2021 and December 2023 that amounted to a change of control, entitling them to a $187.5 million payment.
The funds held 11% of the Hertz warrants, implying about $1.7 billion of claims if other holders also sought payments from the Estero, Florida-based company.
But in Friday’s decision, Judge Eric Davis of the Delaware Chancery Court rejected the funds’ breach of contract claim.
He said Hertz’s $3.4 billion of stock repurchases and $2.2 billion of debt issuance, taken together, did not amount to “significant structural changes to Hertz’s capital makeup that a ‘recapitalization’ suggests.”
To hold otherwise, the judge said, “would be overly inclusive and could produce absurd results.”
Lawyers for the Discovery funds did not immediately respond to requests for comment. Discovery is based in Norwalk, Connecticut.
Hertz was pleased with the decision.
“As we said back in June this claim was meritless and not supported by the terms of the warrant language or market practice,” Hertz said in a statement.
The case is Discovery Global Opportunity Master Fund Ltd et al v Hertz Global Holdings Inc, Delaware Chancery Court, No. 2024-0655.
(Reporting by Jonathan Stempel in New YorkEditing by Marguerita Choy)
