JPMorgan’s refusal to increase Hertz bid costs co-investors billions

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JPMorgan’s refusal to increase its bid for Hertz in a bankruptcy auction this spring — despite pressure from co-investors — now looks like a multi-billion dollar mistake as the rent-a-car industry revs back to life, a source said.

The bank, which owned most of Hertz’s debt, wouldn’t raise its bid in the May 12 bankruptcy auction for the company, according to a source with direct knowledge of the matter.

Instead, a consortium made up of JP Morgan and other Hertz creditors sold most of their shares in the company. Since then, Hertz’s value — goosed last week by its announcement it’s buying 100,000 Teslas — has roughly tripled in six months, meaning the losing bidding group has also lost out on billions of dollars, the source said.

The JPM group that owned most of the Hertz debt was bidding against a team of Knighthead Capital, Certares Opportunities and Apollo Capital Management.

The bidding went back-and-forth on May 12 and the creditors’ group was asked to raise its offer one more time.

Seven of the other eight members in the JPMorgan consortium that also included AllianceBernstein, Centerbridge Partners, Warburg Pincus, Dundon Capital Partners, Fidelity, Pentwater Capital, Bank of America and Marathon Asset Management wanted to better their offer, the source with direct knowledge said.

JPMorgan, which owned most of Hertz’s debt, wouldn’t raise its bid in the May 12 bankruptcy auction for the company, according to a source with direct knowledge of the matter.
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JPMorgan was one of the biggest creditors and said no, the source said.

“They just said they wouldn’t pay more,” the source said. “We would have been able to bid higher one more time and we would have won.”

The Knighthead group paid $7.5 billion in cash, according to a Hertz filing. That included paying the Hertz creditors, like JP Morgan, in full.

Creditors recovered their money, or made a nice profit if they bought around the time of the bankruptcy, but as it turned out, they also left a lot on the table.

Hertz now has an enterprise value, which is debt plus equity, of roughly $23 billion — more than three times what it sold for in May.

Hertz now has an enterprise value, which is debt plus equity, of roughly $23 billion — more than three times what it sold for in May.
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It emerged from bankruptcy with the new owners on June 30.

Hertz is planning to list shares in a Nasdaq public offering Monday. The stock is expected to open at around $28, sources said.

Presently, the shares are traded over-the-counter and closed up 2.58 percent Wednesday to close at $32.62.

A JPMorgan spokesman declined to comment.

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