We secured dismissal of breach of contract claims alleging Hertz was required to redeem $188 million of warrants

On February 7, 2025, Davis Polk secured dismissal of a breach of contract action filed by Discovery Global Opportunity Master Fund, Ltd. and Discovery Global Beacon Partners, LP (collectively, “Discovery”) against our client, Hertz Global Holdings, Inc. in the Delaware Court of Chancery.  Discovery holds approximately 11% of outstanding warrants that Hertz had issued in June 2021 following its emergence from chapter 11 bankruptcy proceedings.  Those warrants generally entitled the holders to obtain shares of Hertz common stock at a set price, subject to other protections in the warrant agreement. 

In its complaint, Discovery alleged that a series of share repurchases and debt financing transactions undertaken by Hertz between November 2021 and December 2023 constituted a “recapitalization” under the warrant agreement, thereby triggering Hertz’s obligation to redeem Discovery’s warrants. Discovery sought damages in an amount of at least $188 million, as well as an order of specific performance requiring Hertz to comply with its redemption obligations.  Davis Polk moved to dismiss the complaint in its entirety.

In granting Hertz’s motion, the court adopted Davis Polk’s arguments that (i) under the plain language of the warrant agreement, a “recapitalization” triggered Hertz’s redemption obligations only if all of Hertz’s common stock was converted or exchanged for another form of consideration through the “recapitalization”; (ii) the share repurchases and debt financing transactions that were undertaken by Hertz over a two-year period did not constitute a “recapitalization” within the meaning of the warrant agreement, notwithstanding the impact of those transactions on the company’s capital structure; and (iii) the plaintiffs’ interpretation of the warrant agreement would lead to commercially unreasonable results.

The Davis Polk team included partner Andrew Ditchfield (who argued the motion), counsel Alison B. Miller and associates Kyra Macy Kaufman and Tony Sun.  Partners Louis L. Goldberg and Randall Derek Walters provided corporate advice.  All members of the Davis Polk team are based in the New York office.

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