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Debt | 12 Months Ended
--- | ---
Dec. 31, 2022
Debt Disclosure [Abstract] |
Debt | Debt The Company's debt consists of the following (in millions):
| Weighted Average Effective Interest Rate at December 31, 2022 |  | Weighted Average Stated Interest Rate at December 31, 2022 |  | Fixed or Floating Interest Rate |  | Maturity |  | December 31, 2022 |  | December 31, 2021
Senior Notes |  |  |  |  |  |  |  |  |  |  |
2027 Notes | 5.61% |  | 5.50% |  | Fixed |  | 2027 |  | $ | 1,200.0 |  |  | $ | 1,200.0 |
Other Debt |  |  |  |  |  |  |  |  |  |  |
ABL Credit Facility | N/A |  | 5.88% |  | Floating |  | 2027 |  | 1,339.7 |  |  | 456.0 |
AR Facility | N/A |  | 5.04% |  | Floating |  | 2023 |  | 335.0 |  |  | 225.0 |
Finance lease liabilities | 3.35% |  | N/A |  | Fixed |  | 2023-2030 |  | 64.5 |  |  | 52.6 |
Unamortized Debt Issuance Costs(a) |  |  |  |  |  |  |  |  | (5.2) |  |  | (6.1) |
Total debt |  |  |  |  |  |  |  |  | 2,934.0 |  |  | 1,927.5 |
Less: Current maturities of long-term debt |  |  |  |  |  |  |  |  | (12.1) |  |  | (11.4) |
Long-term debt, net |  |  |  |  |  |  |  |  | $ | 2,921.9 |  |  | $ | 1,916.1 |
(a) Unamortized debt issuance costs totaling $10.4 million and $5.0 million related to the ABL Credit Facility and AR Facility (as each is defined below) as of December 31, 2022 and December 31, 2021, respectively, are included in "Other long-term assets" in the consolidated balance sheets. The effective interest rate for the fixed rate 2027 Notes (as defined below) includes the stated interest on the notes and the amortization of any debt issuance costs. Maturities The nominal principal amounts of maturities of debt for each of the periods ending December 31 are as follows (in millions):
2023 | $ | 12.1 |
2024 | 11.7 |
2025 | 11.9 |
2026 | 10.9 |
2027 | 2,881.4 |
After 2027 | 11.2 |
Total | $ | 2,939.2 |
The Company's liquidity needs arise from the funding of its costs of operations and capital expenditures, debt service on its indebtedness, payment of dividends and repurchases of its shares. The Company believes that cash generated from operations and cash received from the disposal of rental and other equipment, together with amounts available under its senior secured asset-based revolving credit facility (the "ABL Credit Facility") and AR Facility (as defined below) will be adequate to permit the Company to meet its obligations over the next 12 months. Senior Notes On July 9, 2019, the Company issued $1.2 billion aggregate principal amount of its 5.50% Senior Notes due 2027 (the “2027 Notes”). Interest on the 2027 Notes accrues at the rate of 5.50% per annum and is payable semi-annually in arrears on January 15 and July 15. The 2027 Notes will mature on July 15, 2027. Ranking; Guarantees The 2027 Notes are the Company’s senior unsecured obligations, ranking equally in right of payment with all of the Company’s existing and future senior indebtedness, effectively junior to any of the Company’s existing and future secured indebtedness, including the ABL Credit Facility, to the extent of the value of the assets securing such indebtedness, and senior in right of payment to any of the Company’s existing and future subordinated indebtedness. The 2027 Notes will be guaranteed on a senior unsecured basis, subject to limited exceptions including special purpose securitization subsidiaries, by the Company’s current and future domestic subsidiaries. Redemption The Company may redeem the 2027 Notes, in whole or in part, at any time (i) on or after July 15, 2022 and prior to July 15, 2023, at a price equal to 102.750% of the principal amount of the 2027 Notes, (ii) on or after July 15, 2023 and prior to July 15, 2024, at a price equal to 101.833% of the principal amount of the 2027 Notes, (iii) on or after July 15, 2024 and prior to July 15, 2025, at a price equal to 100.917% of the principal amount of the 2027 Notes and (iv) on or after July 15, 2025, at a price equal to 100.000% of the principal amount of the 2027 Notes, in each case, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. Covenants The indenture governing the 2027 Notes contains certain covenants applicable to the Company and its restricted subsidiaries, including limitations on liens, indebtedness, mergers, consolidations and acquisitions, sales, transfers and other dispositions of assets, loans and other investments, dividends and other distributions, stock repurchases and redemptions and other restricted payments, restrictions affecting subsidiaries, transactions with affiliates and designations of unrestricted subsidiaries. Upon the occurrence of certain events constituting a change of control triggering event, the Company is required to make an offer to repurchase all of the 2027 Notes (unless otherwise redeemed) at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any to (but excluding) the repurchase date. If the Company sells assets under certain circumstances, it must use the proceeds to make an offer to purchase the 2027 Notes at a price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date. Events of Default The indenture also provides for customary events of default, including the following (subject to any applicable cure period): nonpayment, breach of covenants in the indenture, payment defaults under or acceleration of certain other indebtedness, failure to discharge certain judgments and certain events of bankruptcy, insolvency and reorganization. If an event of default occurs or is continuing, the trustee or the holders of at least 30% in aggregate principal amount of the 2027 Notes then outstanding may declare the principal of, premium, if any, and accrued and unpaid interest, if any, to be due and payable immediately. ABL Credit Facility On July 31, 2019, Herc Holdings, Herc and certain other subsidiaries of Herc Holdings entered into a credit agreement with respect to a senior secured asset-based revolving credit facility, which was amended and extended on July 5, 2022. As a result of the amendment, the aggregate amount of the revolving credit commitments was increased from $1.75 billion to $3.5 billion (subject to availability under a borrowing base). Up to $250 million of the revolving loan facility is available for the issuance of letters of credit, subject to certain conditions including issuing lender participation. Subject to the satisfaction of certain conditions and limitations, the ABL Credit Facility allows for the addition of incremental revolving commitments and/or incremental term loans. The ABL Credit Facility was also amended to include a provision that the Company, in consultation with a Sustainability Coordinator, may establish key performance indicators (“KPIs”) with respect to certain environmental, social and governance targets of the Company and its subsidiaries, which if mutually agreed, may be incorporated into the ABL Credit Facility through an amendment (an “ESG Amendment”). Upon the effectiveness of an ESG Amendment, the commitment fee and the spreads applicable to revolving loans may be increased or decreased within certain limits based on performance against the KPIs. Maturity The ABL Credit Facility matures on July 5, 2027. Guarantees; Collateral/Security The obligations of each of the borrowers under the ABL Credit Facility are guaranteed by each of Herc Holdings’ direct and indirect U.S. and Canadian subsidiaries, with certain exceptions, including special purpose securitization subsidiaries. The obligations of the borrowers under the ABL Credit Facility and the guarantees thereof are secured by security interests in substantially all of the assets of each borrower and guarantor, including pledges of all the capital stock of all of their direct subsidiaries, with certain exceptions. The liens securing the ABL Credit Facility are subject to certain exceptions. Also, subject to certain limitations and conditions, the ABL Credit Facility permits the incurrence of future secured debt on a basis either pari passu with, or subordinated to, the liens securing the ABL Credit Facility. Interest The interest rates applicable to any loans under the ABL Credit Facility are based, at the option of the borrowers, on (i) a floating rate based on Term SOFR (for loans denominated in U.S. dollars) or CDOR (for loans denominated in Canadian dollars) plus an initial margin of 1.50% and a SOFR adjustment of 0.10% per annum or (ii) a base rate plus an initial margin of 0.50%, in each case, where margin is adjusted under the ABL Credit Facility based on the quarterly average excess availability under the ABL Credit Facility. Covenants The ABL Credit Facility contains a number of covenants that, among other things, limit or restrict the ability of the borrowers and their subsidiaries to incur additional indebtedness, prepay other indebtedness, make dividends and other restricted payments, create or incur liens, make acquisitions and other investments, engage in mergers, consolidations or sales of assets, engage in certain transactions with affiliates, and enter into certain restrictive agreements limiting the ability to create or incur liens. In addition, under the ABL Credit Facility, upon excess availability falling below certain levels, the borrowers will be required to comply with a minimum fixed charge coverage ratio of no less than 1.00:1.00. As of December 31, 2022, the appropriate levels of liquidity have been maintained, therefore this financial maintenance covenant is not applicable. Events of Default The ABL Credit Facility provides that the occurrence of any of the following events will constitute an event of default: payment default, breach of representation or warranty, covenant breach, cross default to other material indebtedness, certain bankruptcy events, dissolution, invalidity of the credit agreement or any intercreditor agreement (if any), judgment in excess of a certain monetary threshold, any security or guarantee documents cease to be in effect, an ERISA event, pension event or a change of control. Upon the occurrence and during the continuation of an event of default, the agent may exercise remedies on behalf of the lenders, including accelerating the repayment of outstanding loans under the ABL Credit Facility. Accounts Receivable Securitization Facility In September 2018, the Company entered into an accounts receivable securitization facility (the "AR Facility"). The AR Facility was amended in August 2022 to extend the maturity date to August 31, 2023 and increase the aggregate commitments from $250 million to $300 million and replace LIBOR as a benchmark rate with Term SOFR. In November 2022, the Company further increased the aggregate commitments to $335 million. In connection with the AR Facility, Herc and one of its wholly-owned subsidiaries sell their accounts receivables on an ongoing basis to Herc Receivables U.S. LLC, a wholly-owned special-purpose entity (the "SPE"). The SPE's sole business consists of the purchase by the SPE of accounts receivable from Herc and the Herc subsidiary seller and borrowing by the SPE against the eligible accounts receivable from the lenders under the facility. The borrowings are secured by liens on the accounts receivable and other assets of the SPE. Collections on the accounts receivable are used to service the borrowings. The SPE is a separate legal entity that is consolidated in the Company's financial statements. The SPE assets are owned by the SPE and are not available to settle the obligations of the Company or any of its other subsidiaries. Herc is the servicer of the accounts receivable under the AR Facility. All of the obligations of the Herc subsidiary seller and the servicer and certain indemnification obligations of the SPE under the agreements governing the AR Facility are guaranteed by Herc pursuant to a performance guarantee. The AR Facility is excluded from current maturities of long-term debt as the Company has the intent and ability to consummate refinancing and extend the term of the agreement. The agreements governing the AR Facility contain restrictions and covenants which include limitations applicable to Herc, the Herc subsidiary seller and the SPE on the creation of certain liens, and restrictions and covenants which include limitations applicable to the SPE on the making of certain restricted payments, and limitations applicable to Herc and the SPE with respect to certain corporate acts such as mergers, consolidations and the sale of substantially all assets, with certain exceptions. The Company was in compliance with all such covenants as of December 31, 2022. The financing agreement with the lenders provides for customary events of default (subject to customary exceptions, thresholds and grace periods) including, without limitation, failure to perform covenants, ineffectiveness of transaction documents, invalidity of security interests or failure to cooperate in the administrative agent's assumption of control of accounts, material inaccuracy of representations or warranties, failure of certain ratios related to the accounts receivables, specified cross default and cross acceleration to other material indebtedness, certain bankruptcy events, certain ERISA events, material judgments, material adverse effect and change in control. Borrowing Capacity and Availability After outstanding borrowings, the following was available to the Company under the ABL Credit Facility and AR Facility as of December 31, 2022 (in millions):
| Remaining Capacity |  | Availability Under Borrowing Base Limitation
ABL Credit Facility | $ | 2,134.5 |  |  | $ | 1,575.3 |
AR Facility | — |  |  | — |
Total | $ | 2,134.5 |  |  | $ | 1,575.3 |
Letters of Credit As of December 31, 2022, $25.8 million of standby letters of credit were issued and outstanding, none of which have been drawn upon. The ABL Credit Facility had $224.2 million available under the letter of credit facility sublimit, subject to borrowing base restrictions.

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