Hertz to File for Bankruptcy, According to Reports

Andrew Cummings
May 24, 2020

Hertz Global Holdings Inc., the car-rental company founded with a dozen Ford Model Ts over a century ago, filed for bankruptcy late Friday after sweeping travel restrictions and the global economic collapse destroyed demand for its vehicles.

The car-rental business has been decimated as the pandemic has ground travel to a halt, forcing Hertz's CEO to resign as the company missed lease payments and laid off 10,000 workers last month.

Hertz, whose largest shareholder is billionaire investor Carl Icahn with a almost 39 per cent ownership stake, is reeling from government orders restricting travel and requiring citizens to stay at home. The company also noted they have more than $1 billion (£821,959,400 / €917,010,700) in cash to support its continuing operations.

The firm, which earns much of its income from auto rentals at airports, said it had been affected by the sharp downturn in global travel. The proceeds from those securities finance purchases of vehicles that are then leased to Hertz in exchange for monthly payments that have risen as the value of cars falls.

Hertz earlier signalled it could avoid bankruptcy if it received relief from creditors or financial aid that the company and its competitors have sought from the United States government. The company listed about $25.8 billion in assets and $24.4 billion of debts.

After several last-ditch efforts to avoid it - and five days after installing a new CEO - Hertz Global Holdings filed for bankruptcy May 23.

The Chapter 11 court protection will allow Hertz to operate while it conceives a plan to turn around the business while paying its debts.

A representative for Hertz declined to comment. In particular, Hertz implemented furloughs and layoffs of 20,000 employees which is almost 50% of its global workforce.

The more than a century old vehicle rental firm, whose largest shareholder is billionaire investor Carl Icahn, is reeling from government orders restricting travel and requiring citizens to remain home.

Hertz's woes are compounded by the complexity of its balance sheet, which includes more than $14bn of securitised debt.

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