Rental car company Hertz files for bankruptcy

Andrew Cummings
May 23, 2020

Sources for Bloomberg said the rental auto company is looking to cut a deal with its creditors over missed debt payments, but the parties have yet to reach an agreement, which could force Hertz into filing for bankruptcy protection in the coming days.

Hertz's worldwide operations in Europe, Australia and New Zealand as well as its franchised locations in the USA are not affected.

Hertz has around $19 billion in debt, including $4.3 billion in corporate bonds and loans as well as $14.4 billion of debt backed by their vehicles, according to The Journal. The public health crisis has also caused a cascade of bankruptcies or Chapter 11 preparations among companies dependent on consumer demand, including retailers, restaurants and oil and gas firms.

In March 2020, however, Hertz began laying off workers in an attempt to save money after missing lease payments on its rental vehicle fleet.

Hertz's board earlier in the day approved the company seeking Chapter 11 protection in a United States bankruptcy court in DE, according to court records. Forbearance and waiver agreements on the missed payments were set to expire on May 22.

What they're saying: Hertz locations will remain open for now, and the company says it has over $1 billion in cash on hand to support operations.

"No business is built for zero revenue", former CEO Kathryn Marinello said on the company's first-quarter earnings conference call May 12.

"Management has concluded there is substantial doubt regarding the company's ability to continue as a going concern within one year from the issuance date of this quarterly report", it said.

A trade group representing Hertz, the American Car Rental Association, has asked Congress to do more for the industry by expanding coronavirus relief efforts and advancing new legislation targeting tourism-related businesses.

Hertz's business had already been struggling even before the pandemic as it tried to fend off competition from other rental agencies as well as ride-hailing businesses like Uber and Lyft.

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