Debt and coronavirus push Hertz into bankruptcy protection

Marco Green
May 24, 2020

A Hertz auto rental is closed during the coronavirus pandemic in Paramus, New Jersey, May 6, 2020. The Estero, Florida-based company named him its fifth CEO since 2014 just four days before the bankruptcy filing. The company said it would use more than $1 billion in cash on hand to support its ongoing operations as it proceeds with the bankruptcy process.

She added: "There's only so long that companies" reserves will carry them'.

Hertz has around $19 billion (R340 billion) in debt, which includes roughly $4.3 billion in corporate bonds and loans as well as $14.4 billion of debt backed by the company's fleet of vehicles, and lenders had asked the company for upfront payment on some of those obligations but couldn't get it to agree, according to The Journal. The Chapter 11 proceedings only involve the U.S. and Canadian subsidiaries.

The filing excludes Hertz's worldwide operating regions in Europe, Australia and New Zealand, as well as its more than 10,000 franchised locations.

Under Chapter 11 restructuring, creditors must settle for less than full repayment, but the business is likely to continue operating.

Hertz, including its Dollar, Thrifty, Firefly, Hertz Car Sales, and Donlen subsidiaries, remains open and serving customers, according to a statement from the company. Hertz said their ultimate goal is to provide a "more robust financial structure that best positions the company for the future as it navigates what could be a prolonged travel and overall global economic recovery". Hertz disclosed on April 29 that it had missed substantial lease payments related to its rental cars. Selling off cars quickly can help maximize the value of assets that rapidly depreciate, but flooding the market with too many cars depresses prices.

Icahn's holding company is Hertz's largest shareholder, with a 38.9% stake in the company, according to FactSet.

Hertz, originally known as Rent-a-Car Inc., was founded in Chicago in 1918.

Much of Hertz's business came from locations in airports, but orders issued by state governments for Americans to stay at home during the coronavirus pandemic significantly reduced air travel.

Other reports by Click Lancashire

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