Hertz Global Holdings Inc., a car rental company more than a century old, filed for bankruptcy protection on Friday after its business disappeared during the coronavirus pandemic and talks with creditors did not result in necessary relief.
Hertz said in a lawsuit in the United States on Friday that it voluntarily filed for Chapter 11 reorganization. Its international operating regions, including Europe, Australia and New Zealand, were not included in the US procedures.
The company, whose largest shareholder is billionaire investor Carl Icahn, suffers from government orders that restrict travel and requires citizens to stay at home. Much of Hertz's revenue comes from rental cars at airports, which have virtually disappeared as potential customers avoid flying.
With nearly $ 19 billion in debt and approximately 38,000 employees worldwide by the end of 2019, Hertz is among the largest companies to be undone by the pandemic. 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 companies.
So far, US airlines have avoided similar destinations after receiving billions of dollars in government aid, an avenue that Hertz has unsuccessfully explored.
The Estero, Fla., Company, which operates Hertz, Dollar and Thrifty car rentals, was talking to creditors after skipping significant car rental payments due in April. The missed payments tolerance and exemption agreements were scheduled to expire on May 22. Hertz has about $ 1 billion in cash.
The size of Hertz's rental obligations increased as the value of vehicles decreased due to the pandemic. In an attempt to appease creditors who have asset-backed securities that finance its fleet of more than 500,000 vehicles, Hertz has proposed selling more than 30,000 cars a month by the end of the year, in an effort to raise nearly $ 5 billion. in the USA, a familiar person. with the said subject.
On May 16, the board appointed executive Paul Stone to replace Kathryn Marinello as CEO. Hertz previously laid off some 10,000 employees and said there was substantial doubt about its ability to remain a constant concern.
Hertz's problems are compounded by the complexity of its balance sheet, which includes more than $ 14 billion in securitized debt. The proceeds from these bonds finance purchases of vehicles that are rented to Hertz in exchange for monthly payments that increase as the value of cars decreases.
Hertz also has traditional credit lines, loans and bonds with conditions that can trigger defaults based on the lack of these lease payments or the non-fulfillment of other conditions, such as delivering a timely operating budget and repaying the borrowed funds.
Hertz previously signaled that it could avoid bankruptcy if it received relief from creditors or financial aid that the company and its competitors sought from the U.S. government. The US Treasury started helping businesses as part of an unprecedented $ 2.3 trillion relief package, approved by Congress and sanctioned.
A commercial group representing Hertz, the American Car Rental Association, asked Congress to do more for the sector, expanding coronavirus relief efforts and advancing new legislation geared to tourism-related businesses.
Even before the pandemic, Hertz and colleagues were under financial pressure, as travelers switched to hitchhiking services like Uber.
To combat Uber, Hertz adopted a recovery plan, with the goal of modernizing its smartphone apps and improving the management of its rental car fleet.
Hertz has its roots in 1918, when Walter Jacobs, then a pioneer in car rental, founded a company that allowed customers to temporarily drive one of a dozen Ford Motor Co Model Ts, according to the company's website.