Friday, 05 June, 2020

Hertz could file for bankruptcy ‘as soon as this weekend'

Hertz could file for bankruptcy ‘as soon as this weekend': report Could Hertz Find A Lifeline In Carl Icahn As It Looks To Avoid Bankruptcy?
Ginger Lawrence | 23 May, 2020, 08:36

The Estero, Florida-based company, which operates Hertz, Dollar and Thrifty car-rentals, had been in talks with creditors after skipping significant car-lease payments due in April.

Hertz, one of the largest rental vehicle companies in the world, filed for Chapter 11 bankruptcy on Friday evening, the company announced in a press release.

"With the severity of the COVID-19 impact on our business, and the uncertainty of when travel and the economy will rebound, we need to take further steps to weather a potentially prolonged recovery", said Hertz President and CEO Paul Stone in a statement Friday.

Hertz has around $US19 billion in debt, which includes roughly $US4.3 billion in corporate bonds and loans as well as $US14.4 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.

How major United States stock indexes fared Friday
Also weighing on sentiment was news that China would drop its annual economic growth target for the first time. The move has drawn strong rebukes from the US government and rights groups.

Chapter 11 is a mechanism that allows a company that is no longer able to repay its debt to restructure itself without creditors. Jacobs sold the company, initially called Rent-A-Car Inc., to John D. Hertz in 1923.

However, there is the possibility that lead shareholder Carl Icahn could rescue the company as he looks to protect his $1.6 billion investment that is now valued at $170 million, sources told Bloomberg. Hertz earlier laid off about 10,000 employees and said there was substantial doubt about its ability to continue as a going concern. 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. Its biggest creditors are banks, but the filing lists IBM, Lyft, United and Southwest Airlines as others owed between $6 million and $23 million each. The company joins department store chain J.C. Penney, as well as Neiman Marcus, J.Crew and Stage Stores.

Hertz filed for bankruptcy Friday night after failing to reach an agreement with lenders, The Wall Street Journal first reported Friday.