Rental car company Hertz files for bankruptcy

Cornelia Mascio
Mag 23, 2020

According to Jalopnik.com, the company announced last month that it had missed "substantial lease payments on its cars" during the coronavirus pandemic.

"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.

Chapter 11 is a mechanism that allows a company that is no longer able to repay its debt to restructure itself without creditors.

In late March, Hertz shed 12,000 workers and put another 4,000 on furlough, cut vehicle acquisitions by 90% and stopped all nonessential spending.

With almost US$19 billion of debt and roughly 38,000 employees worldwide as of the end of 2019, Hertz is among the largest companies to be undone by the pandemic.

Hertz's stock dropped by as much as 50% in after-hours trading following the The Wall Street Journal's initial report that the company would file for bankruptcy on Friday night. He also noted that CEO changes have been common at Hertz since financier Carl Icahn entered the company in 2014.

The firm, 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 remain home.

Deutsche Bank analyst Chris Woronka credited Marinello with reigniting Hertz's revenue growth, writing in a note to investors that it rose 16% in 2018 and 2019 combined.

Hertz (HTZ) is reportedly in a deadlock with its creditors as it looks to come to an agreement over lease payments for its vehicle fleet as it attempts to avoid filing for bankruptcy.

Hertz' franchise sites, which are not owned by the company, are also not included in the Chapter 11 proceeding. 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 J.Crew and Stage Stores.

Hertz's board earlier in the day approved the company seeking Chapter 11 protection in a U.S. bankruptcy court in DE, according to court records.

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