America’s second-largest rental auto company, Hertz, files for bankruptcy

Cornelia Mascio
Mag 24, 2020

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

The Estero-based company, in a Chapter 11 filing with bankruptcy court in DE after the markets closed Friday, May 22, said it has $25.84 billion in assets and $24.35 billion in debts.

The company - which began operating a century ago in Chicago with a dozen Model T Ford cars - had already furloughed or laid off 20,000 employees, or around half of its global workforce, in response to the pandemic.

Hertz is just the latest high-profile company to feel the financial pain of the COVID-19 crisis: Retailers J.C. Penney, J.

In April the company, which includes car-rental brands Dollar, Thrifty and Firefly, missed a payment on its debt, but reached a short-term deal with its creditors.

With almost US$19 billion (S$27 billion) of debt and roughly 38,000 employees worldwide as of the end of a year ago, Hertz is among the largest companies to be undone by the pandemic. The company listed about $25.8 billion in assets and $24.4 billion of debts.

A Hertz car rental is closed during the coronavirus pandemic in Paramus New Jersey
A Hertz car rental is closed during the coronavirus pandemic in Paramus New Jersey

Hertz has a fleet of about 4 lakh cars in the US.

Because of this, auto rental businesses, such as Hertz, are in trouble.

The bankruptcy filing is meant to allow for a "financial reorganization" of Hertz as well as subsidiaries such as Dollar, Thrifty and Firefly.

Hertz closed most of it's United Kingdom and Irish branches when COVID-19 outbreak began.

The Chapter 11 court protection will allow Hertz to operate while it conceives a plan to turn around the business while paying its debts. In fact, the long-running car-rental company in the US has reportedly been in a critical financial condition earlier this month, citing a 73 percent drop in shares over the past three months. The proceeds from those securities finance purchases of vehicles that are then leased to Hertz in exchange for monthly payments that have risen as the value of cars falls. Hertz typically responds to falling demand by selling cars from its fleet, so it has been hit especially hard by the drop in prices at used-car auctions.

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