Hertz Global Holdings Inc., the car-rental company established with twelve Ford Model Ts over 100 years ago, filed for bankruptcy last Friday following sweeping travel restrictions and the global economic meltdown quenching the demand for its vehicles.
The Chapter 11 filing in Delaware permits Hertz to continue with operations while it strategizes a plan to pay creditors and resuscitate the business. A person familiar with the issue said the company does not need debtor-in-possession financing for now as it has more than $1 billion cash on hand.
Hertz’s court petition enumerated about $25.8 billion in assets and $24.4 billion of debts while and its largest creditors are Lyft Inc and IBM Corp. After Hertz’s revenue was decimated by coronavirus pandemic, the car renter looked for relief from lenders and sought a bailout from the U.S. Treasury Department. However, while it managed to get a short-term reprieve from creditors, it was not able to seal longer-term agreements.
While talking about the company’s survival amid coronavirus pandemic, Hertz’s CEO, Paul Stone said: “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.”
Hertz revealed it has adequate cash at present to support its operations like Hertz, Thrifty, Dollar, Firefly, Donien and Hertz Car Sales but it might have to generate more, probably through borrowings while the bankruptcy process proceeds.
The Chapter 11 proceedings includes the company’s subsidiaries in U.S. and Canada but doesn’t include its international operations in Europe, Australia or New Zealand. U.S. Bankruptcy Judge, Mary Walrath who is presiding over Hertz’s case is quite familiar with high-profile bankruptcy cases.
According to Joseph Acosta, a partner in Dorsey & Whitney’s bankruptcy firm, Hertz may have to cut down operations in a bid to survive. He said: “Hertz may have little choice but to scale down its operations and sell assets to pay down its significant secured debt. Hopefully, the restructuring expenses will not bury the company in the process.”
In March, the company started downsizing in order to preserve cash as emergency step to keep the business going amid the pandemic. Hertz announced on April 29 that it had skipped it’s rental cars substantial lease payments.
Hertz, formerly known as Rent-a-Car Inc., was established in 1918 in Chicago. As at February 2020, it operated I 12,400 locations globally.
The main bankruptcy case can be found in RE: The Hertz Corporation, 20-111218, U.S. Bankruptcy Court for the District of Delaware (Wilmington)
