Hertz, Dollar, Thrifty Car Rental killed by COVID-19
Hertz is Bankrupt
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Hertz Car rental stated on its website hertz.com: ” Before we rent any vehicle, they are cleaned and disinfected to follow CDC guidelines with our 15-point cleaning process. We use our Hertz Total Disinfectant and seal the vehicle for your protection. Rolling out nationwide in May”
The Hertz Corporation owns Dollar and Thrifty Automotive Group—which separates into Thrifty Car Rental and Dollar Rent A Car. Hertz Global Holdings, the parent company of The Hertz Corporation, was ranked 335th in Forbes’ 2018 Fortune 500 list with car rental stations around the world.
Cleanliness and the number one service in the car rental industry did not stop Hertz from having to throw their towel and declare bankruptcy today.
Hertz car rental Hertz Global Holdings Inc., one of the nation’s largest car-rental companies, filed for bankruptcy protection Friday, posting $19 billion in debt and nearly 700,00 vehicles that have been largely in Hertz parking lots because of the coronavirus.
The Estero, Fla.-based company entered chapter 11 proceedings in the U.S. Bankruptcy Court in Wilmington, Del., hoping to survive a drop-off in-ground traffic from the pandemic and avoid a forced liquidation of its vehicle fleet.
The company’s collapse marks one of the highest-profile corporate defaults stemming from the pandemic’s impact on air and ground travel, though Hertz also had challenges before the current economic crisis. Even before the Covid-19 outbreak, Hertz had been struggling with competition from peers including Enterprise Holdings Inc. and Avis Budget Group Inc., as well as from ride-hailing services such as Uber Technologies Inc. and Lyft Inc. The company lost some $58 million last year, its fourth consecutive annual net loss.
Hertz didn’t reach a deal with creditors before entering chapter 11, heightening the risk of a full liquidation of the fleet, although the company and investors have several weeks to work out an agreement avoiding that outcome, people familiar with the matter said.
Hertz has spent years trying to restructure its business and has blown through four chief executives in less than ten years. Most recently, former Chief Executive Kathryn Marinello was replaced Monday by Paul Stone, who previously served as the company’s executive vice president and chief retail operations officer for North America.
Hertz has also had a debt problem that can be traced back to a 2005 leveraged buyout by private-equity firms. The company went public in 2006, and activist investor Carl Icahn, who started acquiring Hertz shares in 2014, now owns more than one-third of the company and has placed three of his representatives on the board.
The pandemic has diminished automotive traffic in the U.S., squelched car sales, and cut into rental reservations at Hertz.
The bankruptcy is expected to be complex given the company’s vast debt and corporate structure, which includes $14.4 billion of vehicle-backed bonds at subsidiaries that aren’t part of the chapter 11 filing.
Like Avis and some other rental car companies, Hertz doesn’t own its vehicles. The company leases its rental-car fleet, about 770,000 vehicles in total, from separate financing subsidiaries. Now that Hertz has filed for bankruptcy, investors with rights to the vehicle fleet have to wait for 60 days before they can foreclose on and sell the cars. Hertz and its creditors will likely aim to prevent a complete liquidation and strike a deal to downsize the fleet while keeping some vehicles in operation, said people familiar with the matter.
With the $14.4 billion in vehicle-finance bonds so widely held—by pension funds, mutual funds, and structured credit funds—the company has faced difficulty coordinating with bondholders.
Rental-car companies play an important role in supplying newer models to the used-vehicle market. Hertz also is a major customer for U.S. automakers, purchasing about half of its fleet from General Motors Co., Ford Motor Co., and Fiat Chrysler Automobiles NV in 2019, according to a financial filing.
Analysts feared that Hertz could be forced to sell part or all of its fleet into an unusually weak market. But the possible liquidation would come at a time when demand for used vehicles is rising slightly, and pricing in the market is showing signs of recovery after hitting historic lows in April.
On May 2 Hertz reinstated payments to executives.