Hertz filed for bankruptcy protection Friday, unable to withstand the coronavirus pandemonium that has hit global travel and, with it, the indebtedness of the 102-year-old car rental company.
Estero, the lender of the Florida-based company does not want to give it another extension of its late-stage debt repayment on Friday, prompting the filing in Bankruptcy Court with US Hertz and its subsidiaries will continue to operate, according to a release from the company.
At the end of March, Hertz Global Holdings Inc. has secured $ 18.7 billion in debt with only $ 1billion in available cash.
Beginning in mid-March, the company – whose car rental brands include Dollar and Thrifty – lost all revenue when the trip was closed due to a novel coronavirus, and it began missing payments in April. Hertz has been outraged by the management controversy, naming its fourth CEO in six years on May 18.
“No business has been built for zero profit,” former CEO Kathryn Marinello told the company’s first-quarter press conference May 12. “It’s only been a long time that companies’ reserves will take them. “
In late March, Hertz dropped 12,000 workers and put another 4,000 in the furlough, cutting vehicle acquisitions by 90 percent and halting all indefinite spending. The company says the moves will save $ 2.5 billion a year.
But the cuts came too late to save Hertz, the No. 1. 2 auto rental company founded in 1918 by Walter L. Jacobs, who started in Chicago a lot of a dozen Ford Model Ts. Jacobs sold the company, first called Rent-A-Car Inc., to John D. Hertz in 1923.
In a note to investors in late April, Jefferies analyst Hamzah Mazari predicts that Avis rivals will survive the coronavirus crisis but Hertz has only a 50-50 chance “as it is slower to cut the costs. “
On May 18, Hertz took the unusual step of naming chief operating officer Paul Stone as CEO and announced that Marinello would step down as CEO and from the company’s board. Mazari called the change unusual just days before a potential bankruptcy filing. He also noted that changes to the CEO have become commonplace in Hertz since finance Carl Icahn entered the company in 2014.
Icahn’s holding company is Hertz’s largest shareholder, with a 38.9 percent stake in the company, according to FactSet.
Deutsche Bank analyst Chris Woronka has allowed Marinello to dominate Hertz’s earnings growth, writing in a note to investors that it will rise 16 percent in 2018 and 2019 combined.
Hertz’s bankruptcy filing was no surprise. In a first-quarter report filed earlier in May with security regulators, the company said it could not repay or repay the loan and may not have enough cash to maintain operations.
“Management has ended with considerable doubt about the company’s ability to continue as a concern for one year from the release date of this quarterly report,” it said.
Under a Chapter 11 restructuring, creditors will have to pay less in full, but the company is likely to continue operating.
Hertz is not the first struggling company to be pushed into the coronavirus crisis. The company joins department store chain J.C. Penney, as well as Neiman Marcus, J.Crew and Stage Stores.