MIAMI (AP) – Hertz filed for bankruptcy protection on Friday, unable to resist the coronavirus pandemic that has paralyzed world travel and, with it, the deeply indebted business of the 102-year-old car rental company.
Lenders from the Estero, Florida-based company were unwilling to grant him another extension on his car lease debt payments beyond Friday's deadline, prompting the filing in the US Bankruptcy Court. USA In Delaware.
Hertz and its subsidiaries will continue to operate, according to a company statement. Hertz's main international operating regions and franchised locations are not included in the presentation, according to the statement.
At the end of March, Hertz Global Holdings Inc. had accumulated $ 18.7 billion debt with just $ 1 billion of cash on hand.
Starting in mid-March, the company, whose car rental bands also include Dollar and Thrifty, lost all revenue when the trip was closed due to the coronavirus, and began missing payments in April. Hertz has also been hit by administrative turmoil, naming its fourth CEO in six years on May 18.
"No business is built with zero income," former CEO Kathryn Marinello said in the company's first-quarter earnings conference call on May 12. "There is only one time that the companies' reserves will take them."
In late March, Hertz laid off 12,000 workers and put another 4,000 on leave, reduced vehicle acquisitions by 90%, and stopped all non-essential expenses. The company said the moves would save $ 2.5 billion a year.
But the cuts came too late to save Hertz, the country's No. 2 car rental company founded in 1918 by Walter L. Jacobs, who started in Chicago with a fleet of a dozen Ford Model Ts. Jacobs sold the company, initially called Rent-A-Car Inc., to John D. Hertz in 1923.
In a note to investors in late April, Jefferies analyst Hamzah Mazari predicted that rival Avis would survive the coronavirus crisis, but Hertz only had a 50-50 chance "given that he was slower to cut costs."
On May 18, Hertz named chief operating officer Paul Stone as CEO and announced that Marinello would resign as CEO and from the company's board of directors. Mazari called the move unusual only a few days before a possible bankruptcy filing. He also noted that changes to the CEO have been common at Hertz since financier Carl Icahn joined the company in 2014.
Icahn's holding company is Hertz's largest shareholder, with a 38.9% stake in the company, according to FactSet.
Deutsche Bank analyst Chris Woronka attributed Marinello's revival of Hertz's revenue growth and wrote in a note to investors that it increased 16% in 2018 and 2019 combined.
Hertz's bankruptcy protection statement was not a surprise. In its first-quarter report filed in early May with securities regulators, the company said it may not be able to pay or refinance the debt and it may not have enough cash to continue operating.
"Management has concluded that there are substantial doubts about the company's ability to continue as a going concern within one year from the date of issuance of this quarterly report," he said.
Under a Chapter 11 restructuring, creditors will have to settle for less than full repayment, but the company is likely to continue operating.
Hertz is not the first company in difficulty to go bankrupt due to the coronavirus crisis. The company joins the J.C. Penney department store chain, as well as Neiman Marcus, J.Crew, and Stage Stores.
There are Hertz rental offices in cities in Northern California, such as San Francisco, Oakland, and San José.
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