Hertz Global Holdings Inc., one of the nation’s largest car-rental companies, is the latest victim of an economic downturn spurred by the COVID-19 pandemic.
The Estero, Florida-based company which stated with a fleet of a dozen Ford Model T’s over a century ago filed for Chapter 11 bankruptcy protection after it was unable to reach long-term relief agreements with its creditors.
Hertz sought help from the United States government, “but access to funding for the rental car industry did not become available.”
The company had already furloughed or laid off 20,000 employees, or roughly 50 percent of its global workforce, in response to the coronavirus pandemic.
It also announced pay cuts for senior leader in March. A decision that was reversed not so recently.
Hertz will continue to operate while restructuring its debts.
It’s a very tough business
The COVID-19 pandemic has brought the travel industry to a standstill. Business travelers and family vacationers have shelved their travel plans. The company noted that uncertainty regarding when revenue will return and when the car rental market will reopen for sales “necessitated today’s action.”
Hertz, which also owns the Dollar and Thrift brands, had piled up $17 billion in debt. The economic downturn due to the coronavirus pandemic came as “a rapid, sudden and dramatic” blow.
“Hertz has over a century of industry leadership and we entered 2020 with strong revenue and earnings momentum,” CEO Paul Stone said in the news release. “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 bankruptcy protection filing is hardly a surprise for industry analysts. In its Q1 2020 report filed earlier in May with securities regulators, the car rental company said it may not be able to repay or refinance debt.
There is about in the company’s ability to continue operating from the issuance date of the quarterly report.
Under a Chapter 11 bankruptcy filing, Hertz creditors will have to settle for less than complete repayment. Hertz isn’t the first American company to come face bankruptcy due to the ongoing pandemic. The car rental firm joins department store J.C. Penney, J. Crew, Stage Stores and Neiman Marcus.
According to FactSet, Icahn’s holding company is Hertz’s largest shareholder with a 39 percent stake in the company.
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