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Hertz filed for bankruptcy protection Friday, unable to withstand the coronavirus pandemic that has crippled global travel and with it, the heavily indebted 102-year-old car rental company’s business.
The Estero, Florida-based company’s lenders were unwilling to grant it another extension on its auto lease debt payments past a Friday deadline, triggering the filing in U.S. Bankruptcy Court in Delaware.
Hertz and its subsidiaries will continue to operate, according to a release from the company. Hertz’s principal international operating regions and franchised locations are not included in the filing, the statement said.
By the end of March, Hertz Global Holdings Inc. had racked up $18.7 billion in debt with only $1 billion of available cash.
Starting in mid-March, the company — whose car-rental bands also include Dollar and Thrifty — lost all revenue when travel shut down due to the coronavirus. The company made “significant efforts” but couldn’t raise money on the capital markets, so it started missing payments to creditors in April, the filing said. Hertz has also been plagued by management upheaval, naming its fourth CEO in six years on May 18.
“No business is built for zero revenue,” former CEO Kathryn Marinello said on the company’s first-quarter earnings conference call May 12. “There’s only so long that companies’ reserves will carry them.”
In late March, Hertz shed 12,000 workers and put another 4,000 on furlough, cut vehicle acquisitions by 90% and stopped all nonessential spending. The company said the moves would save $2.5 billion per year.
But the cuts came too late to save Hertz, the nation’s No. 2 auto 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.
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In a note to investors in late April, Jefferies analyst Hamzah Mazari predicted that rival Avis would survive the coronavirus crisis but Hertz had only a 50-50 chance “given it was slower to cut costs.”
On May 18, Hertz named operations chief Paul Stone as CEO and announced that Marinello would step down as CEO and from the company’s board. Mazari called the step unusual just days before a potential bankruptcy filing. He also noted that CEO changes have been common at Hertz since financier Carl Icahn entered the company in 2014.
Icahn’s holding company is Hertz’s largest shareholder, with a 38.9% stake in the company, according to FactSet.
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