Car rental firm Hertz in talks with government and lenders in bid to stave off bankruptcy
Business has dropped by about 80 per cent since the onset of the Covid-19 pandemic
Car rental giant Hertz Global Holdings is doing everything it can to preserve cash and gain leniency from its lenders to avoid a bankruptcy filing amid a collapse in the travel industry, chief executive Kathryn Marinello said.
The company has been in discussions with creditors for weeks and is still pushing the US Treasury Department to help car rental companies, which Ms Marinello says have been hit as hard as the airline sector by travellers staying at home due to the coronavirus pandemic.
“We are seeking the support of our lenders and banks,” said Ms Marinello, whose biggest shareholder at Hertz is billionaire investor Carl Icahn. “We are also seeking the support of the government. Yes, we can avoid bankruptcy.”
Hertz is working with several advisory firms to restructure its balance sheet, according to sources. While the company is preparing for bankruptcy as a possibility, the sources said this is a last resort.
The company’s shares fell 16 per cent as of 12:30 pm in New York trading on Wednesday, paring an earlier decline of as much as 29 per cent. The Wall Street Journal earlier reported on preparations toward a possible bankruptcy.
Hertz disclosed earlier on Wednesday that it had missed substantial lease payments related to the cars it rents out. With business down about 80 per cent since the pandemic took hold, Hertz has furloughed thousands of workers without pay and looked for ways to stay afloat until travellers reemerge.
The missed payments were the clearest indication yet that Hertz hasn’t come to an agreement with its banks for forbearance. If Hertz doesn’t make payments by the end of a grace period on May 4, and enough lenders and noteholders don’t agree to waive a resulting default, the company said it could be “materially and negatively affected".
Hertz’s filing “suggests it is struggling to obtain all necessary amendments and waivers to reduce its required payments”, Joel Levington, a Bloomberg Intelligence credit analyst, said in a note.
“Should it achieve that, we think raters may view the changes in terms as tantamount to a selective default, and without the change, the potential for a corporate restructuring is possible.”
Updated: April 29, 2020 09:40 PM