Hertz car rental files for bankruptcy as business giant becomes latest to collapse under strain of coronavirus pandemic – The Sun

HERTZ car rental has filed for bankruptcy as the business giant becomes the latest to collapse under the strain of the coronavirus pandemic.

The 102-year-old company's lenders were unwilling to grant Hertz another extension on its auto lease debt payments, forcing them to file for bankruptcy on Friday.

Hertz and its subsidiaries will continue to operate, according to a release from the company.

Its 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 $18.7billion in debt, with only $1billion of available cash.

Starting in mid-March, the company lost all revenue when travel shut down due to the coronavirus, and it started missing payments in April.

"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 percent and stopped all nonessential spending.

The company said the moves would save $2.5billion per year.

But the cuts came too late to save the nation’s No.2 auto rental company founded in 1918.

In a note to investors in late April, financial 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."

The bankruptcy was not surprising, as the company's first-quarter report, filed earlier in May with securities regulators, the company said it may not be able to repay or refinance debt and may not have enough cash to keep operating.

"Management has concluded there is substantial doubt regarding the company’s ability to continue as a going concern within one year from the issuance date of this quarterly report," it 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 isn't the first struggling company to be pushed into bankruptcy by the coronavirus crisis.

The company joins department store chain J.C. Penney, as well as Neiman Marcus, and J. Crew.

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