Hertz Global Holdings Inc, the vehicle rental company founded with a dozen of Ford Motor Co’s Model Ts more than a century ago, filed for bankruptcy late on Friday after sweeping travel restrictions and the global economic collapse destroyed demand for its vehicles.
The Chapter 11 filing in Delaware allows Hertz to keep operating while it devises a plan to pay creditors and turn around the business.
The second-largest US vehicle rental company does not need debtor-in-possession financing for now, because it has more than US$1 billion cash on hand, a person familiar with the matter said.
Hertz’s court petition listed about US$25.8 billion in assets and US$24.4 billion of debts, and its biggest creditors include IBM Corp and Lyft Inc. After the COVID-19 pandemic cut revenue, the vehicle renter sought relief from lenders and a bailout from the US Department of the Treasury, but while it negotiated a short-term reprieve from creditors, it did not work out longer-term agreements.
“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 chief executive officer Paul Stone said in a statement.
The Estero, Florida-based company named him its fifth CEO since 2014 just four days before the bankruptcy filing.
Hertz, originally known as Rent-a-Car Inc, was founded in Chicago in 1918. It was operating 12,400 locations worldwide as of February.
The company said that it has enough cash for now to support its operations, which include Hertz, Dollar Rent A Car Inc, Thrifty Car Rental, Firefly Car Rental, Hertz Car Sales and Donlen Corp.
However, it might need to raise more, perhaps through added borrowings while the bankruptcy process moves forward.
The Chapter 11 proceedings involve the company’s US and Canadian subsidiaries and do not include its international operations in Europe, Australia or New Zealand.
To survive, Hertz might have to slim down operations considerably, said Joseph Acosta, a partner in bankruptcy law firm Dorsey & Whitney.
“Hertz may have little choice but to scale down its operations and sell assets to pay down its significant secured debt,” Acosta said in an e-mail. “Hopefully, the restructuring expenses will not bury the company in the process.”
The company in March began laying off workers to preserve cash as emergency measures to contain the virus halted business and leisure travel.
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