Hertz Preparing to File for Bankruptcy as Soon as Friday Night

The logo of the American car rental company Hertz is seen at the Nantes Atlantique airport

The logo of the American car rental company Hertz is seen at the Nantes Atlantique airport

Hertz, one of the largest rental auto companies in the world, filed for Chapter 11 bankruptcy on Friday evening, the company announced in a press release. The action includes the company's USA and Canadian subsidiaries, but doesn't cover Europe, Australia and New Zealand, according to a statement Friday evening. The public health crisis has also caused a cascade of bankruptcies or Chapter 11 preparations among companies dependent on consumer demand, including retailers, restaurants and oil and gas firms.

USA airlines have so far avoided similar fates after receiving billions of dollars in government aid, an avenue Hertz has explored without success.

The car-rental business has been decimated as the pandemic has ground travel to a halt, forcing Hertz's CEO to resign as the company missed lease payments and laid off 10,000 workers last month.

The size of Hertz's lease obligations have increased as the value of vehicles declined because of the pandemic.

On May 18, Hertz took the unusual step of naming operations chief Paul Stone as CEO and announced that Marinello would step down as CEO and from the company's board.

"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.

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Hertz's woes are compounded by the complexity of its balance sheet, which includes more than US$14 billion of securitised debt.

Hertz has halted about 90% of its new vehicle orders for 2021, a move that could pinch automakers as the vehicle rental segment typically brings about 10% of auto sales for the year.

However, there is the possibility that lead shareholder Carl Icahn could rescue the company as he looks to protect his $1.6 billion investment that is now valued at $170 million, sources told Bloomberg.

Hertz earlier signaled it could avoid bankruptcy if it received relief from creditors or financial aid the company and its competitors have sought from the United States government.

Hertz's business had already been struggling even before the pandemic as it tried to fend off competition from other rental agencies as well as ride-hailing businesses like Uber and Lyft.

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.

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