Auto rental company Hertz files for bankruptcy due to Covid-19 pandemic

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

Hertz has around $US19 billion in debt, which includes roughly $US4.3 billion in corporate bonds and loans as well as $US14.4 billion of debt backed by the company's fleet of vehicles, and lenders had asked the company for upfront payment on some of those obligations but couldn't get it to agree, according to The Journal.

In March 2020, however, Hertz began laying off workers in an attempt to save money after missing lease payments on its rental auto fleet. Its global operating regions including Europe, Australia and New Zealand were not included in the USA proceedings, the company said.

By the end of March, Hertz Global Holdings Inc. had racked up $30.7 billion NZD in debt with only $1.6 billion of available cash.

"No business is built for zero revenue", former CEO Kathryn Marinello said on the company's first-quarter earnings conference call May 12.

Chapter 11 is a mechanism that allows a company that is no longer able to repay its debt to restructure itself without creditors. Mazari called the step unusual just days before a potential bankruptcy filing.

The firm, whose largest shareholder is billionaire investor Carl Icahn with a almost 39 per cent ownership stake, is reeling from government orders restricting travel and requiring citizens to remain home.

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Car-rental giant Hertz could file for bankruptcy as soon as this weekend after it was unable to reach an agreement with its biggest lenders, The Wall Street Journal reported on Friday.

Hertz's board earlier in the day approved the company seeking Chapter 11 protection in a U.S. bankruptcy court in DE, according to court records.

Under a Chapter 11 restructuring, creditors will have to settle for less than full repayment.

"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.

Hertz joins other large American companies in filing for COVID-19 related bankruptcy actions, including J.C. Penney and Neiman Marcus.

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