Hertz could file for bankruptcy ‘as soon as this weekend'

A Hertz car rental is closed during the coronavirus pandemic in Paramus New Jersey

Under Chapter 11 restructuring, creditors must settle for less than full repayment, but the business is likely to continue operating.

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. A large portion of Hertz's revenue comes from auto rentals at airports, which have all but dried up.

Before the pandemic the company had amassed billions of dollars in debt, with the rise of ride-hailing apps leading to a drop in demand for vehicle rentals.

USA airlines have so far avoided similar fates after receiving billions of dollars in government aid, an avenue Hertz has tried unsuccessfully.

Starting in mid-March, the company lost all revenue when travel shut down due to the coronavirus pandemic and it started missing debt payments in April. Hertz has about $1bn of cash. Stone was named CEO on May 18 - days before the bankruptcy filing - after Kathryn Marinello stepped down.

The company - which began operating a century ago in Chicago with a dozen Model T Ford cars - had already furloughed or laid off 20,000 employees, or around half of its global workforce, in response to the pandemic.

A Hertz car rental is closed during the coronavirus pandemic in Paramus New Jersey
A Hertz car rental is closed during the coronavirus pandemic in Paramus New Jersey

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

Hertz, based in Estero, Fla., missed a lease payment last month and convinced creditors to wait until Friday evening before declaring a default.

Hertz did not immediately respond to a request for comment.

Hertz joins other large American companies in filing for COVID-19 related bankruptcy actions, including J.C. Penney and Neiman Marcus. It has also sought a bailout from the US Treasury Department.

Car-rental giant Hertz filed for bankruptcy Friday night after it was unable to reach an agreement with its biggest lenders, The Wall Street Journal first reported.

Even before the pandemic, Hertz and its peers were under financial pressure as travellers shifted to ride-hailing services such as Uber. To combat that threat, Hertz had adopted a turnaround plan, aiming to modernise its smartphone apps and improve management of its fleet of rental cars.

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