Car-rental giant Hertz is reportedly preparing for a potential bankruptcy after it missed lease payments
4 May 2020 - Business Insider
Car-rental company Hertz is preparing for a potential bankruptcy filing, The Wall Street Journal reported Wednesday, as the coronavirus pandemic brings nearly all travel to a standstill.
People familiar with the matter told the paper that Hertz is working to reduce its debt payments and is in talks on a forbearance agreement that could help it avoid bankruptcy. The situation remains fluid, according to the Journal's sources.
Shares of Hertz declined more than 15% in trading Wednesday, as broader indices rose, following The Wall Street Journal's report.
The news of a possible bankruptcy arrives two days after Hertz on Monday said in a regulatory filing that it "did not make certain payments" on its operating lease as it remains in discussions with lenders to reduce its payments. If those discussions aren't fruitful by the first week of May, "Hertz could be materially and negatively impacted," it said.
Earlier in April, the company laid off 10,000 workers — about 26% of its workforce at the end of 2019 — "in an effort to align staffing levels with travel demand."
A Hertz representative said they were "unable to comment" on the Wall Street Journal report, but offered the following statement regarding the filings:
"As a result of the pandemic and the uncertainty about the timing and strength of a recovery, Hertz is taking aggressive actions to preserve liquidity to support its ongoing operations," they said. "We are reducing expenses, deferring capital expenditures, and adjusting fleet levels and staffing based on the significant decline in travel demand. Our 8-k today provided an update on our vehicle financing. Importantly, conversations with our lenders are ongoing and we remain in discussions with the U.S. Treasury for support."
Ryan Brinkman, an analyst at JPMorgan, theorized on April 23 that government assistance could help Hertz remain solvent.
"We do think a potentially large amount of cash could be made available to Hertz from the federal government, potentially solving any liquidity concerns, although we are also uncertain with regard to the terms," he said in a note to clients.