Hertz Hits a Wall With Creditors
Hertz Global Holdings Inc. has been in discussions with creditors in the hopes of making a deal that addresses its missed debt payments and gives the company further leeway. Rental agencies are struggling, with Hertz in the roughest shape of all. All thanks to a certain virus, business has dried up, and Hertz finds itself sitting on a pile of quickly depreciating cars it cannot afford to replace. The company’s stock also plummeted at the end of February — going from $20.29 per share to today’s $2.86.
The rental agency has until Friday to negotiate an extended forbearance agreement or drop $400 million in lease payments, but news has surfaced that lenders think Hertz declaring bankruptcy may be just as good a solution.
According to Automotive News, inside sources claim the rental agency has reached an impasse with creditors. While business will probably rebound eventually, it’s looking as though Hertz will need to be kept on life support until contagion fears subside for that to happen. This offers little assurance to those interested in a prompt payday. Forcing the outfit to sell off its assets (a fleet of over 750,000 relatively new automobiles) now seems the probable outcome.
From Automotive News:
An uptick in used-vehicle prices from dismal levels seen in March and April have given [asset-backed securities] holders less incentive to extend the forbearance period for Hertz a second time, the people said. Back in April, lenders were more willing to be lenient to avoid selling the vehicles backing the ABS into a deeply depressed market.
Prices of used vehicles hit bottom the week ending April 19, down more than 15 percent from where they were prior to government shutdown orders, according to market researcher J.D. Power. But by the end of the first week of May, prices were down less than 10 percent.
Still, any liquidation scenario does pose a risk to bondholders. Selling off cars quickly can help maximize the value of assets that rapidly depreciate, but flooding the market with too many cars depresses prices.
[Image: vieninsweden/Shutterstock]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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When two people from your office building die from COVID-19, you take COVID-19 seriously. One was an avid runner, getting in at least one 10K a month. Those who post because they can't go to Golden Corral and "muh four pieces of pie" get taken far less seriously.