Hertz Hits a Wall With Creditors

Matt Posky
by Matt Posky
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]

Comments
Join the conversation
4 of 100 comments
  • Lou_BC Lou_BC on May 25, 2020

    @Theloon is back at it again. The freedum fighter. Sunetra Gupta was basing his assumptions upon the idea that at least 50% of the population has been exposed to SARS-CoV-2. Sweden had assumed that at least 30% of their population has been exposed. Seroprevalence studies in Sweden show only 7.3% of the populace has been exposed. This link explains why Sweden's approach won't work in the USA. https://www.healthline.com/health-news/heres-what-happened-in-sweden-and-you-cant-compare-it-to-u-s#Sweden-not-untouched-by-COVID-19 "In Sweden, 13 percent of adults have obesity and 6.9 percent have diabetes, while 40 percent of American adults have obesity and 9.1 percent have diabetes." "Swedes have government-funded universal healthcare. Contrast this with the 29 percent of American adults who are underinsured and 13 percent who are uninsured. Many of these people have untreated chronic health conditions that put them at greater risk from COVID-19." "The Swedish government even provides paid sick leave" "As a result, many Swedes voluntarily follow the COVID-19 guidelines put forth by their government." "Björn Olsen, a professor of infectious medicine at Uppsala University (Sweden), said herd immunity was a “dangerous and unrealistic” approach. “I think herd immunity is a long way off, if we ever reach it,” "It’s now settled fact, based on reams of data from nearly every Western country, that lockdowns do not work. " Trumpoid Dipsh!t Syndrome British Columbia has one of the the lowest COVID-19 death rates in North America. https://www.bloomberg.com/news/articles/2020-05-16/a-virus-epicenter-that-wasn-t-how-one-region-stemmed-the-deaths

    • See 1 previous
    • Lou_BC Lou_BC on May 25, 2020

      @Aurthur Daily - The most disturbing thought I have about all this is the possibility that @theloon isn't a provocateur/troll but one of many who actually believes in what he posts. The USA Empire is not long of this world.

  • El scotto El scotto on May 25, 2020

    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.

  • Syke The expected opening comments. Have had mine for two years now, the car has done exactly what I want out of it, and a little better. I'm quite happy with the car, haven't had to adjust my driving style or needs in the slightest, and . . . . oh, did a mention that I don't give a damn what today's price at the pump is?Probably going to go for a second one in the coming year, the wife's happy enough with mine that she's ready and willing to trade in the Nissan Kicks. Eventually, the not often used van will end up getting traded on a Chrysler Pacifica Hybrid, basically ensuring that we don't use gas for anything except the occasional long trip.And the motorcycles.
  • Bobbysirhan I've never found the Allegro appealing before, but a few years of EV rollouts make it seem downright desirable.
  • Scoutdude I know that dealership. Way back when my friend's grandfather was that Turner that owned the Chrysler Plymouth International dealer, in MacPherson. Of course the International was dropped when they didn't deem the Scout reason enough to keep the franchise. I moved from there in late 1978 so it is possible I saw this running around town way back when.
  • Lou_BC "Overpriced" is a misnomer. Arguably, if they are selling they are not overpriced. "Dealer mark-up above MSRP" is a mouthful but more accurate. Simple, don 't buy anything marked up. A computer will help you search the country. It's a PITA but doable.
  • Buickman GM sucks
Next