By on May 5, 2020

Lenders are cutting Hertz a break by affording the company an extended grace period, giving it a chance to cope with its debt. Last we checked on the rental agency, things weren’t going well. With governments cracking down on movement amid the coronavirus pandemic, no one is going anywhere — and the Hertz’s bottom line showcases exactly how bad this has been for business. Hertz had to bring in economic advisors to help the business manage its swiftly mounting debt load as it discussed how to avoid bankruptcy.

Similarly hit by the pandemic, airlines got a multi-billion-dollar bailout. Agencies like Hertz, Avis, and Enterprise, however, have had to seek their aid elsewhere, all the while hoping the U.S. Treasury Department answers their plea. Thus far, it’s been crickets.

Car renters are confronting a harrowing reality. They need to refresh their gigantic fleets in a period where no one can turn a profit, there’s little promise of a swift recovery, and used car values are cratering. Hertz started laying off workers in March as customers evaporated. By the end of April, it also announced it was defaulting on lease payments related to its fleet. With creditors rarely unclear about when they want their money, things were looking grim. 

Fortunately, Hertz’s latest filing with the U.S. Securities and Exchange Commission (SEC) indicates the company has entered into forbearances and limited waivers with certain corporate lenders and holders of the company’s asset-backed vehicle debt. That document indicates that the firm now has until May 22nd to “engage in discussions with its key stakeholders with the goal to develop a financing strategy and structure that better reflects the economic impact of the COVID-19 global pandemic and Hertz’ ongoing operating and financing requirements.”

The original deadline was May 4th.

According to reports from Bloomberg, Hertz was actively preparing to file Chapter 11 court protections while in talks with creditors. Automotive News also had the lowdown on the company’s massive fleet:

Hertz has traditionally been a leading buyer of fleet cars from the Detroit 3 and other automakers. Last year, Hertz held as many as 567,600 vehicles in its U.S. fleet and 204,000 in its international unit, holding those in the U.S. for an average of 18 months and international vehicles for 12 months, according to a U.S. filing.

Its biggest suppliers of fleet vehicles were General Motors (21 percent), Fiat Chrysler (18 percent), Ford (12 percent), Kia (10 percent), Toyota (9 percent), Nissan (7 percent) and Hyundai (5 percent), according to the filing.

That’s a lot of cars to have just sitting around, depreciating. It highlights how much of a struggle Hertz will have moving forward. Many regions find themselves under extended lockdown orders lasting through May, limiting any opportunities the rental industry might have had for a rebound this month. Similarly, it’s assumed that travel will be one of the last sectors to return to normalcy as large swaths of the population continue to practice social distancing.

[Image: vieninsweden/Shutterstock]

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17 Comments on “Hertz, Still Hurting, Cuts a Deal With Creditors...”


  • avatar
    dwford

    Can’t rent them, can’t sell them, and couldn’t buy more even if they could sell them. Creditors don’t want to be paid in cars since they couldn’t sell them either. Forbearance is really the only option right now.

    This pandemic has exposed just how frail the just in time economy is for corporations, governments, and regular people – all whom are living paycheck to paycheck.

    • 0 avatar
      thelaine

      It wasn’t the pandemic, it was the response to the pandemic that killed this economy. People have been living paycheck to paycheck since paychecks were invented. They should not be blamed for this government mandated, panic-induced catastrophe.

  • avatar
    SaulTigh

    I was reading an article earlier today about what an unmitigated hell flying will be in the future. More expensive (fewer seats you see), 4 hour pre arrivals, no snacks or food on the planes. I wonder if long term, people will be more inclined to rent cars for long cross-country trips?

  • avatar
    thornmark

    In Ft Myers they were incinerated

    Massive fire near Florida airport burns more than 3,500 rental cars

    nypost.DOTcom/2020/04/06/fire-near-florida-airport-burns-more-than-3500-rental-cars/

  • avatar
    sgeffe

    Is Hertz a separate entity from other car-rental companies? Is National and Avis under the same umbrella, or are both under the Enterprise umbrella? Or is it National/Avis/Dollar that are together?

  • avatar
    deanst

    I went through a similar experience as a lender to a Canadian car rental firm. We made out fine as the cars could be sold to cover the debt. However, when the entire economy is in turmoil and used car prices are falling, there is no profitable exit plan.

  • avatar

    New normal is not travel. And why to travel? It only consumes resources. XXth century was an anomaly.

    • 0 avatar
      jimmy2x

      I travel because I like to see places that I haven’t seen before and sometimes to revisit places that I went to years ago. If you want to just stay home, do it. We are not all the same.

      • 0 avatar
        Lie2me

        There’s always a compromise, although air travel no longer appeals to me, the idea of getting in my car and seeing a million places this country has to offer is looking really good to me. In the name of social-distancing we may see an increase in RV sales

    • 0 avatar
      don1967

      “New” anything – new era, new economy, new normal – is rarely symptomatic of anything besides a mass delusion.

    • 0 avatar
      Art Vandelay

      Yes, let’s all go backwards!

  • avatar
    PandaBear

    When they discover how much work can be done without traveling, these companies’ valuation will change in the long term.

  • avatar
    Erikstrawn

    “Agencies like Hertz, Avis, and Enterprise, however, have had to seek their aid elsewhere, all the while hoping the U.S. Treasury Department answers their plea. Thus far, it’s been crickets.”

    Corporate socialism. What reason is there to guard against the future if the government is always going to bail you out?

    • 0 avatar
      Art Vandelay

      While I agree, the situation gets murky when Governments mandate you as a business close your doors.

      • 0 avatar
        thelaine

        Wait until they find out the economic lockdown had not effect on the spread of the virus.

        https://www.thesun.co.uk/news/11568244/uk-coronavirus-lockdown-futile-hasnt-saved-lives/

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