The Struggle Continues for Hertz, Now Seeking a Bankruptcy Loan
Colossal rental car provider Hertz is on the hunt for life-sustaining cash, but raising it itself now seems out of the question. Hertz Global Holdings, which filed for bankruptcy in May, recently moved ahead with a plan to raise a cool half-billion through a stock sale, only for the Securities and Exchange Commission to step in and say “hey, whoa, no more of that.”
Left with no other option, Hertz is now seeking a bankruptcy loan.
According to Bloomberg, the rental car giant announced its loan hunt in a Monday regulatory filing that quickly went to work sinking the company’s stock. Hertz shares fell 12 percent in Tuesday trading.
After buying time for debt restructuring with U.S. securities holders, Hertz stemmed some of the bleeding by punting a large amount of its rolling stock onto the red-hot used car market. 100,000 vehicles left its possession in June and July, with 182,000 more to go. Its fleet level is down 30 percent.
Still, the cratering of the rental car market at the hands of the coronavirus pandemic exerted far more fiscal force.
Hertz said revenues fell 67 percent in the second quarter of 2020, with the company posting an $847 million loss. The stock sell kiboshed by the SEC still raised some $29 million, Hertz said. And while air travel volume has grown since the depths of this spring’s lockdown, with a corresponding uptick in car rentals, Hertz doesn’t have time to wait for normality to return.
Without an extension beyond Sept. 30, Hertz must start making payments on its European fleet, which is owned by investors who hold its asset-backed securities. Hertz already has reached an agreement allowing it to use much of its U.S. fleet with a commitment to pay securities holders US$108 million a month from July until the end of the year.
Hence the pressing need for a loan. In its Monday filing, Hertz notified shareholders that sunny times are not just around the corner as it moves through the bankruptcy process.
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