As the Corona Virus has all but decimated car rental, Hertz has buckled and filed for bankruptcy in Delaware.
This is the latest commercial victim of the most challenging business times of the last 300 years. Their Chapter 11 filing will still allow Hertz to stay in operations to try to pay their creditors and potentially have an attempt at keeping the business going. This applies only to the Company;s US and Canadian subsidiaries.
Europe, Australia and New Zealand are not affected by this Chapter 11 filing in the USA. Hertz has gone on to confirm that it had in excess of $1 billion to keep operations running which includes its subsidiaries; Dollar,Thrifty,Donlen, Firefly and Hertz Car Sales. However in order to stay afloat and cover creditors it will need to raise more money or come up with a rescue plan as the bankruptcy pushes ahead.
Their financial position is so tight listing $25.8 Billion in assets and $24.4 Billion of debts. The writing was on the wall when the second largest US car rental company began laying off staff to stretch cash flows. As the pandemic spread, business was ground to a halt including the leisure and tourism industry.
The Company has been in talks with the Government’s Treasury Department regarding a bailout. When they looked at the numbers they did not have enough to see themselves through to a recovery. Sometimes being big is a disadvantage. A large fleet, almost zero demand, and plunging prices for used cars, it is clear they would be overtrading.
Perhaps the most telling of issues is the Hertz model of owning or leasing the bulk of its fleet instead of acquiring them through buyback agreements with manufacturers. Thus when demand falls they typically sell parts of their fleet to stay afloat. These extraordinary circumstances have proved the weakness of that strategy.
Hertz, originally known as Rent-a-Car Inc., was founded in Chicago in 1918. It was operating 12,400 locations worldwide as of February 2020.