Virus-hit Hertz declares bankruptcy in U.S. and Canada

Daniel Fowler
May 23, 2020

However, there is the possibility that lead shareholder Carl Icahn could rescue the company as he looks to protect his $1.6 billion investment that is now valued at $170 million, sources told Bloomberg.

Hertz filed for bankruptcy Friday night after failing to reach an agreement with lenders, The Wall Street Journal first reported Friday.

The firm, which earns much of its income from auto rentals at airports, said it had been affected by the sharp downturn in global travel.

"The impact of Covid-19 on travel demand was sudden and dramatic, causing an abrupt decline in the Company's revenue and future bookings", Hertz said in a press release.

Under a Chapter 11 restructuring, creditors will have to settle for less than full repayment.

United States airlines have so far avoided similar fates after receiving billions of dollars in government aid, an avenue Hertz has explored without success.

According to Jalopnik.com, the company announced last month that it had missed "substantial lease payments on its cars" during the coronavirus pandemic.

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Hertz has around $US19 billion in debt, including $US4.3 billion in corporate bonds and loans as well as $US14.4 billion of debt backed by their vehicles, according to The Journal.

"No business is built for zero revenue", former CEO Kathryn Marinello said.

Hertz's woes are compounded by the complexity of its balance sheet, which includes more than US$14 billion of securitised debt. If Hertz is unable to make the payments or come to an agreement with its creditors, bankruptcy may be unavoidable.

Hertz's stock plunged in after-hours trading following the news.

Hertz's business had already been struggling even before the pandemic as it tried to fend off competition from other rental agencies as well as ride-hailing businesses like Uber and Lyft.

Hertz traces its roots to 1918, when Walter Jacobs, then a pioneer of renting cars, founded a company allowing customers to temporarily drive one of a dozen Ford Motor Co Model Ts, according to the company's website.

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