Hertz in talks for bankruptcy funding

Hertz Global Holdings is in talks to obtain a bankruptcy loan to fund its business reorganization after scrapping a controversial sale of potentially worthless stock, according to people familiar with the matter.

The rental-car company on Wednesday called off a potentially unprecedented sale of up to $500 million in shares, leaving it in need of an alternative source of financing to keep its business afloat through its Chapter 11 restructuring. Bankruptcy is expensive, and Hertz was counting on raising capital from speculative day traders that have shown a strong interest in the company despite its financial strain.

Hertz scrapped the planned stock sale after the Securities and Exchange Commission said it had concerns about the company’s plans to raise money by selling more potentially worthless stock. SEC Chairman Jay Clayton had said on CNBC that regulators expected Hertz to answer additional questions before it started selling shares.

With the stock deal shelved, Hertz is in discussions with a group of top lenders, including a number of hedge funds, to supply a financing package, people familiar with the matter said. This bankruptcy loan could approach $1 billion, the people said. Hertz declined to comment. Funding a company’s bankruptcy has long been a safe and lucrative business for Wall Street banks and asset managers, earning them high fees and interest rates with minimal risk. For Hertz, financing the bankruptcy case through the sale of stock would have been a preferable and cheaper option.