Hertz maneuvers to stave off bankruptcy filing

Hertz Global Holdings Inc. is doing everything it can to preserve cash and get leniency from lenders to avoid a bankruptcy filing in the midst of the travel industry’s collapse, Chief Executive Officer Kathryn Marinello said in an interview.

The company has been in discussions with creditors for weeks and is still pushing the U.S. Treasury Department to help rental-car companies, which Marinello says have been hit as hard as the airline sector by the coronavirus pandemic.

“We are seeking the support of our lenders and banks,” said Marinello, whose biggest shareholder at Hertz is billionaire investor Carl Icahn. “We are also seeking the support of the government. Yes, we can avoid bankruptcy.”

Hertz is working with several advisory firms to restructure its balance sheet, people familiar with the matter said. While the company is preparing for bankruptcy as a possibility, the people said it’s a last resort.

The company’s shares rose 1% in New York trading Friday, paring an earlier decline of as much as 29%. The Wall Street Journal reported earlier on the preparation for a possible bankruptcy.

Hertz’s bonds plunged to new lows and were among the top decliners in the U.S. high-yield market Wednesday. Its 5.5% unsecured notes fell around 5 cents on the dollar to 20.5 cents, according to Trace.

Hertz disclosed earlier Wednesday that it has missed substantial lease payments related to the cars it rents out. With business down about 80% since the pandemic took hold, the company has furloughed thousands of workers without pay and looked for ways to stay afloat until travelers re-emerge.

If Hertz doesn’t make payments by the end of a grace period Monday, and enough lenders and note holders don’t agree to waive a resulting default, the company said in a regulatory filing that it could be “materially and negatively affected.”

Hertz’s filing “suggests it is struggling to obtain all necessary amendments and waivers to reduce its required payments,” Joel Levington, a Bloomberg Intelligence credit analyst, said in a note. “Should it achieve that, we think raters may view the changes in terms as tantamount to a selective default, and without the change, the potential for a corporate restructuring is possible.”

Barclays and Deutsche Bank are the lead banks Hertz has been working with to find a solution.

Marinello also holds out some hope that the Treasury will throw a lifeline to the rental industry. Hertz, Avis Budget Group and Enterprise Holdings employ about 160,000 people, the three companies said in a letter to Secretary Steve Mnuchin on March 18.

Hertz employs about 30,000 of those workers, many of whom have been laid off as the company has cut $1 billion in costs, Marinello said.

Rental companies’ biggest expense is the depreciation of its cars. With consumers sheltering, car auctions closed and dealers restricted from selling in some states, usedvehicle prices have plunged. If the trend lasts, it will hammer profits for Hertz and Avis and make it costly to reduce the size of their fleets.