Crisis drives Hertz into filing for bankruptcy

Hertz filed for bankruptcy protection Friday, unable to withstand the coronavirus pandemic that has crippled global travel and with it the heavily indebted 102-year-old car rental company’s business.

The Estero, Floridabased company’s lenders were unwilling to grant it another extension on its auto lease debt payments past a Friday deadline, triggering the filing in U.S. Bankruptcy Court in Delaware.

Hertz and its subsidiaries will continue to operate, according to a release from the company. Hertz’s principal international operating regions and franchised locations are not included in the filing, the statement said.

By the end of March, Hertz Global Holdings Inc. had racked up more than $24 billion in debt, according to the bankruptcy filing, with only $1 billion of available cash.

In late March, Hertz shed 12,000 workers and put another 4,000 on furlough, cut vehicle acquisitions by 90% and stopped all nonessential spending. Hertz said the moves would save $2.5 billion per year, but the cuts came too late to save the nation’s No. 2 auto rental company.

In a note to investors in late April, Jefferies analyst Hamzah Mazari predicted that rival Avis would survive the coronavirus crisis, but Hertz had only a 50-50 chance “given it was slower to cut costs.”

Under a Chapter 11 restructuring, creditors will have to settle for less than full repayment. Its biggest creditors are banks, but the filing lists IBM, Lyft, United and Southwest Airlines as others owed between $6 million and $23 million each.

Hertz joins department store chain J.C. Penney as well as Neiman Marcus, J. Crew and Stage Stores as companies pushed into bankruptcy by the pandemic.

DREAMSTIME/TNS Despite recently implementing a number of cost-saving measures, Hertz was forced to file bankruptcy Friday.