Hertz files for bankruptcy protection- COVID-19
The car rental Company Hertz filed for bankruptcy protection on Friday. The heavily indebted 102-year-old business was unable to withstand the coronavirus pandemic, which has crippled global travel and demand for rental vehicles.
The Estero, Florida-based company’s lenders were unwilling to grant it another extension on its auto lease debt payment 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 realase from the comapany.
By the end of March, Hertz Global Holding Inc. had racked up $18.7 billion in debt with only $1 billion of available cash.
Starting in mid-march, the company, lost all revenue when travel shut down due to the novel coronavirus, and its started missing payments in April. Hertz has also been plagued by managemnet upheaval, naming its fourth CEO in six years on May 18.
“No business is built for zero revenue,” former CEO Kathryn Marinello said on the company first quarter earnings conference call May 12.”There’s only so long that companies reserves will carry them,”
In late March, Hertz shed 12000 workers and put another 4,000 on furlough. cut vehicle acquisition by 90% and stopped all nonessential spending. The company said the moves would save $2.5 billion per year.
But the cuts too late to save Hertz, 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 50-50 chance “given it was slower to cut costs”.
On May 18 Hertz took the unusual step of naming operation chief Paul stone as CEO and announced that them Marinello would step down as CEO and from the company board Mazari- called the change in his unusual just days before a potential bankruptcy feeling he also noticed that the SEO changes have been common Hertz since financial CarlIchan and enter the company in 2014.
ICHAN holding a company in Hertz’s largest shareholder with a 38.9 % stake in the company according to the FactSet.
Deutsche Bank analyst Veronica credited Marinello with reginating Hertz as revenue growth writing in note investor that it cross 16% in 2018 and 2019 combined.
Management has concluded that there is substantial doubt regarding the company able to continue as a going concern within one year from the date of this quarterly report it said.
Under chapter 11 respecting creditors will have to settle for less than full payment but the company is likely to continue operating.
Hertz isn’t the first struggling company to be pushed into Bankruptcy by the coronavirus crisis the company joins department store chain, J.C Penny. as well as Neiman Marcus, J.Crew and stage Stores.