A 102-year-old car rental company Hertz filed for bankruptcy protection on Friday in the US, New Zealand Herald reported on Saturday. Hertz’s financial problems have triggered the filing in US Bankruptcy Court in Delaware,
Since the global epidemic began, Hertz has undertaken a range of measures to reduce costs and ensure international managers keep the business as robust as possible globally.
Unfortunately, the heavily indebted Hertz’s business has been unable to withstand the epidemic that has crippled global travel. The Estero, Florida-based company’s lenders were unwilling to grant it another extension on its auto lease debt payments past a Friday deadline. By the end of March, Hertz Global Holdings Inc. had racked up $18.7 billion in debt with only $1b of available cash. Thus, the financial deficit triggers the filing in US Bankruptcy Court in Delaware.
In their efforts to keep the business alive, Hertz has cut all discretionary spending, reduced labour costs and sought new rental agreements with landlords. The top managers even have been de-fleeting the company’s network, and de-registering unused vehicles.
As the statement says, Hertz and its subsidiaries will continue to operate, the company’s principal international operating regions and franchised locations are not included in the filing, indeed.
Hertz has also been plagued by management 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’s first-quarter earnings conference call on May 12.
In late March, Hertz shed 12,000 workers and put another 4000 on furlough, cut vehicle acquisitions by 90 per cent and stopped all non-essential spending. The company said the moves would save $2.5b per year.
Hertz’s bankruptcy protection filing was hardly a surprise.
To sum it up, under a Chapter 11 restructuring, creditors will have to settle for less than full repayment, but the company is likely to continue operating.
Amid the coronavirus crisis, Hertz isn’t the first struggling firm to be pushed into bankruptcy. The 102-year-old enterprise with the brilliant reputation just joint department store chain JC Penney, as well as Neiman Marcus, J Crew and Stage Stores.