Hertz Global Holdings filed for bankruptcy in Delaware after sweeping travel restrictions and the global economic collapse destroyed demand for its rental cars.
The Chapter 11 filing allows Hertz to keep operating while it devises a plan to pay its creditors and turn around the business. The action includes the company’s U.S. and Canadian subsidiaries, but doesn’t cover Europe, Australia and New Zealand, according to a statement on Friday.
Hertz said it had $1 billion in cash to support its operations, which include Hertz, Dollar, Thrifty, Firefly, Hertz Car Sales, and Donlen. But it might need to raise more, perhaps through added borrowings while the bankruptcy process moves forward, Hertz said.
The court petition listed about $25.8 billion in assets and $24.4 billion of debts. Its biggest creditors include IBM Corp. and Lyft Inc., according to the document.
Hertz has traditionally been a leading buyer of fleet cars from the Detroit 3 and other automakers. Last year, Hertz held as many as 567,600 vehicles in its U.S. fleet and 204,000 in its international unit, holding those in the U.S. for an average of 18 months and international vehicles for 12 months, according to a U.S. filing.
Its biggest suppliers of fleet vehicles were General Motors (21 percent), Fiat Chrysler (18 percent), Ford (12 percent), Kia (10 percent), Toyota (9 percent), Nissan (7 percent) and Hyundai (5 percent), according to the filing.
The second-largest U.S car-rental company began laying off workers to preserve cash in March as emergency measures to contain the coronavirus halted business and leisure travel. Hertz disclosed on April 29 that it had missed substantial lease payments related to its rental cars. It named a new CEO in May — its fifth since 2014.
The Estero, Fla.-based company had been negotiating with lenders for relief as well as with the U.S. Treasury Department about the possibility of a bailout. But with dismal demand, an oversize fleet and plunging prices for used cars, Hertz didn’t have enough liquidity to last until a market recovery.
“Uncertainty remains as to when revenue will return and when the used-car market will fully re-open for sales, which necessitated today’s action,” Hertz said.
While all travel-related companies have been hurt by the pandemic, a big part of what’s weighed on Hertz is its strategy of owning or leasing a large portion of its fleet outright instead of acquiring them through buyback agreements with manufacturers. Hertz typically responds to falling demand by selling cars from its fleet, so it has been hit especially hard by a drop in prices at used car auctions.
White & Case is the company’s legal adviser, Moelis & Co. is the investment banker, and FTI Consulting is providing financial advice. Carl Icahn holds a 38.89 percent equity stake, Hertz said.
Hertz, originally known as Rent-a-Car, was founded in Chicago in 1918. It was operating 12,400 locations worldwide as of February, according to a regulatory filing.