Bankrupt auto rental giant Hertz has won court approval to sell $1 billion in shares, according to multiple published reports Friday.
The company sought approval for the plan in a bankruptcy court filing this week, as it tries to take advantage of a recent surge in its stock price.
The car rental giant has proposed offering as many as 246.78 million common shares. Hertz based its request to the court on a nearly 10-fold increase in its stock price from 56 cents on May 26 to $5.53 on Monday, according to the filing.
“The recent market prices of and the trading volumes in Hertz’s common stock potentially present a unique opportunity for the debtors to raise capital on terms that are far superior to any debtor-in-possession financing,” the company told the bankruptcy judge.
The company said it has $1 billion on hand to fund ongoing operations. The newly issued stock would have to sell for just over $4 a share to raise the necessary funds.
Shares of Hertz fell 33 cents, or 11.6%, to $2.51 in after-hours trading. The stock had gained 37% during the regular session.
Hertz filed for bankruptcy protection earlier this month as the collapse in the global travel industry caused by the coronavirus pandemic overwhelmed its ability to reach long-term agreements with creditors on reduced payments.
"With the severity of the COVID-19 impact on our business, and the uncertainty of when travel and the economy will rebound, we need to take further steps to weather a potentially prolonged recovery,” CEO Paul Stone said at the time.
Hertz operates the Hertz, Dollar, Thrifty and Firefly rental companies, as well as Hertz Car Sales, and the Donlen fleet management company.