Hertz Global Holdings (HTZ) - Get Hertz Global Holdings, Inc. Report is looking to take advantage of its recent stock-price run-up and issue what could amount to as much as $1 billion in additional equity to raise funds it needs to pay off creditors amid its own bankruptcy proceedings.
In a court filing, 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.
Hertz said it would warn any potential buyers “the common stock could ultimately be worthless.”
The move has raised attention not only for its robbing-Peter-to-pay-Paul vibe, but for its legality, given the New York Stock Exchange is in the process of delisting Hertz for falling below $1. The company has appealed the notice of delisting.
Jared Ellias, a law professor at the University of California, Hastings College of Law, told The Wall Street Journal that he had studied hundreds of bankruptcies but had never before seen a company try to fund a case with an equity offering.
Shares of Hertz would have to sell for more than $4 each for it to raise $1 billion.
Hertz shares were up 52.91% at $3.15 in trading on Friday after declining more than 18% on Thursday.
Hertz filed for bankruptcy protection last Friday 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.
The company said it has $1 billion on hand to fund ongoing operations.
Hertz operates the Hertz, Dollar, Thrifty and Firefly rental companies, as well as Hertz Car Sales, and the Donlen fleet management company.