Car rental company Hertz Global Holdings, Inc. (HTZ) - Get Report filed for bankruptcy protection late 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,” said Hertz President and CEO Paul Stone in a statement.
The company said it has $1 billion on hand to fund ongoing operations. “Depending upon the length of the COVID-19 induced crisis and its impact on revenue, the company may seek access to additional cash, including through new borrowings, as the reorganization progresses,” Hertz said in the statement.
Hertz instituted furloughs and layoffs affecting 20,000 of its employees, or about half of its workforce, as the coronavirus was gathering momentum in the U.S. in March. The company said it plans to continue to pay its remaining employees, vendors and suppliers “in the usual manner,” while it reorganizes.
“The company actively engaged with many of its largest creditors to temporarily reduce the required payments under the company's vehicle operating lease,” Hertz said in the statement. “Although Hertz negotiated short-term relief with such creditors, it was unable to secure longer-term agreements. Additionally, the company sought assistance from the U.S. government, but access to funding for the rental car industry did not become available,” the statement said.
Hertz's international operations in Europe, Australia and New Zealand were not included in the chapter 11 filing. Neither were Hertz's franchised locations, which are not owned by the company.
Hertz operates the Hertz, Dollar, Thrifty and Firefly rental companies, as well as Hertz Car Sales, and the Donlen fleet management company.
White & Case LLP is serving as legal advisor, Moelis & Co. is serving as investment banker, and FTI Consulting is serving as financial advisor.
Shares of Hertz fell $1.01, or 36%, to $1.83 in after-hours trading Friday ahead of the announcement. The stock lost 7.5% in the regular session.