Hertz given more time to rework debt to avoid bankruptcy

Hertz cars at San Francisco International Airport last week. The rental-car company recently disclosed that it had missed substantial lease payments related to its rental cars.
Hertz cars at San Francisco International Airport last week. The rental-car company recently disclosed that it had missed substantial lease payments related to its rental cars.PHOTO: AGENCE FRANCE-PRESSE

NEW YORK • Hertz Global Holdings reached an eleventh-hour pact with lenders to give the struggling rental-car company more time to rework its debt and extend a grace period on payments it has missed related to leasing vehicles.

The forbearances and waivers give the company until May 22 to "develop a financing strategy and structure that better reflect the economic impact of the Covid-19 global pandemic", Hertz said in a regulatory filing.

The shares briefly erased a decline of as much as 36 per cent but were still down 11 per cent as of 8.55am yesterday in New York, before the start of regular trading.

The company was earlier preparing to file for bankruptcy if it failed to rework its debt and could not get lenders to extend a grace period on a missed payment.

It was preparing to file for Chapter 11 court protection if needed, according to people with knowledge of the matter, who asked for anonymity to discuss the confidential talks.

A representative for Hertz did not return an e-mail and calls seeking comment.

A Chapter 11 filing would permit Hertz to stay in business while it works out a plan to pay its creditors and turn the business around.

The company expanded its roster of advisers to include FTI Consulting, which specialises in restructuring and bankruptcy cases, the people said, confirming an earlier report by The Wall Street Journal.

While the United States government has a US$50 billion (S$70.8 billion) bailout plan for airlines, Hertz has not been able to access that programme, and its chief rival, Avis Budget Group, had a stronger balance sheet going into the Covid-19 crisis.

Hertz had also been negotiating with the US Treasury Department about the possibility of a bailout.

But with dismal demand, a too-big fleet and plunging prices for used cars, it did not have enough liquidity to last until a market recovery.

The forbearances and waivers give the company until May 22 to "develop a financing strategy and structure that better reflect the economic impact of the Covid-19 global pandemic", Hertz said in a regulatory filing.

It began laying off workers to preserve cash in March as global travel restrictions cut deep into sales.

By April 29, it disclosed that it had missed substantial lease payments related to its rental cars.

Hertz, originally known as Rent-a-Car, was founded in Chicago in 1918. It was operating from 12,400 locations worldwide as of February.

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A version of this article appeared in the print edition of The Straits Times on May 06, 2020, with the headline 'Hertz given more time to rework debt to avoid bankruptcy'. Subscribe