Hertz files for US bankruptcy protection as car rentals evaporate

NEW YORK • US car rental firm Hertz Global Holdings, at more than a century old, has filed for bankruptcy protection after its business was decimated amid the coronavirus pandemic and talks with creditors failed to result in much needed relief.

Hertz's board on Friday approved the company seeking Chapter 11 protection in a United States bankruptcy court in Delaware, according to court records. Its international operating regions such as Europe, Australia and New Zealand were not included in the US proceedings, the company said.

Sime Darby Services (SDS), which represents the Hertz brand in Singapore, said it has not been impacted by Hertz's move.

"Business is as usual for us," said SDS managing director Christopher Chin, adding that his company's business has not been significantly affected by the Covid-19 disease "as short-term rentals form a small part of our overall business".

Hertz, whose largest shareholder is billionaire investor Carl Icahn with a nearly 39 per cent ownership stake, is reeling from government orders restricting travel and requiring citizens to stay at home.

A large portion of Hertz's revenue comes from car rentals at airports, which have all but evaporated as potential customers eschew plane travel.

With nearly US$19 billion (S$27 billion) of debt and roughly 38,000 employees worldwide as of the end of last year, Hertz is among the largest companies to be undone by the pandemic.

The public health crisis has also caused a cascade of bankruptcies or Chapter 11 preparations among companies dependent on consumer demand, including retailers, restaurants and oil and gas firms.

US airlines have so far avoided similar fates after receiving billions of dollars in government aid, an avenue Hertz has tried unsuccessfully.

The company, based in The Estero, Florida, operates Hertz, Dollar and Thrifty car rentals, and had been in talks with creditors after skipping significant car-lease payments that were due last month.

The size of Hertz's lease obligations have increased as the value of vehicles declined because of the pandemic. In an attempt to appease creditors holding asset-backed securities that finance its fleet of more than 500,000 vehicles, Hertz has proposed selling more than 30,000 cars a month up to the end of the year in an effort to raise around US$5 billion, a person familiar with the matter said.

On May 16, the board appointed executive Paul Stone to replace Ms Kathryn Marinello as chief executive. Hertz had earlier laid off about 10,000 employees and said there was substantial doubt about its ability to continue as a going concern.

Hertz traces its roots to 1918, when Mr Walter Jacobs, then a pioneer of renting cars, founded a company allowing customers to temporarily drive one of a dozen Ford Motor Model Ts, according to the company's website.

REUTERS

• Additional reporting by Melissa Heng

A version of this article appeared in the print edition of The Sunday Times on May 24, 2020, with the headline 'Hertz files for US bankruptcy protection as car rentals evaporate'. Print Edition | Subscribe