Virus-hit Hertz declares bankruptcy in US and Canada

Cars sit idle at the Hertz Rent-A-Car rental lot at San Francisco International Airport in California

Hertz Global Holdings Inc is preparing to file for bankruptcy as soon as Friday night after failing to reach a standstill agreement with its top lenders, the Wall Street Journal reported, citing people familiar with the matter.

Hertz (HTZ) is reportedly in a deadlock with its creditors as it looks to come to an agreement over lease payments for its vehicle fleet as it attempts to avoid filing for bankruptcy.

With almost $19 billion of debt and roughly 38,000 employees worldwide as of the end of 2019, Hertz is among the largest companies to be undone by the pandemic.

In April, as travel ground to a halt, it laid off 10,000 workers - roughly 26% of its total workforce - and even put at least 20 identical yellow Corvette Z06s up for sale online at a steep discount as it tried to preserve cash. Mr Jacobs sold the company, initially called Rent-A-Car, to John D. Hertz in 1923.

On May 18, Hertz named operations chief Paul Stone as chief executive and announced that Ms Marinello would step down as chief executive and from the company's board. Billionaire investor Carl Icahn holds a 39 per cent equity stake.

Sources told the paper that Hertz is expecting to seek chapter 11 protections, which would make it one of the largest corporate casualties of the coronavirus pandemic's widespread economic fallout as travel restrictions decimate the rental vehicle industry. In its first-quarter report filed earlier in May with securities regulators, the company said it may not be able to repay or refinance debt and may not have enough cash to keep operating.

"The impact of Covid-19 on travel demand was sudden and dramatic, causing an abrupt decline in the company's revenue and future bookings", Hertz said on Friday.

"Management has concluded there is substantial doubt regarding the company's ability to continue as a going concern within one year from the issuance date of this quarterly report", it said.

Hertz also has traditional credit lines, loans and bonds with conditions that can trigger defaults based on missing those lease payments or failing to meet other conditions, such as delivering a timely operating budget and reimbursing funds it has borrowed. The company joins department store chain J.C. Penney, as well as J.Crew and Stage Stores.

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