Hertz files for bankruptcy protection

Rental car company Hertz has filed for bankruptcy protection. It's another blow to business amid the pandemic.


Rental-car company Hertz has filed for bankruptcy protection, unable to withstand the coronavirus pandemic that has slammed global travel.

The news for the heavily indebted 102-year-old car rental company's business comes as another hit to business amid the pandemic, even as restrictions across states have been eased.

"The impact of COVID-19 on travel demand was sudden and dramatic, causing an abrupt decline in the Company's revenue and future bookings," the company said Friday. "Hertz took immediate actions to prioritize the health and safety of employees and customers, eliminate all non-essential spending and preserve liquidity. However, uncertainty remains as to when revenue will return and when the used-car market will fully re-open for sales, which necessitated today's action.

The company said it plans to use money to keep running as it goes through the process, The New York Times reported. By the end of March, Hertz Global Holdings Inc. had racked up $18.7 billion in debt with only $1 billion of available cash.

"Today's action will protect the value of our business, allow us to continue our operations and serve our customers, and provide the time to put in place a new, stronger financial foundation to move successfully through this pandemic and to better position us for the future," Hertz President and CEO Paul Stone said in a statement.

In late March, Hertz shed 12,000 workers and put another 4,000 on furlough, cut vehicle acquisitions by 90% and stopped all nonessential spending. The company said the moves would save $2.5 billion per year.

Video: RV sales booming during pandemic

But the cuts came too late to save Hertz, the nation’s No. 2 auto rental company founded in 1918 by Walter L. Jacobs, who started in Chicago with a fleet of a dozen Ford Model Ts. Jacobs sold the company, initially called Rent-A-Car Inc., to John D. Hertz in 1923.

Hertz's franchised locations, which are not owned by the company, are not included in the Chapter 11 proceedings, the business said.

Under a Chapter 11 restructuring, creditors will have to settle for less than full repayment, but the company is likely to continue operating.

Hertz isn't the first struggling company to be pushed into bankruptcy by the coronavirus crisis. The company joins department store chain J.C. Penney, as well as Neiman Marcus, J.Crew and Stage Stores.

In a note to investors in late April, Jefferies analyst Hamzah Mazari predicted that rival Avis would survive the coronavirus crisis but Hertz had only a 50-50 chance “given it was slower to cut costs.”

The company said its businesses, including Hertz, Dollar, Thrifty, Firefly, Hertz Car Sales and Donlen subsidiaries, are open and serving customers.