Hertz files for U.S. bankruptcy protection as car rentals evaporate in pandemic

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

The more than a century old car rental firm Hertz Global Holdings filed for bankruptcy protection on Friday after its business all but vanished during the coronavirus pandemic and talks with creditors failed to result in needed relief.

Hertz said in a U.S. court filing on Friday that it voluntarily filed for Chapter 11 reorganization. Its international operating regions including Europe, Australia and New Zealand were not included in the U.S. proceedings.

The firm, whose largest shareholder is billionaire investor Carl Icahn, is reeling from government orders restricting travel and requiring citizens to remain 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 $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. 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.


3 replies

  1. U.S. Corporate Bond Sales Smash Record, Soaring Over $1 Trillion

    By Molly Smith

    May 28, 2020, 12:54 PM EDT

    It began with a rush in mid-March, when a pair of U.S. corporate giants, Exxon Mobil Corp. and Verizon Communications Inc., braved the financial turmoil created by the coronavirus pandemic and sold a combined $12 billion of bonds in a single day. Others quickly followed, emboldened by the unprecedented support provided by the Federal Reserve, and before long, deals were being rushed out at a clip never before seen in the history of U.S. bond markets.

    On Thursday, that boom reached an astonishing milestone: $1 trillion worth of investment-grade corporate debt sales had been brought to market in the first 149 days of the year. In 2019, a fairly typical year in the bond market, that figure wasn’t reached until November.

    For the Fed, the borrowing binge is precisely the reaction it was looking for when it announced two months ago that it would prop up companies ravaged by the pandemic by providing a $750 billion promise to buy corporate debt. The Fed has yet to purchase even one individual bond, having only started buying some corporate debt through exchange-traded funds two weeks ago. But from the moment policy makers signaled their intentions, the floodgates opened, rebooting deal activity that had gone dormant earlier in the month and sparking a massive market rebound across nearly all asset classes.

    For companies, the cash has been a crucial lifeline that could help many of them make it through the economic collapse that the virus triggered. Fittingly, it was a bond deal Thursday by the hotel chain Marriott International Inc., a company that has been devastated by the plunge in travel, that helped push the sales figure over the trillion-dollar mark. In a dramatic sign of just how high the stakes are — and how important it is for companies to maintain access to debt markets — there have been more corporate bankruptcies in May than in any other month since the Great Recession.

    All of this new debt creates a new set of risks, though. U.S. companies were already highly levered coming into the crisis and by helping them heap more debt onto their balance sheets, the Fed runs the risk of deepening the pain if many of them fail to survive the virus. The central bank also will also have to decide — in coming months or, perhaps, years — when and how to remove the support without sinking corporate borrowers into distress.

    “Leverage is going higher as cash flows are declining. Depending on how the recovery takes shape, this may weigh on credit quality and ratings,” said Steven Boothe, a high-grade debt portfolio manager at T. Rowe Price. “If it’s steep and long drawn out, that will be something to be mindful of.”

    The bond frenzy may be nearing an end — at least for now. For the second-half of the year, most strategists expect a slowdown in corporate borrowing, especially if the economy rebounds quickly.

    With their balance sheets amply padded, companies may just borrow $200 billion in the last six months of the year, according to Bank of America Corp. strategists led by Hans Mikkelsen. The pace may also slow down heading into the U.S. presidential election, said Peter Aherne, head of North American investment-grade capital markets, syndicate, and capital strategy and structuring at Citigroup Inc.


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