Hertz Global Holdings filed for bankruptcy late Friday after sweeping travel restrictions and the global economic collapse destroyed demand for its vehicles.
Hertz said it has enough cash for now to support its operations, which include Hertz, Dollar, Thrifty, Firefly, Hertz Car Sales, and Donlen. But it might need to raise more, perhaps through added borrowings while the bankruptcy process moves forward.
The bankruptcy reorganization will not affect the car rental company's operations on Guam or Saipan.
“We would like to assure our customers and vendors that the Chapter 11 filing by Hertz Global Holdings will not have any impact on our operations in Guam or Saipan. We are and will continue to be open for business," said Jeff Jones, President of Triple J Rentals- the Hertz Franchisee for Guam, Saipan and Micronesia.
Hertz's court petition listed about $25.8 billion in assets and $24.4 billion of debts, and its biggest creditors include IBM Corp. and Lyft Inc. After the coronavirus pandemic decimated revenue, the car renter sought relief from lenders and a bailout from the U.S. Treasury Department. But while it managed to negotiate a short-term reprieve from creditors, it wasn't able to work out longer-term agreements.
"With the severity of the COVID-19 impact on our business, and the uncertainty of when travel and the economy will rebound, we need to take further steps to weather a potentially prolonged recovery," Paul Stone, Hertz chief executive officer, said in a statement. The Estero, Florida-based company named him its fifth CEO since 2014 just four days before the bankruptcy filing.
The Chapter 11 proceedings involve the company's U.S. and Canadian subsidiaries and don't include its international operations in Europe, Australia or New Zealand.
"Hertz may have little choice but to scale down its operations and sell assets to pay down its significant secured debt," Joseph Acosta, a partner in the bankruptcy practice at the law firm Dorsey & Whitney, said in an email. "Hopefully, the restructuring expenses will not bury the company in the process."
The company began laying off workers to preserve cash in March as emergency measures to contain the virus halted business and leisure travel. Hertz disclosed on April 29 that it had missed substantial lease payments related to its rental cars.
While all travel-related companies have been hurt by the pandemic, a big part of what's weighed on Hertz is its strategy of owning or leasing a large portion of its fleet outright instead of acquiring them through buyback agreements with manufacturers. Hertz typically responds to falling demand by selling cars from its fleet, so it has been hit especially hard by the drop in prices at used-car auctions.
Hertz, originally known as Rent-a-Car Inc., was founded in Chicago in 1918. It was operating 12,400 locations worldwide as of February.
The Guam Daily Post contributed to this report.