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Hertz Global’s debts make up about $20 billion. If Hertz does not agree with its creditors about how to rework its debt before May 22, it will have to file for Chapter 11 court protection. HTZ stock price has fallen significantly.
The second-largest U.S. car rental company Hertz Global Holdings Inc (NYSE: HTZ) is struggling to prove it can steer clear of bankruptcy. The company hired FTI Consulting to advise it and held talks with some of its creditors to gain more time to develop a rescue plan. Amid the news, Hertz Global (HTZ) stock went through the floor, dropping by 16.16% to $3.01 yesterday. However, Hertz Global shares surged by 5.65% in the pre-market, slightly rebounding to $3.18.
This year, HTZ shares are 80.89% down. The stock kept on the float at the beginning of 2020 but in February, it started falling. In March, Hertz Global stock crashed on the back of the whole market meltdown, but the closing price yesterday was even worse than the lowest point of March.
Hertz Global Preparing for Bankruptcy
The transport industry has heavily suffered because of coronavirus pandemic. And Hertz Global has not managed to survive this hard hit. The company’s debts make up about $20 billion, a great part of the sum accrues to cars bought on lease.
The company wrote in its filing to SEC:
“As a result of the COVID-19 global pandemic, Hertz and its subsidiaries have experienced a rapid, sudden and dramatic negative impact on their businesses. While Hertz has taken aggressive action to eliminate costs, it faces significant ongoing operating expenses.”
In March, Hertz Global started laying off employees. On April 27, Hertz failed to make payments in accordance with an operating lease. The company had to come up with a decision for its further actions before May 4. As its CEO Kathryn Marinello said last week, the company was doing its best to preserve cash and get leniency from lenders to avoid going bankrupt.
On Monday, Hertz Global missed a deadline to pay about $500 million tied to $13 billion in financing for 500,000 rental cars. Then, its creditors gave the company some more time to come up with the solution. The forbearances and waivers give Hertz Global time until May 22 to “develop a financing strategy and structure that better reflects the economic impact of the Covid-19 global pandemic.”
However, there is little chance the company will manage to make good on all the debts it has.
Hertz Global said:
“There can be no assurances that Hertz will be able to successfully negotiate any further forbearance or waivers extending relief past May 22.”
If Hertz Global does not agree with its creditors about how to rework its debt and misses the deadline again, it will have to file for Chapter 11 court protection as bankruptcy will be the only choice.