Hertz files for Chapter 11 bankruptcy protection with $19 BILLION of debt

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Car rental giant Hertz has filed for Chapter 11 bankruptcy protection in the US after 102 years of trading.  This does NOT include its international operations, so any pre-paid bookings made for non-US locations should be safe – for now.

The process will, according to the company, leave it with:

“a more robust financial structure that best positions the company for the future as it navigates what could be a prolonged travel and overall global economic recovery.”

It is also important to remember that many smaller Hertz outlets, especially off-airport ones, are franchises.  These would not be impacted if the company did disappear for good.

Hertz also owns Dollar, Thrifty and Firefly brands which are also impacted by this filing.

The numbers are startling.  The company has almost $19 billion of debt (double its 2019 revenue) and under $1 billion of cash.  The majority of the debt is secured against its fleet of cars, but Hertz was caught out by clauses which force the company to make cash payments to lenders if second-hand car values fall.  The debt is primarily in the form of bonds which require regular repayments and, because of the large number of bondholders, is far harder to restructure than bank debt.

Chapter 11, of course, is NOT ‘receivership’ in the UK sense.  Chapter 11 is effectively a standstill arrangement, which gives Hertz breathing space to restructure its affairs without the risk of its assets being seized by creditors.

It is difficult to imagine any scenario in which the Hertz brand will disappear.  At the end of the day, the brand is the ONLY real asset that the company has.  It does not own any of its cars outright and the only ‘assets’ it has are its customer list and leases on prime airport pick-up locations.

The lenders should recover most of their money if the Hertz fleet of 560,000 vehicles did have to be liquidated, although it is beneficial for the entire car industry to keep the company alive.  CNN reported that car rental companies buy 10% of all new cars in the US – 1.7 million vehicles last year.   One plan, apparently, is for Hertz to begin selling down its fleet at the rate of 30,000 cars per month to raise funds.

It is bad news for Hertz shareholders, of course, although they had already lost over 80% of their value this year.  In truth, the car rental industry in the United States has been in trouble ever since the launch of Uber and Lyft.  Many travellers now find it more convenient to use a rideshare service during their travels rather than deal with the hassles of hiring a car.

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  1. Hope they come through this OK, I’ve only had good experiences with them in the USA and Australia. Even their South African franchise, which wasn’t meant to recognise status, gave me a great upgrade on a R99/day promo rate!

  2. Email from Hertz on Friday…my Gold Plus Rewards points are expiring shortly. Options 1. “Make a reservation” – ain’t going to happen any time soon. 2. “Use your points”. Any thoughts on how to use them?

    • Does the US site still allow hotel transfers? I know the UK site removed the option.

    • A couple of days before my points expired in December, I emailed them telling them I did not realise they would expire after 18 months as it was still advertised in many places on the website that expiry is after 24 months. They responded back saying they would reinstate my points by contacting them after my next rental.

  3. terri says:

    I have found hertz cars in USA to be lower mileage than some of other companies. I also like the gold option. Orlando airport branch has on consequtive rentals added unexpected surcharges upon return that they insist are correct when challenged. Takes 30+ minutes of hassle to get them removed and they rely on customer being in a hurry/distracted heading for a flight. I’ve learnt the printer is your best friend in these situations and keep showing the paperwork with nil to pay highlighted.

  4. Always had good experience with Hertz or its other brands so hopefully will survive.
    Bit like airline failures only makes the likelihood post the pandemic that travel going to become a lot more expensive.

  5. ChrisD says:

    I don’t wish Hertz any harm, but the the whole rental car industry is such a legacy beast, it deserves to be shaken up. The product they offer is so hard to navigate, so many different cost options, insurances, penalties, forms and paperwork, not to mention all the stories of bogus charges and disputed damage. It’s such a dirty game. Other than the unlikely angle take by Uber and Lyft I’m surprised no-one has come along and shaken things up.

  6. David says:

    For me Hertz had adapted fairly well and i’ve sailed through as Gold when collecting a car especially in the US when your name is on the board and keys in the car to go. The hidden killer is not just Lyft and Uber but comparing it to paying hotel parking fees and valet costs and the car rental. Take that out and I’d rent everytime in the US but cant justify the high parking levys of most hotels.

  7. Stian says:

    Does anyone know if our Hertz points will be in danger of being wiped out by this bankruptcy?

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