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It's Not Looking Good For Hertz [Updated]

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Photo: Hertz

The rental-car industry is in shock right now after months of zero demand and virtually no business. Talks between Hertz and its creditors don’t seem to be going anywhere, leaving the company staring bankruptcy in the face.


Saturday, March 23, 2020 12:35 p.m: Hertz filed for Chapter 11 Bankruptcy late Friday night

Late last month, Hertz announced that, in the wake of the global pandemic and quarantine, it had missed substantial lease payments on its cars—which the company doesn’t buy outright at the point of purchase. At the time, the company claimed it was seeking leniency from creditors but reports indicated it was already considering its bankruptcy options.


And now it seems those considerations may be fruitless. Automotive News reports that Hertz is now stuck in a deadlock with a key group of its creditors tied directly to its fleet of vehicles:

The deadlock between the car-rental company and creditors, including holders of asset-backed securities tied to fleets of vehicles, comes as some investors have grown more confident they’ll be made whole if Hertz files for bankruptcy and is forced to sell the cars backing their bonds, the people said.

Hertz has until Friday to either extend a forbearance agreement or make around $400 million of lease payments. If no deal can be reached, Hertz may need to seek court protection in the coming days, according to the people. Top shareholder Carl Icahn could still swoop in with a last-minute rescue to protect a $1.6 billion investment, now worth about $170 million as of Thursday’s close, one of the people said.

The problem for Hertz now, though, is that the used car market has also tanked, so used car prices are lower and the company won’t get as much money if it’s forced to sell off its fleet. In the U.S., Hertz operates over 567,000 vehicles, and over 200,000 more in its international fleet.

Dumping hundreds of thousands of used rental cars into a used market already struggling its own right could likely lead to a collapse, as we’ve discussed before.


The company has already offered up its fleet of Chevy Corvette Z06 models (if you’re lucky enough to be looking for a good deal right now), but given the state of arrangements with creditors, it looks like a lot more will be in the yard sale shortly.