It appears Hertz has run out of gas.
Hertz Global Holdings Inc. could file for bankruptcy this weekend after the Florida-based car rental company failed to reach an agreement with top lenders, The Wall Street Journal reported.
Hertz, which also operates the Dollar and Thrifty car rental brands, had been holding talks with creditors after skipping major car-lease payments due in April. Forbearance and waiver agreements on the missed payments were set to expire on Friday (May 22).
The report said Hertz is planning to seek Chapter 11 protection after COVID-19 resulted in restrictions on travel that brought the airline industry to a near standstill and cut road traffic as well, decimating the car rental market, sources told the news service.
Hertz and creditors, including holders of asset-backed securities tied to its fleet of vehicles, appeared deadlocked Friday. Hertz was under pressure to either extend a forbearance agreement or make a $400 million lease payment.
Carl Celian, a top shareholder, could provide a last-minute rescue to protect a $1.6 billion investment, now worth about $170 million, the WSJ reported.
Hertz declined to comment.
The company’s shares fell by 38 percent after the close of trading, according to Yahoo Finance.
A bankruptcy would make Hertz one of the highest-profile corporate defaults from the COVID-19 pandemic.
Creditors sought an upfront payment from Hertz in exchange for a further extension. But the two sides couldn’t come to an agreement, a source told the news outlet.
Hertz has $19 billion in debt, comprising $4.3 billion of corporate bonds and loans and $14.4 billion in vehicle-backed debt held at financing subsidiaries.
Still, a liquidation poses a risk to bondholders. While a quick sell-off of vehicles can the value of assets that quickly depreciate, flooding the market with too many cars lowers prices, per the report.
“Cars aren’t like fine wine; they don’t get better with age,” Dan Zwirn, CEO of Arena Investors, who has held debt and equity stakes in auto companies for more than 20 years told the WSJ.
Last fall, Hertz was celebrating after it topped the J.D. Power rankings that measured satisfaction among car rental agencies, Forbes reported.
Hertz ranked No.1 as the most satisfying car rental agency ahead of seven competitors. The company beat Enterprise, which topped the rankings last year, to take the top slot.