WILMINGTON, Del. -- Hertz Global Holdings Inc. agreed to pay lenders who indirectly control the company’s fleet of rental cars $650 million as part of a deal to suspend a bankruptcy court fight over the vehicles, according to court documents.
Under the accord, Hertz will for the rest of the year halt its effort to cancel some of the nearly 500,000 leases on the cars the company rents out to consumers. A separate Hertz entity owns the vehicles, which the company leases back.
The company will ask U.S. Bankruptcy Judge Mary Walrath to approve the settlement at a court hearing scheduled for July 24. It filed its proposed resolution in Wilmington, Del., just before midnight on Monday.
Since filing for bankruptcy in May, Hertz has been fighting with lenders who funded the purchase of its vehicle fleet and are repaid through the lease deal. The two sides have been at a standoff over how best to shrink the Hertz fleet and still maintain regular payments to the lenders.
The deal ends a spat over how much Hertz must pay in 2020. In January, should there be no permanent resolution, the company can return to court and renew its request to cancel some of the leases.
The cars are housed in an entity linked to Hertz’s asset-backed securities and leased to the rental giant. Normally, when a company with ABS files for bankruptcy, it must choose to confirm or reject the entire master lease tied to the debt. If it keeps the lease, it has to continue making payments on the vehicles as it offloads them piecemeal. If it walks away, all of the collateral is liquidated to pay back bondholders.
Hertz had sought to selectively reject leases for around 30 percent of the vehicles governed by the master lease.
The case is Hertz Corp. 20-11218, U.S. Bankruptcy Court, District of Delaware (Wilmington).