Hertz Global Holdings Inc. could run out of cash as soon as this quarter due to a precipitous decline in revenue and the collapsing used-car market, Moody’s Investors Service warned as it downgraded the rental-car company three steps further into junk.
“The company’s cash burn could exhaust its cash resources during the second quarter,” Moody’s analysts wrote Friday. Hertz probably needs relief from lenders, which may include asset-backed security creditors who fund its rental-car fleet, according to Moody’s, which dropped its rating to Caa3 from B3.
Hertz is seeking advice from restructuring bankers at Moelis & Co. on ways to boost liquidity and avoid filing for Chapter 11 bankruptcy, people familiar with the situation said Thursday. One of the options that’s been under discussion with bankers is raising cash by issuing new debt, Bloomberg News reported earlier. The maneuver would need an amendment to a secured debt facility, the people said, asking not to be identified while discussing a private matter.
With air travel falling more than 90 percent and likely to remain depressed through 2020, Hertz’s earnings and cash flow will suffer, and the company has too many cars in its fleet, Moody’s said. The credit rater said it believes used-car prices have fallen at least 10 percent, and Hertz may not have enough liquidity to last until that market starts to recover.