Hertz Global Holdings Inc. reached an eleventh-hour pact with lenders to give the struggling rental-car company more time to rework its debt and extend a grace period on payments it has missed related to leasing vehicles.
The forbearances and waivers give the company until May 22 to “develop a financing strategy and structure that better reflects the economic impact of the COVID-19 global pandemic,” Hertz said in a regulatory filing.
The rental-car company had been talking with some of its creditors about how to ease its burden without going through bankruptcy, and the company was preparing to file for Chapter 11 court protection if needed, according to people with knowledge of the matter, who asked for anonymity to discuss the confidential talks.
Hertz has traditionally been a leading buyer of fleet cars from the Detroit 3 and other automakers. Last year, Hertz held as many as 567,600 vehicles in its U.S. fleet and 204,000 in its international unit, holding those in the U.S. for an average of 18 months and international vehicles for 12 months, according to a U.S. filing.
Its biggest suppliers of fleet vehicles were General Motors (21 percent), Fiat Chrysler (18 percent), Ford (12 percent), Kia (10 percent), Toyota (9 percent), Nissan (7 percent) and Hyundai (5 percent), according to the filing.
Meanwhile, the company expanded its roster of advisers to include FTI Consulting Inc., which specializes in restructuring and bankruptcy cases, the people said, confirming an earlier report by The Wall Street Journal.
Sweeping travel restrictions tied to the COVID-19 outbreak and the global economic collapse have hammered revenue, particularly in the rental car business. While the U.S. government has a $50 billion bailout plan for airlines, Hertz hasn’t been able to access that program, and its chief rival, Avis Budget Group Inc., had a stronger balance sheet going into the crisis.
The company had been negotiating with lenders for relief as well as with the U.S. Treasury Department about the possibility of a bailout. But with dismal demand, a too-big fleet and plunging prices for used cars, Hertz didn’t have enough liquidity to last until a market recovery.
Hertz began laying off workers to preserve cash in March as the travel restrictions cut deep into sales.
By April 29, Hertz disclosed that it had missed substantial lease payments related to its rental cars. Creditors gave Hertz until Monday to come up with a solution, and CEO Kathryn Marinello said in an interview at the time that Hertz was doing everything it could to preserve cash and get leniency from lenders to avoid going seeking protection.
Hertz, originally known as Rent-a-Car Inc., was founded in Chicago in 1918. It was operating 12,400 locations worldwide as of February, according to a filing.
Automotive News staff contributed to this report.