Hertz files for bankruptcy, intends to stay in business
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Friday evening, rental car giant Hertz filed for bankruptcy in order to restructure its debts totaling more than $17 billion. The company intends to use more than $1 billion in cash on hand in order to keep the company running while it goes through the bankruptcy process.
“The impact of COVID-19 on travel demand was sudden and dramatic, causing an abrupt decline in the Company’s revenue and future bookings. Hertz took immediate actions to prioritize the health and safety of employees and customers, eliminate all nonessential spending and preserve liquidity,” the company said in a statement. “The financial reorganization will provide Hertz a path toward a more robust financial structure that best positions the Company for the future as it navigates what could be a prolonged travel and overall global economic recovery.”
Not included in the bankruptcy are international operating regions including Europe, Australia and New Zealand as well as Hertz franchised locations.
Prior to filing for bankruptcy, the rental car company, which also operates Dollar and Thrifty, had taken drastic measures to try and protect itself. The company flooded the used vehicle market with fleet sales, consolidated off-airport rental locations, deferred capital expenditures and cut market spend and reduced its global workforce by 50% representing 20,000 employees.
The bankruptcy filing comes at the end of the same week Hertz announced a new CEO, Paul Stone, who succeeded Kathryn Marinello. Back in March, Marinello declined a $300 million to $500 million loan from Barclays and filed a public document that said Hertz “does not anticipate any vehicle debt financing requirements for its global car rental business for the remainder of the year.”
At the same time, competitor Avis negotiated $750 million in borrowing capacity from a JPMorgan-led lending group and looks to be weathering the COVID-19 pandemic much better. One could argue Hertz leadership didn’t recognize the seriousness of the current situation until it was too late, resulting in a new CEO and arguably the highest profile bankruptcy filing so far due to COVID-19 impacts.
For now, any Hertz Gold Plus points you have are safe to redeem for free rentals, though worth much less than in previous years thanks to no-notice devaluations that put a sour taste in frequent renters’ mouths. In May of last year, Hertz increased the number of points required for a free rental day by up to 70%. One of the most valuable ways to redeem Hertz points is to transfer to airline partners, and it looks like that ability has already been removed. After trying to login to the Hertz Rewards website with multiple accounts and browsers, I only get error messages:
I’ve enjoyed Hertz President’s Circle status for the last couple years with the ability to pick any car I want, skip the counter and quickly exit airport locations with a ‘Clear Fast Lane’. Over the last year however, car selection options seemed to dwindle, fare tolls and convenience charges got annoying, and there was always the chance you could be falsely accused of stealing a car thanks to an internal glitch.
Hertz was the gold standard of car rentals for several decades, but bad financing deals starting in 2005 when Ford Motor Co. sold Hertz and new leadership lessened its ability to resell cars back to automakers started a downtrend for the company. Hopefully the new leadership and a fresh restart through the bankruptcy proceedings can set Hertz back on the right path.
Featured image by George Rose/Getty Images.
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