Rental car giant Hertz has ditched its CEO as it missed a large debt payment and maneuvers to avoid bankruptcy.
At the end of April Hertz was looking at a large payment on $17 billion in debt. Their loans are backed by their fleet of vehicles, but the plummeting value of used cars meant Hertz had to make up the difference in cash. Lenders didn’t want to force them into bankruptcy, though, believing debt would have a better shot getting paid if the rental company continued as a going concern.
Hertz has a deadline of May 22 to develop a financing plan – but the lack of financing is an own goal, since their CEO walked away from up to half a billion in cash back in March.
Weeks ago I passed along a piece on why Hertz has struggled so badly compared to others like Avis.
On March 26 — amid shelter-in-place orders from New Jersey to Illinois — Hertz filed a baffling public document that appeared to suggest the company’s fleet financing wouldn’t need any more attention through 2020. Hertz “does not anticipate any vehicle debt financing requirements for its global car rental business for the remainder of the year,” it said.
But that outlook changed the first two weeks of April when the value of the average used car plummeted by 18 percent over the previous year, according to the Manheim car index. The drop was devastating because, as The Post has previously reported, it’s 500,000 cars act as collateral for $13 billion in financing — and when the collateral drops in value, the company has to make up the difference in cash.
“Hertz only woke up to all this weeks ago,” one lending source said.
There was a time when Hertz was the rental company for business travelers. In this extended montage from Up in the Air when George Clooney is grounded in Omaha he wants to buy a Chrysler Sebring from Hertz.
Now I avoid them. Their problems aren’t all financial or COVID-related. On the bright side though Hertz just dumped a bunch of cheap Corvette Z6s onto the market.