HERTZ GLOBAL CARSHARING: THE BANKRUPTCY PROCEEDINGS ARE POSTOPEND FOR A WHILE

American company Hertz Global Holdings Inc., which provides car rental services all around the world, announced that it managed to agree with the creditors on the extension of the maturity of the loans. Previously, the final deadline was on May 4. However, the creditors made a concession and now the debts can be paid until May 22. The management of the company hopes that the given time will help to prepare a refinancing plan and avoid bankruptcy.

Negotiations with the creditors were caused by a missed deadline that Hertz Global admitted on April 27. The company was forced to immediately hire the consultants to negotiate. The amount of the debt to creditors, according to informed sources, exceeds $ 17 billion. Therefore, the negotiating parties hired the professionals from reputable consulting companies and banking structures. According to the experts, White & Case LLP, Moelis & Co Bank, are on the side of Hertz Global. Will the company eventually get out of the bankruptcy?

Hertz Global (formerly Rent-a-Car Inc.) was originated in Chicago over a hundred years ago, in 1918. According to data for February, the company had 12,400 working offices in various countries of the world. In March 2020, the company had to reduce its staff by laying off about 10 thousand people who worked in the United States.

In March the workers began to go on unpaid leave.

As it was noted by Catherine Marinello, the Executive Director of Hertz Global, the industry cannot survive without a state support. Unlike the air carriers that received billions of subsidies, the car rental companies have not received any money. Not only Hertz Global, but also its main competitors found themselves in a crisis situation - they were also forced to reduce the staff by seeking help and trying to reduce the costs.

The main problem of car sharing, according to the experts, is depreciation. It takes a leading place in the structure of the expenses. The pandemic supplemented the difficult financial situation with additional factors: the citizens went on the isolation and the prices for used vehicles fell sharply. In these conditions, it became difficult to reduce the possible costs by selling a part of the cars. Even the dismissal of almost a third of the staff could not fundamentally change the situation.

Despite the deferral of the credit payments, Hertz Global hired bankruptcy consultants.

This fact made the investors very angry, which resulted in the collapse of shares by 16.2%. Considering that since the beginning of the year, their value has already fallen by 80%, the company seeks to avoid bankruptcy.

A number of experts point out that the problems of Hertz Global were only exacerbated by the pandemic, since billions of dollars of debt appeared much earlier. The leasing contracts for the purchase of vehicles are the main part of the debt. The company ended the year 2019 with more than $ 110 million loss.

The analysts call a change in the customers’ preferences the main reason of the problems. Even before the pandemic, many tourists preferred to use taxi services (such as Uber) instead of carsharing. Now many people are wondering: will the carsharing services continue to exist after the end of the current crisis?