Hertz has filed for bankruptcy after being dealt a devastating blow by the coronavirus.
The Chapter 11 filing was made in the U.S. Bankruptcy Court for the District of Delaware and includes its Hertz’s U.S. and Canadian subsidiaries.
The bankruptcy filing is intended to allow for a “financial reorganization” of Hertz as well as subsidiaries such as Dollar, Thrifty and Firefly. Hertz said their ultimate goal is to provide 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.”
Despite the bankruptcy filing, it’s business as usual as Hertz and its subsidiaries remain open. As a result, “all reservations, promotional offers, vouchers, and customer and loyalty programs” should continue as planned. The company also noted they have more than $1 billion (£821,959,400 / €917,010,700) in cash to support its continuing operations.
That’s a pretty significant cash reserve, but the company is drowning in approximately $17 (£13.9 / €15.6) billion in debt. The coronavirus has also ground travel to a halt, virtually eliminating the need for rental cars.
In the bankruptcy announcement, Hertz said “The impact of COVID-19 on travel demand was sudden and dramatic, causing an abrupt decline in the company’s revenue and future bookings.” The company went on to say they took immediate action in response to the pandemic and eliminated all non-essential spending as prioritized the health and safety of its customers and employees.
Unfortunately, these actions have also included mass layoffs. In particular, Hertz implemented furloughs and layoffs of 20,000 employees which is nearly 50% of its global workforce.
It remains unclear how the bankruptcy will pan out, but there have been fears the rental company could liquidate part of its fleet of roughly 570,000 vehicles. If this were to happen, it could flood the used car market and drag prices down significantly.