Hertz prepares to file for bankruptcy, stock tanks

Hertz Global Holdings Inc. has hired an additional adviser to help prepare for a planned bankruptcy filing, according to people familiar with the matter, as the coronavirus pandemic squeezes the car-rental business.

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HTZHERTZ GLOBAL HLDGS1.02-0.29-22.14%

The Estero, Fla., company, which missed a lease payment last week, has engaged FTI Consulting Inc. to advise on efforts to streamline operations in advance of a possible chapter 11 filing to restructure $17 billion in debt, the people said.

Hertz didn't respond to a request for comment. FTI declined to comment.

HERTZ MISSES LEASE PAYMENT, PREPS FOR POTENTIAL BANKRUPTCY

In addition to FTI, Hertz is working with legal counsel White & Case LLP and investment bank Moelis & C.

Car-rental ridership is plunging amid the Covid-19 pandemic and the broad economic pullback, touching off a cash burn at Hertz. At the same time, the company's financing costs are spiking due to the rapid decline in used vehicles prices.

The missed lease payment set off a grace period that expires Monday. Hertz has been working to secure lenders' agreement to hold off on taking action against the company and to continue negotiations.

Revolving lender Barclays PLC is working with Latham & Watkins LLP, while a group of term loan lenders has engaged financial adviser Houlihan Lokey Inc., and law firm Arnold & Porter Kaye Scholer LLP, the people said.

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In recent months, both Hertz and rival Avis Budget Group Inc. have cut executive pay and resorted to furloughs and job cuts, with Hertz last month laying off about 10,000 employees in North America. Avis said Monday it would try to borrow $400 million for general purposes.

Even before the pandemic, Hertz and its rivals were struggling with losing customers to ride-hailing firms such as Uber Technologies Inc. and Lyft Inc.

With ride-hailing apps becoming more prevalent, especially at airports, many travelers have opted to use them over renting a car, eroding bookings in recent years, according to industry executives.