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Hertz Global Holdings Inc. is preparing for a possible bankruptcy filing after the rental-car company failed to make lease payments to preserve cash amid the Covid-19 pandemic, according to people familiar with the matter.
The rental-car company and its advisers are negotiating with senior lenders and certain holders of its vehicle finance subsidiary's notes with the aim of temporarily reducing payments, the company said Wednesday in a securities filing.
The situation is fluid, the people familiar with the matter said, adding that Hertz is in talks with lenders on a forbearance agreement to waive a default and to potentially avoid bankruptcy.
While the car rentals have fallen off a cliff with most Americans refraining from traveling, Hertz still faces monthly payments under its operating lease, which it uses to lease vehicles for its rental car fleet.
Hertz failed to make payments Monday under the operating lease, kicking off a grace period that ends on May 4. If a sufficient amount of creditors don't agree to waive any default by the end of the grace period, "Hertz could be materially and negatively impacted" the company said.
It has so far received required support from holders of the vehicle finance notes, but hasn't yet received sufficient support for a waiver from its senior lenders, Hertz said Wednesday.
Hertz and some of its creditors have hired restructuring advisers, people familiar with the matter said. Hertz has $17 billion worth of debt, which includes $3.7 billion of corporate bonds and loans and $13.4 billion of vehicle-backed notes.
Government-mandated lockdowns and travel restrictions related to the Covid-19 outbreak have hit rental-car companies hard. Hertz and rivals Avis Budget Group Inc. and Enterprise Holdings Inc. have laid off workers to cut costs and have lobbied for federal assistance to keep their businesses afloat while demand for their services craters.
Hertz recently laid off about 10,000 employees in North America as the pandemic depressed travel. The layoffs follow the implementation of furlough programs in March.