- Hertz talking with banks, led by Barclays, to raise hundreds of millions of dollars
- Credit derivatives market is pricing a 70% chance that Hertz defaults in the next five years
- Last week, stock price printed a record low after losing 85% of the value in the last five weeks
Hertz Corporation (NYSE:HTZ) has been holding exploratory talks with banks to raise cash as the company struggles to cope with the consequences of the coronavirus outbreak. Shares of the car rental company collapsed more than 13% as a result.
Fundamental analysis: Global slowdown hits the travel industry hard
The coronavirus outbreak has been causing huge headaches to the travel and leisure industry and Hertz is no different. The car rental company has been struggling to deal with the impact from the coronavirus outbreak and therefore, it is holding talks with banks for new financing.
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“Like the rest of the global travel sector, Covid-19’s impact on Hertz arrived swiftly, and the reversal in customer demand has been significant,” Hertz Chief Executive Officer Kathryn Marinello said in a statement late Thursday.
The British banking giant Barclays (LON:BARC) is leading a group of banks talking to Hertz. According to reports, the two sides are discussing options, such as a first-lien loan, second-lien financing, or collateralizing the company’s vehicle fleet.
“We are aggressively taking actions to sustain operations and preserve liquidity, while confronting the issues raised by some of the most difficult economic conditions we have experienced,” added Marinello.
The talks are private, and still ongoing, it is reported. One of the options includes a first-lien worth as much as several hundreds of millions with a yield of 12%.
The leadership of the company has access to around $1 billion in liquidity. According to the credit derivatives market, there is a 70% chance that Hertz defaults in the next five years.
Technical analysis: Stock price collapses
Shares of Hertz are trading nearly 15% lower today following the news that the car rental company is talking to banks to discuss options. The stock price fell around 85% in around five weeks’ time.
As seen in the chart, the stock price collapsed almost vertically in the last few weeks. Last week’s low below the $4 mark is the all-time low for Hertz shares. The upper blue line is resistance, the former support, which capped the recovery.
A continuation of this bearish move is likely to see a move towards a record low, or even maybe a fresh record low.
Shares of Hertz have plunged nearly 15% today after reports emerged that the car rental company is in talks with banks about the new financing. The coronavirus outbreak has hit the company strongly and recovery may be extremely difficult.