- Hertz files for Chapter 11 bankruptcy protection in the U.S as COVID-19 wipes demand.
- The car rental company failed to receive financial support from the U.S government.
- The Florida-based company laid off about 10,000 employees to shore up finances in 2020.
In its announcement on Friday, Hertz Global Holdings Inc. (NYSE: HTZ) said it filed for bankruptcy as the Coronavirus pandemic weighed on demand and it failed to receive the required financial support from its creditors.
Having operated for over a century, the car rental company filed for Chapter 11 protection in a Delaware court. It did not include its international operations in Australia, Europe, and New Zealand in its U.S. claim.
Shares of the company were reported more than 50% down in extended trading on Friday. At £1.49 per share, Hertz is about 90% down year to date in the stock market.
Billionaire Carl Icahn has a 39% ownership stake in Hertz
Billionaire Carl Icahn is the largest investor in Hertz with an around 39% ownership stake. Following the government-imposed lockdown that restricted people to their homes, demand for Hertz’ services vanished in recent months. Much of its revenue is attributed to car rentals at airports. With COVID-19 halting the global air travel, the company’s revenue tanked sharply in 2020.
Hertz concluded the last year with a workforce of 38,000 employees worldwide and roughly £15.59 billion of debt that makes it one of the largest companies that have been pushed into bankruptcy due to the ongoing health crisis.
Much like the U.S. airlines, Hertz also sought financial support from government’s £1.89 trillion COVID-19 relief fund to survive the pandemic; an effort that later collapsed and left no option for the car rental firm but to file for bankruptcy.
Hertz is now left with £820 million in cash. In a bid to spark an interest in creditors, Hertz recently announced plans of selling 30,000 cars per month from its global fleet comprising over 500,000 vehicles to raise £4.10 billion.
Hertz laid off 10,000 employees in 2020 to preserve cash
Earlier in 2020, the Florida-based company also resorted to laying off as many as 10K workers to improve its cash reserves. Hertz’ balance sheet currently highlights an over £11.48 billion of securitized debt. Learn more about the basics of balance sheets.
Hertz’ financial struggles, however, started before the outbreak as ride-hailing services including Uber posed a serious competition and stole its business. In 2019, however, its performance was fairly upbeat with an annual gain of about 20%.
The car rental company touched a year to date high of £16.61 per share in late February followed by a COVID-19 driven downward rally. At the time of writing, Hertz is valued at £331.49 million.