[Thanks democrats...] Hertz files for bankruptcy

https://www.cnn.com/2020/05/22/business/hertz-bankruptcy/index.html

New York (CNN Business)Hertz filed for bankruptcy Friday night, the latest 
victim of the sudden economic downturn sparked by the Covid-19 pandemic.

The company has been renting cars since 1918, when it set up shop with a 
dozen Ford Model Ts, and has survived the Great Depression, the virtual 
halt of US auto production during World War II and numerous oil price 
shocks. By declaring bankruptcy, Hertz says it intends to stay in business 
while restructuring its debts and emerging a financially healthier 
company.

"The impact of Covid-19 on travel demand was sudden and dramatic, causing 
an abrupt decline in the company's revenue and future bookings," said the 
company's statement. It said while it too immediate action in response to 
the crisis, "uncertainty remains as to when revenue will return and when 
the used-car market will fully re-open for sales, which necessitated 
today's action."

The filing is arguably the highest-profile bankruptcy of the Covid-19 
crisis, which has prompted bankruptcies by national retailers like 
JCPenney, Neiman Marcus and J.Crew, along with some energy companies such 
as Whiting Petroleum and Diamond Offshore Drilling. But none of the 
companies to file so far have had such as large a share of their industry 
as does Hertz, which along with rivals Avis Budget (CAR) and privately 
held Enterprise dominate the rental car industry

The entire rental car industry has been devastated by the plunge in travel 
since the pandemic hit earlier this year. Nearly two-thirds of its revenue 
comes from rentals at airport locations, and air travel has fallen 
sharply. Since the start of April, the number of people passing through 
TSA checkpoints at US airports has plummeted 94% compared with a year ago.

A bankruptcy filing does not mean a company will be forced out of 
business. Many companies have gone through the process and gone on to post 
record profits, including automaker General Motors (GM) and many of the 
nation's airlines. But many companies that have filed for bankruptcy with 
the intention of staying in business have not survived the process.
Hertz said the bankruptcy process will give it "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."

Deep cuts already in place
The company rents cars under the brands Hertz, Dollar, Thrifty and 
Firefly, a discount brand outside the United States.

The company has already made deep cuts to stem its losses. It has notified 
12,000 employees in North America that that they were losing their jobs, 
and another 4,000 are on furloughs. Its US workforce stood at 38,000 
employees at the start of the year, with about a quarter of them 
represented by unions.

Hertz (HTZ) shares closed down 7.5% on Friday and have fallen 82% so far 
this year. Shares moved sharply lower in after-hours trading Friday 
evening. Shares are likely to become worthless as part of the bankruptcy 
process.

Hertz missed an April 27 payment that was owed to a group of lenders that 
lease vehicles in Hertz's day-to-day US rental fleet. The lenders extended 
a grace period for the payment until May 22 "to engage in discussions ... 
with the goal to develop a financing strategy and structure that better 
reflects the economic impact of the Covid-19 global pandemic and Hertz' 
ongoing operating and financing requirements."

The company had a total of 568,000 vehicles and 12,400 corporate and 
franchise locations worldwide at the start of this year. About a third of 
those locations are at airports.

A significant portion of Hertz's nonairport business is renting cars to 
people who are having their vehicles repaired after accidents. But with so 
many people out of work or working from home, the miles being driven and 
the number of car accidents are down significantly. Car insurers are 
voluntarily returning more than $7 billion, or between 15% to 25% of 
premiums, to their customers.

Mounting losses and debt
Hertz posted annual revenue of $9.8 billion last year, a company record, 
and its rental car revenue is comparable to that of rival Avis Budget 
Group (CAR). But Hertz has problems that predate the Covid-19 pandemic. It 
posted a $58 million net loss in 2019, down from a $225 million loss in 
2018. But in the first three of this year it lost $356 million.

Hertz had $18.8 billion of debt on its books as of March 31, up $1.7 
billion from the end of last year. Most of that debt, $14.4 billion, is 
backed by its vehicles. That includes the debt for which it missed the 
payment in April the prompted this latest crisis. It had only $1 billion 
in cash on its balance sheet as of the end of March,

A storied history

Hertz was founded in Chicago just more than a century ago by Walter 
Jacobs, who sold the company in 1923 to John Hertz, who renamed it and 
expanded the fleet to 600 cars. He began the nation's first national 
rental network in 1925 and opened its first airport location at Chicago 
Midway Airport in 1932.

Hertz has had a number of high-profile corporate owners, including RCA, 
United Airlines (UAL), and most recently Ford (F), which sold it to a 
group of private equity firms in 2005 for $5.6 billion. It was taken 
public a year later.

Its primary shareholder today is activist investor Carl Icahn, who owns 
about 38% of its shares outstanding. He continued to increase his stake in 
the company all the way through mid-March. Those shares, which increased 
the size of his stake by 26%, have lost more than 60% of their value in 
the two months since his most recent purchases.

The problems at Hertz and the rental car business overall are particularly 
bad news for the world's automakers. Rental car companies are 
traditionally a major purchaser of new cars. Last year they purchased 1.7 
million US cars, according to Cox Automotive. That equaled to 10% of US 
new car purchases.

Hertz had already announced it would not purchase any new cars for the 
rest of this year, and that it is starting to sell its vehicles as used 
cars. As of early March, it had sold 41,000 cars out of its US fleet and 
another 13,000 out of its European fleet. But a halt of used car auctions 
and the closure of many used and new car dealerships has brought sales to 
a virtual halt.

But it is clear that as used car sales channels return to normal, rental 
car companies will continue to slash the size of their fleets. Avis Budget 
said it expects its fleet in the Americas will be reduced by 20% by the 
end of June, compared to a year earlier.


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President Trump has boosted the economy, reduced illegal immigration, 
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