Hertz filed for Chapter 11 bankruptcy amid rising debt and a sharp drop in demand for rental cars during the coronavirus pandemic.
The company is the latest travel-related business to fall victim to the coronavirus, which has grounded travelers and tourists and led to a sharp drop in revenue.
“The impact of COVID-19 on travel demand was sudden and dramatic, causing an abrupt decline in the Company’s revenue and future bookings,” the company said in a statement. “Hertz took immediate actions to prioritize the health and safety of employees and customers, eliminate all non-essential spending and preserve liquidity.
“However, 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,” it continued. “The financial reorganization will provide Hertz a path toward 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.”
The company says it has over $1 billion cash on hand to keep its sites up and running while it undergoes the bankruptcy process.
“Today’s action will protect the value of our business, allow us to continue our operations and serve our customers, and provide the time to put in place a new, stronger financial foundation to move successfully through this pandemic and to better position us for the future,” said Hertz President and CEO Paul Stone. “Our loyal customers have made us one of the world’s most iconic brands, and we look forward to serving them now and on their future journeys.”
Friday’s bankruptcy filing does not include operations in Australia, Europe and New Zealand, and also excludes franchisee locations.
While revenue for the company rose in January and February, the pandemic hit the company hard in March, bringing its growth to a halt. Its growth was particularly blunted with a string of stay-at-home orders and a sharp drop in business in airports, where Hertz and other car rental companies earn a large chunk of their revenue.
Hertz’s shares have dropped to $2.84, down from $20 in late February.