Hertz Global Holdings Inc.’s creditors were offered two tough choices when hammering out a deal to keep it out of bankruptcy: cut the 102-year-old company some slack and hope it recovers, or let it slip into insolvency and try to recoup their investment in sales of its devalued rental fleet, Bloomberg News reported. The holders of Hertz’s asset-backed securities blinked and gave the company until May 22 to pay them about $400 million. Hertz knew its creditors would want to avoid bankruptcy, which could trigger a fire sale of devalued used cars if the ABS trusts that hold the vehicles have to liquidate. That sets up a parallel quandary for Hertz’s bank lenders, which kept fighting after the ABS holders had agreed to a forbearance. In the next two weeks, Hertz’s banks — led by Deutsche Bank AG and Barclays Plc — must decide whether to allow Hertz to raise more money to pay the ABS holders, or let it slide into bankruptcy. The possibility of a future bankruptcy filing is still on the table, according to sources. Rental-car companies in bankruptcy typically look to unwind their ABS by selling down the fleet that backs the bonds. The coronavirus pandemic that has squeezed Hertz’s finances, though, has also sent resale values for those vehicles plunging.
