Hertz Corp. will sell as many of its rental cars as possible while in bankruptcy to bring its huge fleet in line with reduced future demand in a post-pandemic economy, the company’s lead bankruptcy lawyer said during a court hearing yesterday, Bloomberg News reported. The company must figure out how many of the 730,000 autos it controls to keep and how much debt that fleet can support, bankruptcy attorney Thomas Lauria said during a court hearing conducted by video and telephone. When the Covid-19 pandemic hit, all the prediction models the company uses to run its business failed, Lauria said. “We don’t know when people will be free to move around or when people will return to traditional travel patterns and what the new normal will look like,” Lauria told U.S. Bankruptcy Judge Mary Walrath. “The value of the business is uncertain and its capacity to service the debt is less than uncertain — right now, it’s effectively nil.” Hertz will use the next 60 days in bankruptcy to negotiate with creditors, including those whose debt is tied to the value of the vehicle fleet, Lauria said. The company may be forced to make lease payments on the vehicle fleet after that if negotiations fail, Lauria said. Holders of bonds backed by Hertz’s fleet said in court papers that if nothing changes, those payments will hit $1 billion, mostly to compensate them for a loss in the value of the cars. During the hearing lawyers for the vehicle bondholders complained that Hertz is trying to use the cars without paying for them, which imposes losses on the bondholders. Read more.
In related news, billionaire investor Carl Icahn, who was the largest shareholder in Hertz Global Holdings Inc., unloaded his entire stake in the rental car company at a “significant loss” days after it filed for bankruptcy protection, Reuters reported. According to a regulatory filing yesterday, Icahn, who held a nearly 39 percent stake in Hertz and had three representatives on the board, sold 55.34 million shares on Tuesday at 72 cents per share. Hertz fell victim to coronavirus shutdowns that dramatically curtailed travel and created major financial hardships for the company, Icahn said in the filing, adding that he supported the board’s decision to seek bankruptcy protection on Friday. Even though he suffered heavy losses, which he did not quantify, Icahn said that he still believed in the company and thinks it can be a “great company” in the future. At the end of 2019, his stake in Hertz was worth close to $700 million. Read more.
