By the end of March, Hertz Global Holdings Inc. had accumulated $ 18.7 billion in debt with only $ 1 billion in available cash.
Starting in mid-March, the company – whose car rental groups also include Dollar and Thrifty – lost all of its earnings when a trip closed due to the new coronavirus, and began to run out of payments. in April. Hertz has also been in turmoil from management, appointing its fourth CEO in six years on May 18.
“No business is built for zero income,” former CEO Kathryn Marinello said during the company’s first quarter earnings conference call on May 12. “It’s only been so long that corporate reserves will carry them.”
At the end of March, Hertz fired 12,000 workers and put 4000 others on leave, reduced vehicle purchases by 90% and stopped all non-essential expenses. The company said the measures would save $ 2.5 billion a year.
But the cuts came too late to save Hertz, the country’s second largest car rental company founded in 1918 by Walter L. Jacobs, who started out in Chicago with a fleet of a dozen Ford Model Ts. Jacobs sold the business, originally called Rent-A-Car Inc., to John D. Hertz in 1923.
In a note to investors in late April, Jefferies analyst Hamzah Mazari predicted that rival Avis would survive the coronavirus crisis, but Hertz had only 50 to 50 chances “since it was slower to reduce costs ”.
On May 18, Hertz made the unusual decision to appoint Chief Operating Officer Paul Stone as CEO and announced that Marinello would step down from the position of CEO and the company’s board of directors. Mazari described the change as unusual a few days before a possible bankruptcy. He also noted that CEO changes have been common at Hertz since financier Carl Icahn joined the company in 2014.
Icahn’s holding company is Hertz’s largest shareholder, with a 38.9% stake in the company, according to FactSet.
Deutsche Bank analyst Chris Woronka credited Marinello for boosting Hertz’s revenue growth, writing in a note to investors that it increased 16% in 2018 and 2019 combined.
Hertz’s bankruptcy case was not a surprise. In its first quarter report filed earlier in May with securities regulators, the company said it may not be able to repay or refinance its debt and may not have enough cash to continue operating.
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