Although the financing is contingent on approval by the U.S. Delaware District Bankruptcy Court, the struggling rental car giant has big plans for its financing.
Up to $ 1bn (£ 774 / € 853m) could be used to provide equity for the acquisition of vehicles in the US and Canada. While it seems odd that a bankrupt company wants to buy new vehicles, Hertz has previously said it wants to “welcome customers with new vehicles” when travel returns to pre-pandemic levels.
Also read: Hertz declares bankruptcy, fears flooding market with hundreds of thousands of used cars
Purchasing new vehicles also helps keep Hertz’s fleet competitive, while ensuring customer feedback and satisfaction. This is important for the long term and Hertz was recently named # 1 in rental car customer satisfaction by JD Power, despite these “very difficult and unusual times”.
Much of the remaining funds, up to $ 800million (£ 619 / € 683), would be used for working capital and general business needs. This would ideally allow the company to wait for the coronavirus pandemic to subside and travel to return to normal.
A hearing is scheduled for Oct. 29 and Hertz CEO Paul Stone said, “This new funding will provide additional financial flexibility as we continue to navigate the effects of the pandemic on the travel industry and take measures to best position our company for the future. ”
The news skyrocketed Hertz stock as it closed at $ 2.50 (£ 1.94 / € 2.13) on Friday. It is admittedly just a fraction of what it was before the pandemic, but it was a one-day increase of 142.72%.