The second American car rental company Hertz, riddled with debt, filed for bankruptcy protection on Friday, May 22. In debt to the tune of 19 billion dollars (17.4 billion euros), the company, which owns 700,000 vehicles and 12,000 franchised agencies worldwide, had missed a deadline of 400 million dollars, at the end of April, on financing of its fleet, and did not find an agreement with its creditors on Friday. The company, headquartered in Florida, which also owns the Dollar and Thrifty brands, has taken the brunt of the airport closures. These represent, depending on the Financial Times, two-thirds of the turnover of rental firms in the United States and Europe.
But Hertz was already in particularly bad shape before the Covid-19 crisis. A car rental pioneer, it was founded in Chicago in 1918 by a former Ford salesman, Walter Jacobs, who bought a dozen black Ford Ts for hire. The company was sold to John Hertz, the owner of an Illinois city taxi company, who opened his first agency at Chicago Airport in 1932. It was brought under the Ford banner in 1987 and, above all, was the subject of a debt buyout in 2005 for $ 5.6 billion. The principle of these arrangements is to pump all of the company's cash flow to repay the debt of the buyers. It has never recovered, especially since its debt was aggravated by the purchase in 2012 of Dollar-Thrifty for $ 2.3 billion, a price deemed excessive. Let's add errors, depending on the New york times, like buying compact vehicles, which no longer fit consumer tastes.
Five bosses in ten years
Listed on the stock market in 2006, the company was gradually bought by the billionaire financier Carl Icahn from 2014, who ended up holding 39% of the capital and has three representatives on the supervisory board. Competed by Avis, Enterprise, but also Uber and Lyft, the company had suffered losses for four years and had used five bosses in ten years. His last executive boss, Kathryn Marinello, who had started straightening Hertz, was replaced on Monday by his vice-president, Paul Stone.
If restructuring has proved impossible, it is because the vast majority of its debt is made up of bonds, amounting to 14.4 billion, which were used to buy through financial subsidiaries the rental vehicles. The bonds were bought by pension or investment funds, which multiplied the number of interlocutors and made any restructuring agreement almost impossible. As the Wall street journal, the holders of these obligations now have a period of sixty days before being able to seize the vehicles which have been given as a guarantee thereof.
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