While struggling through the COVID-19 pandemic, the Hertz rental car company is striving to avoid Chapter 11 bankruptcy despite the lack of travel.
Hertz announced on Tuesday that it has until May 22 to “develop a financing strategy and structure that better reflects the economic impact” of COVID-19.
According to the New York Post, the reprieve was granted after Hertz missed a deadline to pay around $500 million tied to $13 billion in financing for its fleet of 500,000 rental cars on Monday. Earlier on April 27, the company failed to make certain lease payments, which triggered additional interest obligations.
“Hertz is burning through about $200 million in cash per month,” Jefferies analyst Hamzah Mazari stated. “I think today’s news suggests they are trying to avoid bankruptcy. Hertz is basically asking for a waiver so they can borrow more debt. They are trying to see if there is a fix.”
USA Today reports that Hertz had earlier warned that the pandemic has caused “a rapid, sudden and dramatic negative impact” on the company, causing many people to speculate that it would soon be filing for bankruptcy. In an effort to cut costs, Hertz was forced to terminate nearly 10,000 jobs on April 14.
However, Hertz still faces significant ongoing operating expenses,” including agreements that commit the company to lease more vehicles than it currently needs. Luckily, the company is not expected to drop below April’s lows.
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