The coronavirus has hammered the auto industry, but it’s far from the only sector that’s reeling from the pandemic.
Retailer J.Crew filed for bankruptcy on Monday and Lord & Taylor is expected to follow suit shortly. However, we’re more interested in rental car company Hertz which is probably best known for their high-performance Shelby Mustangs.
Like other companies dependent on travel, Hertz is in dire straits as business has come to standstill. If that wasn’t bad enough, the company is drowning in approximately $17 (£13.7 / €15.7) billion in debt. This has led to fears the company could file for bankruptcy and sell its fleet of vehicles to pay creditors. If the company’s nearly 570,000 vehicles were to flood the used car market, it would drag prices down significantly.
Also Read: Hertz Bankruptcy Could Lead To Rental Fire Sale Dealing Massive Blow To Used Car Market
Thankfully, the company has managed to avoid bankruptcy as CNN reports creditors have thrown Hertz a lifeline. However, they’ve been given a pretty short leash.
Long story short, Hertz was supposed to pay vehicle lenders on April 27th. The company missed that payment and then failed to pay within a one-week grace period.
That’s a terrifying sign, but lenders have now given the company until May 22nd to “develop a financing strategy and structure that better reflects the economic impact of the Covid-19 global pandemic and Hertz’ ongoing operating and financing requirements.” In essence, lenders are willing to be flexible but they want details on how and when Hertz will be able to pay them.
It remains unclear if creditors will like what they hear, but Hertz was already struggling before the pandemic as CNN noted they posted a net loss of $58 (£46.9 / €53.4) million in 2019 and a loss of $225 (£182 / €208) million in 2018. In the meantime, the company has laid off thousands of employees and is trying to figure out a way to survive the current crisis.
