Hertz will pay lenders who indirectly control its fleet of rental cars $650 million in a move that will suspend a bankruptcy court fight related to the vehicles.
As part of the deal, Hertz will halt for the rest of the year its efforts to cancel some of the nearly 500,000 leases on the cars the company currently rents out to consumers. The rental car giant had hoped to originally cancel many of these leases and drastically reduce its fleet numbers.
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Bloomberg notes that a separate Hertz entity owns the vehicles which the company leases back under a contract, providing lenders with strong collateral rights. Through the current lease contract, Hertz needs to pay a fee to cover depreciation on top of the regular rent for each car in its fleet. This new accord will allow Hertz to likely pay less that it would normally owe the lenders.
Hertz filed the proposed resolution in Wilmington, Delaware just prior to midnight on Monday. It will ask U.S. Bankruptcy Judge Mary Walrath to approve the settlement at a court hearing scheduled for Friday, July 24.
Hertz has previously said that in part, it was its lenders that pushed it into bankruptcy in May. In the months since, the company has been squabbling with the lenders who funded the purchase of its vehicle fleet and are repaid thanks to the lease deal.
The rental giant and its lenders have been looking to find a way to reduce Hertz’s fleet of rental vehicles while still maintaining regular payments to lenders.
