U.S. rental car company Hertz Global has reached a last-second agreement with creditors to avoid a possible bankruptcy.
In a regulatory filing, the company said it has entered into forbearances and limited waivers with lenders and holders of its asset-backed vehicle debt. The agreements will give it until May 22 to negotiate with key stakeholders to develop a financing strategy and structure that better reflects the economic impact of the COVID-19 global pandemic.
Hertz said it has taken aggressive action to eliminate costs, but it faces significant ongoing operating expenses.
“As a result of the COVID-19 global pandemic, Hertz and its subsidiaries have experienced a rapid, sudden, and dramatic negative impact on their businesses,” the company said in the filing.
About a third of Hertz’s 12,400 locations are at airports, accounting for two-thirds of its revenue last year. Travel through U.S. airports is down about 95%, according to screening data from the Transportation Security Administration.
On April 27, Hertz missed payments to creditors under its operating lease, causing an amortization event on May 1. The company has reportedly been in talks with some creditors about how to avoid bankruptcy. The Wall Street Journal reported that the company added restructuring specialists FTI Consulting to its team of advisers.
The company reported record annual revenue of $9.8 billion last year but posted a net loss of $58 million in 2019. It lost $225 million in 2018. Hertz notified 10,000 employees on April 14 that they would lose their jobs.
Chief executive officer Kathryn Marinello previously announced she was giving up her base salary and agreed to a 10% salary cut going forward.
Hertz rents cars under the Hertz, Dollar, Thrifty, and Firefly brands. The company’s stock was down more than 14% in midday trading and 80% for the year.
Avis Budget is also estimating an 80% drop in revenue for April and May.
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