Hertz Global Holdings (OTC:HTZG.Q) missed a lease payment and is prepping for a possible bankruptcy filing, sending shares plunging 15% on Wednesday.
The COVID-19 pandemic has hit the travel industry hard, and Hertz is no exception. The company said earlier this month a dramatic decline in air travel has led to a significant increase in auto rental cancellations and a decline in forward bookings. Hertz reacted by slashing its total North American workforce by 10,000, but it appears the cuts might not be enough.
Hertz in a securities filing Wednesday said it is taking "aggressive actions to preserve liquidity," including not making required lease payments.
"As a result of the pandemic, Hertz ... and subsidiaries have experienced a rapid, sudden and dramatic negative impact on their businesses," the company said in the filing. "While the company has taken aggressive action to eliminate costs, the company faces significant ongoing operating expenses."
The company said it was in talks with lenders to waive forbearance agreements that could be triggered and try to avoid a bankruptcy filing.
The Wall Street Journal reports Wednesday that Hertz is in talks with senior lenders and holders of its vehicle finance subsidiary's notes to try to temporarily reduce payments. The paper called the talks "fluid."
Even if Hertz is able to buy more time, the company's outlook will likely be challenged for the foreseeable future. Airlines are projecting that travel demand will not return to pre-pandemic levels for years. Assuming auto rentals will not fully recover until air travel does, Hertz is going to have a lot less business coming in through 2020 and beyond.