Please ensure Javascript is enabled for purposes of website accessibility

Did a Last-Second Deal With Lenders Buy Hertz Enough Time?

By Daniel Miller - May 5, 2020 at 1:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Hertz reached an agreement with lenders that buys it time to form a strategy, but time is ticking.

Hertz Global Holdings (HTZG.Q), a vehicle rental company offering cars, crossovers, and trucks for rent, among other services, calmed some fears of an imminent bankruptcy when it announced it entered into forbearances and limited waivers with certain lenders and holders of the company's asset-backed vehicle debt. The company was unable to make certain payments per the operating lease, as plunging used car prices required Hertz to make up the difference in value with cash.

"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," Hertz wrote in a regulatory filing Tuesday. "While Hertz has taken aggressive action to eliminate costs, it faces significant ongoing operating expenses, including monthly payments under its Amended and Restated Master Motor Vehicle Operating Lease and Servicing Agreement with Hertz Vehicle Financing LLC."

Car rental sign hanging from ceiling

Image source: Getty Images.

This announcement will buy Hertz and its management team time to plan a path forward. However, that time is limited and the situation remains dire: The forbearances and waivers will give management until May 22, 2020 to develop a financing strategy appropriate for the current economic scenario.

Rival Avis Budget Group reported during its first-quarter earnings call that it expects a gradual recovery to begin in June, with the industry "improving thereafter." Hertz has bought itself a little more time, but the stock has shed over 80% of its value over the past three months and faces an immense amount of uncertainty with the state of its business amid COVID-19, a fiercely competitive auto industry, and its $17 billion pile of debt.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Hertz Global Holdings, Inc. Stock Quote
Hertz Global Holdings, Inc.
HTZG.Q
Avis Budget Group, Inc. Stock Quote
Avis Budget Group, Inc.
CAR
$186.89 (0.36%) $0.68

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
390%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.