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."
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.