Airport car rental volumes were nearly wiped out during Hertz's (OTC:HTZG.Q) second quarter, forcing the rental giant to seek debtor-in-possession financing to survive.
Global revenue tumbled 67% to $832 million after air travel was decimated by the coronavirus pandemic. While it has $1.4 billion in cash, which should let it survive through to Dec. 31, unless travel and tourism rebound and it can get extensions on international car payments from its lenders, which are due to begin after Sept. 30, that money won't be enough to make it through the next 12 months.
As a result, Hertz will pursue new financing schemes, including debtor-in-possession loans and vehicle financing options.
Out of gas
Hertz had tried to sell $500 million worth of stock in June, but the offer to sell what would have been virtually worthless stock drew the attention of the SEC, which made Hertz to withdraw the offer. That left Hertz still needing to raise money to survive, which is why it is now seeking these new avenues of funding.
Hertz typically makes most of its money, about two-thirds of the total, from airport car rentals. However, after the COVID-19 outbreak shut down air travel, rentals plummeted 82% from the year ago period.
Hertz began making the first of its monthly installment payments last month on $650 million in rent payments due on its operating leases. While it sold 100,000 vehicles in June and July to help cover those costs, the company needs to sell over 180,500 more vehicles by the end of the year.
The car rental giant reported losing an adjusted $587 million in earnings before interest, taxes, depreciation, and amortization in the second quarter, or $3.51 per share, much worse than Wall Street's forecast of a $2.33 per share loss.