Hertz Global Holdings Inc's share dropped almost 20 percent in after hours session on Monday following a story from The Wall Street Journal that the car rental firm hired an additional counselor to help with an imminent bankruptcy filing.
In the midst of a decline in demand with the coronavirus pandemic, the company engaged the services of FTI Consulting Inc. to guide on attempts to reorganize operations prior to filing, the study disclosed, citing people with knowledge of the issue.
Last month WSJ stated that Hertz had employed lawyers and investment bankers as advisors as the company seeks to renegotiate its $17 billion debt. Hertz's shares finished the day of daily trading up 2.3 per cent.
The car rental firm has been in discussions with some of its creditors on how to relieve their burden without going into bankruptcy, but talks have been difficult and the company is planning to file for Chapter 11 court protection, sources said.
Hertz could file on Tuesday, but if an agreement is not made Tuesday will be more likely. The situation could still change and a filing is not certain, the people said, requesting for anonymity regarding the confidential matter. A Hertz representative was not returning an email and calls requesting comment.
In the midst of the ongoing global health crisis and the large economic pullback, car-rental ridership is plunging into a cash burn at Hertz. At the same time, the funding costs of the business are spiking as a result of the rapid decline in the prices of used vehicles.
The missed lease payment has set off a grace period which expires on Monday. Hertz sought to win the consent of lenders to hold off any action against the company and to continue talks.
Revolving lender Barclays PLC partners with Latham & Watkins LLP, while a group of loan creditors has engaged financial adviser Houlihan Lokey Inc., and law firm Arnold & Porter Kaye Scholer LLP, sources disclosed.
The stock price of the company reflected these challenges: it swooned from its 52-week peak of almost $21 a share at end of February, just prior to the pandemic's impact and sent markets into freefall globally. Hertz's stock closed on Monday at $3.59 a share - and the news that FTI was brought in to advise on a bankruptcy filing sent it down to just below $3 per share after hours.
Hertz and other car rental companies had already lost market share even before the pandemic, as the rise of ride-sharing companies such as Uber and Lyft have slowly eaten away at their profits. Hertz ranked No. 331 on the Fortune 500 in 2019, up four positions from 2019.
