Delaware Chapter 11: The Hertz Corporation
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All Documents Can Be Accessed by Clicking the Case Title Immediately Above
CASE DETAILS
Link: Petition
On May 22, 2020 (the “Petition Date”), The Hertz Corporation (together with its direct and indirect subsidiaries, the “Company”) and twenty-nine of its affiliates (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The Debtors are represented by White & Case LLP as lead counsel and Richards, Layton & Finger, P.A as Delaware counsel. The case has been assigned to the Honorable Mary F. Walrath. A hearing on the Debtors’ first day motions was held on May 27, 2020. The response date for the committee questionnaire is Wednesday, June 3, 2020 at 4:00 pm.
ABOUT THE DEBTORS
Link: Affidavit in Support
Headquartered in Estero, Florida, the Company is a leading provider of vehicle rentals around the world, serving customers under the Hertz, Dollar, Thrifty, and Firefly brands. The Company and its franchisees operate 12,400 car rental locations across North America, Europe, Latin America, Africa, Asia, Australia, the Caribbean, the Middle East, and New Zealand. During the year ended December 31, 2019, the Company operated a peak rental fleet of more than 770,000 vehicles. The Debtors’ 1,600 U.S. and 2,000 international airport locations, which are a minority of their total locations, account for the majority of their rental revenue. In addition to their vehicle rental businesses, the Debtors offer leasing and fleet management services through a subsidiary Debtor, providing a variety of fleet services to North American companies.
As of the Petition Date, the Company employs approximately 24,000 individuals around the world, of which over 15,700 are employed in the U.S. (1,700 of which are on leave or furloughed) and approximately 1,350 are employed in Canada (850 of which are on furlough). The Debtors also have thousands of employees who are members of a labor force union or work council, and are subject to collective bargaining agreements. In the U.S. alone, the Debtors are parties to nearly 150 agreements with national and local unions.
With air travel at record highs in 2018 and 2019, the Company was prospering. It reported adjusted corporate EBITDA of $433 million and $649 million in those years, respectively, and, through the end of 2019, achieved ten consecutive quarters of year-over-year revenue growth. In March of 2020, however, the Company’s business was acutely impacted by travel restrictions and reductions brought about by the coronavirus pandemic. In April 2020 the Company’s global revenue was down 73% from what it was in April of 2019. Though the reduction in air travel, in particular, severely curtailed the Company’s core rental business, its off-airport business was similarly affected. In April, the Company saw approximately 50% drops in vehicle rentals by temporary vehicle replacement customers and rideshare drivers-two key off-airport customer segments. The crisis also subjected the Company to unanticipated demands on its cash reserves. The sharp reduction in used car values precipitated by the crisis burdened the Company with a substantial cash payment due April 27, 2020 in connection with its primary U.S. rental fleet financing arrangement. The Company elected not to consume its liquidity and did not make that payment. A short forbearance and waiver period allowed the Company to reach accords with creditors in Europe and Australia on additional waivers. However, it failed to yield a longer-term solution with the Company’s primary U.S. and Canadian creditor groups.
The Debtors commenced these cases with the goals of stabilizing their operations and developing a business plan and capital structure that is sustainable in the new reality. The Company has substantial unencumbered cash sufficient to fund operations at least through the initial stage of these cases, though it may seek access to additional cash as the case progresses.
FINANCIAL CONDITION
As of the Petition Date, the Company has approximately $19 billion in total financial debt through a variety of financing programs with third parties, $14.7 billion of which relates to vehicle financing ($13.93 billion of which is secured) and $4.348 billion to non-vehicle financing activities ($1.621 billion of which is secured). In addition, the Company has a total of $742 million outstanding among three letters of credit, $542 million of which is secured. The Debtors also list $3.1 billion in debt owed to their top fifty unsecured creditors in the Petition.
CASH COLLATERAL
Link: Cash Collateral Motion
As of the filing date, the Company had more than $1 billion in cash on hand. Depending upon the length of the COVID-19 induced crisis and its impact on revenue, the Company may seek access to additional cash, including through new borrowings, as the reorganization progresses. Although the Company negotiated short-term relief with its auto lease finance creditors, it was unable to secure longer-term agreements. Also, the Company sought assistance from the U.S. government, but access to funding for the rental car industry did not become available. As a result, the Debtors are seeking approval to access cash collateral encumbered by its secured creditors.
Related Significant First Day Motions Can Be Accessed by Clicking on the Links Below