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Hertz Global Holdings Inc. filed for bankruptcy in Delaware after sweeping travel restrictions and the global economic collapse destroyed demand for its rental cars.
The Chapter 11 filing allows the company to keep operating while it devises a plan to pay its creditors and turn around the business.
The second-largest U.S car-rental company began laying off workers to preserve cash in March as emergency measures to contain the coronavirus halted business and leisure travel. Hertz disclosed on April 29 that it had missed substantial lease payments related to its rental cars. It named a new chief executive officer in May — its fifth since 2014.
The Estero, Florida-based company had been negotiating with lenders for relief as well as with the U.S. Treasury Department about the possibility of a bailout. But with dismal demand, an oversize fleet and plunging prices for used cars, Hertz didn’t have enough liquidity to last until a market recovery.
While all travel-related companies have been hurt by the pandemic, a big part of what’s weighed on Hertz is its strategy of owning or leasing a large portion of its fleet outright instead of acquiring them through buyback agreements with manufacturers. Hertz typically responds to falling demand by selling cars from its fleet, so it has been hit especially hard by a drop in prices at used car auctions.
— With assistance by Esha Dey
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