Hertz Global Holdings Inc. brought in restructuring advisers to rework the rental-car company’s debt amid a bleak outlook for business trips and vacations.
Management is seeking advice from restructuring bankers at Moelis & Co. on ways to boost liquidity and avoid filing for Chapter 11 bankruptcy, according to people familiar with the situation.
One of the options that has been under discussion with bankers is raising cash by issuing new debt, Bloomberg previously reported. The maneuver would need an amendment to a secured debt facility, the people said, asking not to be identified while discussing a private matter. The situation remains fluid and plans could change, depending on market conditions and federal support.
A representative for Hertz, based in Estero, Fla., declined to comment. Andrea Hurst, a spokeswoman for Moelis, declined to comment. Hertz has $1 billion in liquidity and no significant corporate debt maturities until June 2021, according a March 26 filing.
Revenue at Hertz has been squeezed as governments around the world instruct their residents to stay at home for all but essential travel. The company’s brands include Dollar, Thrifty and Firefly. With cancellations soaring and new bookings scarce, CEO Kathy Marinello has been consolidating locations, cutting staff and reducing capital spending to preserve liquidity.
The squeeze calls into question Hertz’s ability to manage its nearly $500 million of annual corporate interest expenses, Joel Levington of Bloomberg Intelligence said in a note.
More pressure will come from weak used car prices, according to S&P Global Ratings. That’s a problem because Hertz regularly retires and sells off thousands of older cars from its fleet, and the proceeds are needed to reinvest in new vehicles.
Bonds fall
Hertz’s loans and notes are trading at deeply distressed levels, with bonds maturing in 2024 falling to less than 30 cents on the dollar from around par as recently as last month. In credit markets, derivatives linked to the company are pricing in more than 95 percent odds of a default in the next three years.
“But we think it may be sooner than later — particularly since federal car-rental aid doesn’t appear to be forthcoming — to preserve liquidity and to help reorganize the company with a less-stressed balance sheet,” Levington wrote.
Elements of the potential financing deal were reported earlier by Reuters.
