For those who saw rental car giant Hertz’s bankruptcy filing as a way to get a good deal on a used vehicle because the company would be selling off thousands of vehicles, it may be time to get that checkbook ready.
Hertz Global Holdings Inc. met with its lenders and hammered out an interim $650-million deal that will allow it to proceed with the plans to sell off thousands of vehicles, as it looks to winnow down its expenses while going through the process. No plans for how the sales would be handled or when they would start was outlined.
The agreement calls for Hertz, which filed bankruptcy in May, to pay $650 million in cash in monthly installments for the rest of 2020. In return, it can sell off at least 182,521 leased vehicles between now and December. The company would have about 310,000 vehicles after the sell off.
The number of vehicles it plans to sell has risen since a filing last month in which the company said it wanted to sell about 144,000 vehicles during the restructuring process, according to the Wall Street Journal.
Before anyone begins calculating how fast the sale will get them out of bankruptcy, Hertz is only allowed to keep $900 from each car sold, the Journal reported, noting the company is attempting arrange $2 billion in new financing to help get through the bankruptcy.
Hertz also owns several rental-car brands, including Dollar and Thrifty, filed under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware. The company said in its filing it held assets of nearly $26 billion but also had debts of more than $24 billion.
The global COVID-19 pandemic has crushed the rental car business as travel is restricted and stay-home orders have been put in place across the U.S. The filing was only for its U.S.-based business. Franchise locations as well as its operations in Europe, Australia and New Zealand are not part of the restructuring.
Hertz and its investors and debtholders weren’t the only ones who are expected to be impacted by the bankruptcy filing. The long-time rental industry giant plans to effectively halt the purchase of new cars and light trucks for the foreseeable future, a move that will contribute to the sharp decline in the American market this year.
“We’re not going to be shipping cars to rental fleets for some time,” Mark LaNeve, Ford’s head of sales, services and marketing for North America, told TheDetroitBureau.com at the time of the announcement. He also noted that Hertz rivals such as Avis and Enterprise also are curtailing new vehicle orders, instead planning to continue using vehicles already in their fleets.
Rental car companies in general put a halt to buying new vehicles from all automakers in the U.S. It’s expected that full-stop measure will cut at least 1 million units, and potentially as much as 2 million, from the total sales volume for 2020.