Car rental giant Hertz files for bankruptcy protection with $19BILLION of debt after share prices plummet and 10,000 staff are laid off amid the coronavirus pandemic

Car rental company Hertz filed for Chapter 11 on Friday after failing to reach a standstill agreement with its top lenders.  

The Wall Street Journal reports that Hertz has roughly $19billion of debt. 

That staggering amount is made up of '$4.3billion in corporate bonds and loans and $14.4 billion in vehicle-backed debt held at special financing subsidiaries'.

Florida-based Hertz began bankruptcy protection proceedings in the U.S. Bankruptcy Court in Wilmington, Delaware, in an attempt to avoid a forced liquidation of its vehicle fleet after bookings dropped off overnight due to the coronavirus pandemic.

'Today's action will protect the value of our business, allow us to continue our operations and serve our customers, and provide the time to put in place a new, stronger financial foundation to move successfully through this pandemic and to better position us for the future,' Chief Executive Paul E. Stone said.

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Car rental company Hertz filed for Chapter 11 after failing to reach a standstill agreement with its top lenders, The Wall Street Journal reports

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Hertz's Chief Executive Kathryn Marinello (pictured) was replaced on Monday by then- executive vice president Paul Stone

Hertz is the second-largest car rental company in the US, with around 770, 000 vehicles in its fleet - but they do not own the automobiles outright, and instead lease them through 'separate financing subsidiaries' 

The company - which also operates the Dollar and Thrifty brands - had been holding talks with creditors after skipping significant car-lease payments due in April.  

Forbearance and waiver agreements on the missed payments were set to expire on May 22. Hertz has about $1billion of cash. 

The size of Hertz’s lease obligations have increased as the value of vehicles declined because of the pandemic. 

In an attempt to appease creditors, Hertz has proposed selling more than 30,000 cars a month through the end of the year in an effort to raise around $5billion, a person familiar with the matter said. 

Hertz’s woes are compounded by the complexity of its balance sheet, which includes more than $14billion of securitized debt. 

The proceeds from those securities finance purchases of vehicles that are then leased to Hertz in exchange for monthly payments that have risen as the value of cars fall.

Hertz also has traditional credit lines, loans and bonds with conditions that can trigger defaults based on missing those lease payments or failing to meet other conditions, such as delivering a timely operating budget and reimbursing funds it has borrowed.  

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Hertz is the second-largest car rental company in the US, with around 770, 000 vehicles in its fleet. Rental cars are shown parked at Los Angeles' Dodgers Stadium on Friday

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A drone photo shows hundreds of rental cars parked at Dodgers Stadium due to lack of travelers, who usually rent the cars at airports

The bankruptcy filing makes Hertz one of the most prominent US companies to default amid the coronavirus pandemic. Clothing brand J. Crew and department stores Neiman Marcus and JCPenney have also declared bankruptcy in the past month. 

Hertz' international operating regions including Europe, Australia and New Zealand were not included in the U.S. proceedings, the company said. 

The company had about 38,000 employees worldwide at the end of 2019.      

The Wall Street Journal reports that the company has hired FTI Consulting Inc. as a restructuring advisor.

Car-rental companies have been hit hard by the COVID-19 outbreak, as travel plummets and people shelter in place. Shares of Hertz have fallen 75 per cent this year - and dropped a further 7.5 per cent on Friday.  

Last month, the company laid of 10,000 North American employees amidst the crisis. 

At the time, Hertz's Chief Executive Kathryn Marinello said the pandemic had caused 'a major business disruption as global travel demand dropped to almost zero and the U.S. used-car market effectively shut down.' 

On Monday, Marinello - who was the third CEO since 2010 - was replaced by the company's executive vice president Paul Stone.  

The firm's largest shareholder is billionaire investor Carl Icahn, who has a nearly 39 per cent ownership stake. 

Hertz earlier signaled it could avoid bankruptcy if it received relief from creditors or financial aid the company and its competitors have sought from the U.S. government. 

The U.S. Treasury has started assisting companies as part of an unprecedented $2.3 trillion relief package passed by Congress and signed into law.

A trade group representing Hertz, the American Car Rental Association, has asked Congress to do more for the industry by expanding coronavirus relief efforts and advancing new legislation targeting tourism-related businesses.

Even before the pandemic, Hertz and its peers were under financial pressure as travelers shifted to ride-hailing services such as Uber.

To combat Uber, Hertz had adopted a turnaround plan, aiming to modernize its smartphone apps and improve management of its fleet of rental cars.

Hertz traces its roots to 1918, when Walter Jacobs, then a pioneer of renting cars, founded a company allowing customers to temporarily drive one of a dozen Ford Motor Co Model Ts, according to the company’s website.