Everyone knew that travel-related companies were going to be hit pretty bad because of this coronavirus pandemic. At the same time, many analysts and investors alike were expecting a number of companies to potential go bankrupt before everything ends. However, just before the weekend, investors were bombarded with a number of high-profile bankruptcy announcements that more than surprised many people on Wall Street.
Now, many are wondering how many more travel-related companies will end up going under in the weeks to come. One of them was Hertz (NYSE:HTZ), a major car-rental company, whose revenue has plummeted almost entirely due to the coronavirus.
Hertz filed for bankruptcy protection just before the weekend, entering chapter 11 proceedings after failing to come to a new agreement with its lenders regarding its financial situation. The car rental giant, which owns over 700,000 different vehicles that have been sitting idly by due to this pandemic, has confirmed that it has over $19 billion in debt with little ability to pay it off anytime soon.
While its easy to attribute this entirely due to the effects of COVID-19, the reality is that Hertz has been having problems even before this pandemic took place. Although a big name in the car rental industry, Hertz was still struggling against competitors like Avis as well as ride-sharing companies like Uber and Lyft. Nor is Hertz profitable, with the company reporting $58 million in net losses, the fourth year in a row that its year-end profits were in the red. The company has also gone through four new CEO’s in less than ten years, a pretty high turnover rate by chief executive standards.
Although many investors pushed these warning signs under the rug so to speak, Hertz has had operation problems for a while and has been trying to restructure its business for many years unsuccessfully. Its debt problems first started back in 2005, when a leveraged buyout by private-equity companies ended up saddling the company with billions in long-term debt that it couldn’t pay off. With the company failing to reach an agreement with its creditors before it had to go into bankruptcy protection, there’s a significant risk that Hertz could end up liquidating all of its assets, including its fleet of cars, to pay off its debt.
Shares plummeted down as much as 43% between Friday’s trading session as well as after-hours trading. With the future for Hertz seeming quite uncertain, the next question many investors are asking is which will be the next company to go under? Major airlines are also a big target to potentially go bankrupt, with many suspecting that American Airlines is next on the chopping block.
Hertz Company Profile
Hertz Global Holdings Inc operates an automotive vehicle rental service through the Hertz, Dollar, Thrifty, and Firefly brands. The company offers cars, crossovers, and light trucks for rent; ancillary products and services; rental of industrial, construction, and material handling equipment; and fleet-leasing and fleet-management services. The company operates a network of car rental locations and licenses its brands to associates and franchisees. The highest segment by revenue is the U.S. car rental unit. – Warrior Trading News
