New York (CNN Business)Hertz has received a temporary lifeline from a group of its lenders, as it tries to find a way to survive near-zero travel during the Covid-19 pandemic.
The company had missed an April 27 payment due to a group of lenders who lease vehicles used in Hertz’s day-to-day United States rental car fleet. The one-week grace period for the payment expired on Monday, but the lifeline was extended.
On Tuesday morning, Hertz said that lenders had given it until May 22 “to engage in discussions … with the goal to develop a financing strategy and structure that better reflects the economic impact of the Covid-19 global pandemic and Hertz’ ongoing operating and financing requirements.”
Hertz’s ( stock fell 11% Tuesday and is down 80% this year. )
The company rents cars under the Hertz, Dollar, Thrifty and Firefly brands. Firefly is a discount brand outside the United States.
In total, the company has 568,000 vehicles and 12,400 corporate and franchise locations worldwide. About a third of those locations are at airports, and those locations accounted for two-thirds of Hertz’s revenue last year. That’s a problem given that the number of people flying through US airports is down about 95%, according to screening data from TSA.
A significant portion of Hertz’ non-airport business is renting cars to people who are having their vehicles repaired after accidents. But with so many people out of work or working from home, the miles being driven and the number of car accidents are also down significantly. Car insurers are voluntarily returning more than $7 billion, or between 15% to 25% of premiums, to their customers.
On April 14, Hertz notified 10,000 employees in North America that that they were losing their jobs, equal to about a third of the 38,000 employees in its US workforce. About a quarter of its US employees at the start of the year were represented by either the Teamsters or Machinists unions.
Hertz posted annual revenue of $9.8 billion last year, a record for the company, and its rental car revenue is comparable to that of rival Avis Budget Group. But Hertz has been having profitability problems that pre-date the Covid-19 pandemic. It posted a $58 million net loss in 2019, down from a $225 million loss in 2018.
Hertz was started in 1918 when founder Walter Jacobs bought 12 Model T cars. Five years later John Hertz purchased the company and renamed it. He also expanded the fleet of cars to 600. It began the nation’s first national rental network in 1925, and opened its first airport location at Chicago Midway Airport in 1932.