Hertz filed for bankruptcy protection on Friday in the US, but the move will not impact their New Zealand business.
The heavily indebted 102-year-old car rental company's business has been unable to withstand the coronavirus pandemic that has crippled global travel.
The Estero, Florida-based company's lenders were unwilling to grant it another extension on its auto lease debt payments past a Friday deadline, triggering the filing in US Bankruptcy Court in Delaware.
However, Hertz Asia Pacific vice president Eoin Macneill told the Herald the US bankruptcy would have no effect on Hertz in NZ and Australia at all, as they are a subsidiary of Hertz Corporation, which is completely separate to the US-based Hertz Global Holdings.
"The decision by Hertz Global Holdings and certain of its US and Canadian subsidiaries to voluntarily file for reorganisation under Chapter 11 in the United States Courts has no material impact on Hertz in Australia or New Zealand," Macneill said.
"It's business as usual for us in Australia and New Zealand. Our locations are open across both markets and we're ready to help you with your rental needs – whether for business or leisure purposes.
"All our reservation, loyalty and customer programmes continue to operate, including Hertz Gold Plus Rewards as well as our rewards, coupon and voucher programmes."
Macneill did add the Asia Pacific arm of the company has implemented a number of cost-cutting measures during the course of the Covid-19 outbreak.
"Since the pandemic began, we have undertaken a range of measures to reduce costs and ensure we keep the business as robust as possible in both markets," he said.
"We have cut all discretionary spending, reduced labour costs and sought new rental agreements with landlords. We have also been de-fleeting our network, and de-registering unused vehicles."
Hertz and its subsidiaries will continue to operate, according to a release from the company. Hertz's principal international operating regions and franchised locations are not included in the filing, the statement said. By the end of March, Hertz Global Holdings Inc. had racked up $18.7 billion in debt with only $1b of available cash.
Starting in mid-March, the company — whose car-rental brands also include Dollar and Thrifty — lost all revenue when travel shut down due to the coronavirus, and it started missing payments in April.
Hertz has also been plagued by management upheaval, naming its fourth CEO in six years on May 18.
"No business is built for zero revenue," former CEO Kathryn Marinello said on the company's first-quarter earnings conference call on May 12.
"There's only so long that companies' reserves will carry them."
In late March, Hertz shed 12,000 workers and put another 4000 on furlough, cut vehicle acquisitions by 90 per cent and stopped all non-essential spending. The company said the moves would save $2.5b per year.
But the cuts came too late to save Hertz, the nation's No 2 auto rental company founded in 1918 by Walter L Jacobs, who started in Chicago with a fleet of a dozen Ford Model Ts.
Jacobs sold the company, initially called Rent-A-Car Inc., to John D Hertz in 1923. In a note to investors in late April, Jefferies analyst Hamzah Mazari predicted that rival Avis would survive the coronavirus crisis but Hertz had only a 50-50 chance "given it was slower to cut costs".
On May 18, Hertz named operations chief Paul Stone as CEO and announced that Marinello would step down as CEO and from the company's board. Mazari called the step unusual just days before a potential bankruptcy filing.
He also noted that CEO changes have been common at Hertz since financier Carl Icahn entered the company in 2014. Icahn's holding company is Hertz's largest shareholder, with a 38.9 per cent stake in the company, according to FactSet.
Deutsche Bank analyst Chris Woronka credited Marinello with reigniting Hertz's revenue growth, writing in a note to investors that it rose 16 per cent in 2018 and 2019 combined.
Hertz's bankruptcy protection filing was hardly a surprise.
In its first-quarter report filed earlier in May with securities regulators, the company said it may not be able to repay or refinance debt and may not have enough cash to keep operating.
"Management has concluded there is substantial doubt regarding the company's ability to continue as a going concern within one year from the issuance date of this quarterly report," it said.
Under a Chapter 11 restructuring, creditors will have to settle for less than full repayment, but the company is likely to continue operating. Hertz isn't the first struggling company to be pushed into bankruptcy by the coronavirus crisis. The company joins department store chain JC Penney, as well as Neiman Marcus, J Crew and Stage Stores.