More than a year after the coronavirus (COVID-19) pandemic devastated its business, Hertz has emerged from bankruptcy under new ownership and with a new board of directors.
Under the bankruptcy deal, Knighthead Management, Certares Capital Management, and its co-investors are buying the bulk of Hertz’s equity for roughly $2.8 billion. Shareholders and bondholders backed a roughly $1.6 billion equity rights offering, while Apollo is purchasing $1.5 billion in preferred equity.
The newly reorganized rental car company is emerging from bankruptcy with significantly less debt. It got more than $5.9 billion from its new investors and has seen its stock rise above its fundamental value, thanks to retail traders organized on Reddit. As a result, Hertz says it has reduced its corporate debt by nearly 80% and significantly enhanced its liquidity to fund operations and future growth.
"Faced with the epic and unprecedented challenges presented by the COVID-19 pandemic, and unfazed by early leadership changes, we stayed focused on stabilizing the business and seizing opportunities to mitigate losses and create value for our stakeholders,” said Henry Keizer, chairman of Hertz's outgoing board of directors.
Implementing better practices
As part of its revamped operations, Hertz says it is intent on streamlining operations and improving the customer experience. It will employ technology to “optimize demand forecasting” to better manage its fleet of vehicles.
The company also plans to adopt other technology to smooth the rental process, including the launch of an app allowing customers to check in without standing in line.
When the pandemic hit in late March 2020, the travel industry came to a screeching halt, along with the rest of the economy. Hertz was the hardest-hit rental car company and filed for bankruptcy protection two months later.
As the pandemic continues to fade and Americans begin to travel again, Hertz and other rental car companies face new challenges -- having enough cars to meet demand. Because of the shortage of both new- and late-model used cars, some consumers have been turned away from the rental car counter.
The Wall Street Journal reports that the rental car shortage is especially severe in the most popular tourist destinations like Hawaii. With all cars booked well in advance, some visitors to the islands have resorted to renting personal vehicles from locals.