"The impact of Covid-19 on travel demand was sudden and dramatic, causing an abrupt decline in the Company's revenue and future bookings", Hertz said in a press release. Its worldwide operating regions including Europe, Australia and New Zealand were not included in the United States proceedings, the company said.
In an attempt to appease creditors holding asset-backed securities that finance its fleet of more than 500,000 vehicles, Hertz has proposed selling more than 30,000 cars a month through the end of the year in an effort to raise around US$5 billion, a person familiar with the matter said.
"No business is built for zero revenue", former CEO Kathryn Marinello said.
Chapter 11 is a mechanism that allows a company that is no longer able to repay its debt to restructure itself without creditors.
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". Mazari called the step unusual just days before a potential bankruptcy filing.
However, there is the possibility that lead shareholder Carl Icahn could rescue the company as he looks to protect his $1.6 billion investment that is now valued at $170 million, sources told Bloomberg.
That's because, according to a story from The Wall Street Journal, the rental auto company could be filing for bankruptcy "as soon as this weekend".
Hertz is preparing to file for bankruptcy this weekend after failing to reach an agreement with lenders, The Wall Street Journal reported Friday.
"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.
Hertz has until Friday to make about $400 million in lease payments for its fleet of vehicles or extend a forbearance agreement with its creditors, the news outlet reported. The company joins department store chain J.C. Penney, as well as J.Crew and Stage Stores.