Hertz’ Seeks Bankruptcy Financing, Share Sale Failed

Hertz Global (HTZ) shares fell on Tuesday after the company’s announcement of seeking debtor-in-possession financing following its failed share sale plan.

Shares of Hertz were down nearly 2% to $1.65 on Tuesday.

The car rental company saw a flip in its plan to offer as much as $500 million in stock. It was only able to raise $29 million, hence, the need to seek new sources for cash.

Hertz previously said it would avoid raising money while still in talks of negotiating its debt load in the bankruptcy court, however, the weakening of the travel industry and other coronavirus related uncertainties caused the car rental company to go against its wish.

In June the company put a hold to its share sale plan due to a review being done by the Securities and Exchange Commission after stating in a public filing that the shares “could ultimately be worthless.” This came after the company said it would sell up to $1 billion in shares.

Prior to June, Hertz filed for bankruptcy on May 22. The company saw its shares rise in a threefold value. Hertz stock jumped 157% in the week that ended on June 5, making it the company’s biggest weekly percentage gain so far.

“The recent market prices of and the trading volumes in Hertz’s common stock could potentially present a unique opportunity for the debtors to raise capital on terms that are far superior to any debtor-in-possession financing,” the company said in a regulatory filing last month.

In its second-quarter results, Hertz reported a 67% decline in revenue, making a total of $847 million loss in the three-month period. Though the quarter was a rough one, the company said it had $1.4 billion in cash on hand which could be used to run the company. However, to fully finance operations, the company would require a recovery in demand in key markets, and an extension from creditors of waivers on car payments in parts of Europe and the U.K., according to its Monday’s filing.

The car rental company seeks extension exceeding September 30 to make payment on its Europe and U.K. fleets. It also plans to shrink its U.S. fleets by an additional 182,000 vehicles, after selling off 100,000 in June and July, to pay its $108 million debt to U.S. securities from July to December.