Hertz is preparing to file for bankruptcy imminently if the company fails to rework its debt and can't get lenders to extend a grace period on a missed payment.
The car rental company has been talking to some of its creditors about how to ease its burden without going through bankruptcy, but negotiations have been a struggle and the company is preparing to file for Chapter 11 court protection, according to sources.
The deadline was Monday and Hertz could file on Tuesday if a deal wasn't reached. The situation could still change and a filing isn't definite, said the sources. A representative for Hertz didn't return an email and calls seeking comment.
A Chapter 11 filing would permit Hertz to stay in business while it works out a plan to pay its creditors and turn the business around. The company expanded its roster of advisers to include FTI Consulting, which specialises in restructuring and bankruptcy cases, the sources said, confirming an earlier report by the Wall Street Journal.
Sweeping travel restrictions tied to the Covid-19 outbreak and the global economic collapse have hammered revenue, particularly in the car rental business. While the US government has a $50 billion (Dh183.6bn) bailout plan for airlines, Hertz hasn't been able to access that programme, and its chief rival, Avis Budget Group, had a stronger balance sheet going into the crisis.
The Florida-based company had been negotiating with lenders for relief as well as with the US Treasury Department about the possibility of a bailout. But with dismal demand, a too-big fleet and plunging prices for used cars, Hertz didn't have enough liquidity to last until a market recovery.
Hertz began laying off workers to preserve cash in March as the travel restrictions cut deep into sales. By April 29, Hertz disclosed that it had missed substantial lease payments related to its rental cars. Creditors gave Hertz until May 4 to come up with a solution, and chief executive Kathryn Marinello said in an interview at the time that Hertz was doing everything it could to preserve cash and get leniency from lenders to avoid going bankrupt.
Hertz, originally known as Rent-a-Car, was founded in Chicago in 1918. It was operating 12,400 locations worldwide as of February, according to a filing.