Hertz Global Holdings Inc. is on the hunt for a bankruptcy loan totaling as much as $1.5 billion after regulators blocked the rental car company from pursuing a sale of what likely would be worthless stock, according to people familiar with the matter.
Hertz this week reached out to existing creditors, as well as potential outside investors, for a debtor-in-possession loan sized at $1.1 billion to $1.5 billion, the people said. Hertz didn’t respond to requests for comment.
The car rental company sought chapter 11 in May without a deal with creditors and without a bankruptcy loan to fund its business, unusual for a company of Hertz’s size saddled with roughly $19 billion in debt. At the time, the company’s finance chief said Hertz had enough cash on hand to fund its operations at least through the initial stage of the case.
But as the company’s bankruptcy case drags on amid the continuing coronavirus pandemic fallout on travel, the need for financing has become more acute.
WSJ Pro Bankruptcy reported earlier that Hertz was in talks with its lenders to obtain financing that would help keep it afloat during bankruptcy.
Hertz’s need for cash became more critical after the company pulled the plug on its plan to raise up to $500 million through the sale of its stock during the reorganization.
The company had tried to capitalize on a speculative frenzy fueled by risk-hungry day traders, believing it was a golden opportunity to raise inexpensive capital to cover its bills in chapter 11 proceedings that are often expensive.
Estero, Fla. -based Hertz raised $29 million selling its likely worthless stock before the SEC dissuaded it from selling more.
Now the car rental company needs cash to keep its doors open through the fall as the Covid-19 pandemic continues to play havoc with the world-wide travel industry.
Hertz lost a total of $852 million over the three months ended June 30, according to a securities filing.
Complicating matters is the fact that Hertz doesn’t own its rental car fleet, and can’t pledge those assets as collateral to lenders. Hertz bondholders have the rights to the vehicle fleet, so collateral securing a DIP loan would be derived from its operating business itself, including its trademarks, intellectual property, customer systems and concessions at airports throughout the country.
Soma Biswas contributed to this article
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