Hertz's new ownership has grand plans to remake the car rental firm. Over the next few years, you'll find out if that really happened depending on your experience at an airport car rental counter near you.
After shedding $5 billion of debt, car-rental firm Hertz has a chance to make the most of its opportunities under new ownership now that it is emerging from bankruptcy protection.
Hertz filed for Chapter 11 bankruptcy protection in May 2020, and is coming out of bankruptcy Wednesday, after a several-month bidding war and auction, under a $6 billion reorganization plan funded by Knighthead, Certares and Apollo.
“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, the outgoing chairman of the Hertz board of directors when the reorganization became official Wednesday afternoon,. “When the economy began to show signs of recovery earlier this year, we were perfectly positioned to drive a competitive process that would maximize recoveries. The result – paying our nearly $19 billion of creditors in full and returning substantial value to our shareholders — is remarkable.”
Hertz named eight board of director members, and said it would have the option to name three additional ones.
Greg O’Hara, the founder of Certares, is the board’s new chairperson, and Knighthead Capital co-founder Thomas Wagner will serve as vice chairperson. Other directors include Certares Senior Managing Director Colin Farmer; Knighthead partner Andrew Shannahan; Apollo partner Christopher Lahoud; TPG Capital Senior Advisor and former CEO of Ford Motor Company Mark Fields, current Hertz board member Vincent Intrieri; and Hertz President and CEO Paul Stone.
Hertz’s new ticker symbols starting July 1 will be HTZZ for common shares and HTZZW for warrants.
Coinciding with the restructuring, Hertz launched a cost-reduction program, “right-sized its fleet” both in the U.S. and internationally, managed to obtain concessions at some of its airport locations, and sold its Donlen fleet leasing business for $891 million, Hertz said in a statement.
Plans include using data tech to help reengineer what everyone agrees is a broken car-rental experience; investing in demand sensing and yield management, as well as fleet assignment capabilities, and to fix Hertz’s underperformance in distribution channels.
Certares, the private equity firm with a heavy footprint in travel, including American Express Global Business Travel, Liberty Tripadvisor, Latam Airlines with Knighhead, and Internova Travel Group, can play a role in using data insights from these far-flung travel assets to assist Hertz in planning for shifts in demand and traveler preferences.
Hertz may be able to take advantage of Certares’ ownership stakes across the travel industry. Tripadvisor is offering subscribers to its new Tripadvisor Plus discount program certain Hertz loyalty program benefits, and American Express Global Business Travel could conceivably deepen ties with the car rental firm.
Under the reorganization, Hertz now has $2.2 billion in global liquidity, and a $2.8 billion credit facility, which should give it the ability to invest in its business and to be opportunistic about acquisitions.
Hertz owns the Hertz, Dollar, Thifty, and Firefly car rental brands.
The long-term plan envisions a transition toward electric and alternate fuel vehicles in line with changes in customer tastes.
The reorganization plan sees creditors getting paid off, and shareholders receiving more than $1 billion in value. The $5 billion in debt that is being eliminated includes Hertz’s corporate debt to its European subsidiaries.
Hertz’s website claims the reorganization puts it in an advantageous position: “It provides a robust recovery and excellent value for all of our stakeholders – including our employees and customers as well as our investors, franchisees and business partners – and enables Hertz to emerge from the Chapter 11 process as a much stronger, more competitive company.”
Note: This story was updated to include Hertz’s official announcements about emerging from bankruptcy protection, and the composition of the new board of directors.
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Photo credit: A Hertz car rental shuttle on July 10, 2010 in Los Angeles. The company is emerging from bankruptcy protection. Atomc Taco / Flickr.com