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Hertz’s road to recovery: analyzing financial struggles and opportunities

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Hertz Corporation has faced a string of operational challenges and financial setbacks. The April 9th Octus webinar explored these issues and potential paths forward in rich detail. Moderated by Krishan Sutharshana, Senior Distressed Debt Analyst, the session also featured expert insights from Julian Bulaon (Head of Liability Management – Americas Covenants), Justin Spuma (High Yield Credit Analyst), and Catherine Schwartz (Primary Reporter). Together, they painted a comprehensive picture of Hertz’s situation while presenting actionable solutions through a hypothetical Liability Management Exercise (LME).

Key takeaways included:

  • Hertz’s operations are under strain due to elevated vehicle depreciation, cash burn, and capital structure challenges. Missteps such as accumulating a significant electric vehicle (EV) fleet exacerbated these issues, leading to higher costs and limited customer demand, particularly as EV residual values declined.
  • Recent tariffs have added complexity. While they may boost used vehicle prices (a potential fleet equity tailwind), they cannot offset Hertz’s near-term liquidity challenges, $350 million in potential litigation payout, and $160 million in increased cash interest.
  • A hypothetical LME, outlined by the panelists, leverages greater covenant flexibility to address upcoming maturities in secured and unsecured debt, allowing Hertz to extend its runway while pursuing operational improvements.

Crucially, the experts engaged in discussions about market sentiment, investor expectations, and structural protections in debt agreements, addressing whether an LME or bankruptcy was the likeliest outcome for the company. Julian highlighted the covenant nuances that could allow Hertz to pursue asset transfer strategies, while Justin offered insights on Hertz’s competition with Avis and pricing pressures within the rental car industry. Catherine brought market color, underscoring creditors’ skepticism about Hertz’s ability to recover without restructuring.

Missed the session? Watch the replay and access detailed slides through the Octus Media page linked in the QR code at the webinar’s conclusion.