A word on the Hertz Bankruptcy.

One of the most leveraged companies in one of the most impacted industries, managed to limp along and delay the inevitable for almost a full quarter. The Hertz filing is likely just the tip of iceberg…
I wrote previously that the velocity of change is much more difficult for companies to handle than the magnitude. Hertz had to deal with both. The travel industry has been one of the most impacted (velocity & magnitude) sectors during the COVID pandemic and response.
Hertz’s fleet of 700,000 vehicles, which are mostly rented from airports, has largely been idled due to the slow down in travel caused by the pandemic. Complicating the matter is the value of these assets are falling as vehicle sales slow and used car prices fall.
Hertz also has $21 billion in long term debt.
All of these factors combined into this bankruptcy filing came with lightning speed – relative to filings – adding Hertz to the short list of companies in the “no coupon club.”
Bankruptcy filings are going to be a lagging indicator. And there’s going to be more to come.