The Hertz saga is far from over, but there’s light at the end of the tunnel as, according to Fox Business, the company has secured commitments for $1.65 billion (£1.28 billion / €1.41 billion) in debtor-in-possession financing.
While the financing is contingent on the approval of the U.S. Bankruptcy Court for the District of Delaware, the beleaguered rental car giant has big plans for its funding.
Up to $1 billion (£774 / €853 million) could be used to provide equity for vehicle acquisition in the United States and Canada. While it sounds odd that a bankrupt company would want to buy new vehicles, Hertz has previously said they want to “welcome customers back with new vehicles” when travel returns to pre-pandemic levels.
Buying new vehicles also helps keep Hertz’s fleet competitive, while also ensuring customers return and remain happy. That’s important in the long term and Hertz was recently named #1 in Rental Car Customer Satisfaction by J.D. Power, despite these “very challenging and unusual times.”
A large portion of the remaining funds, up to $800 (£619 / €683) million, would be used for working capital and general corporate purposes. This would ideally buy the company time to wait for the coronavirus pandemic to subside and travel to return to normal.
A court hearing is scheduled for October 29th and Hertz CEO Paul Stone said: “This new financing will provide additional financial flexibility as we continue to navigate the pandemic’s effects on the travel industry and take steps to best position our business for the future.”
The news sent Hertz’s stock soaring as it closed at $2.50 (£1.94 / €2.13) on Friday. That’s admittedly just a fraction of what it used to be before the pandemic, but it was a one day increase of 142.72%.