‘Fire Sale’ of Hertz Rentals Poses Risk to Broader Auto Sector

(Bloomberg) -- The already-reeling used-vehicle market is hanging in the balance as Hertz Global Holdings Inc. negotiates with its creditors, a Benchmark Co. analyst said.

The rental-car company has been seeking leniency from lenders and U.S. government support to avoid a bankruptcy filing, Chief Executive Officer Kathryn Marinello said in an interview Wednesday. Hertz has missed lease payments related to the vehicles it rents out and has until May 4 to either make them or convince lenders to waive a potential default.

“The risk for the auto sector occurs if the creditors of the debt using the rental vehicles as security decide to liquidate the fleet to repay the bonds,” Benchmark analyst Michael Ward wrote in a report Friday. “A fire sale of a significant portion of the Hertz fleet could add to the price volatility in the used vehicle market.”

Used-car prices at auction have plunged since much of the U.S. economy began to shut down in mid-March. Values are expected to remain depressed for months as dealers and rental-car companies alike sell down inventory to adjust to lower demand.

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