Hertz shares fall to record levels after "business continuity" warning issued as debt relief matures

"As such, management has concluded that there is real doubt as to the ability of the business to continue operating within one year from the date of publication of this quarterly report on Form 10-Q, "said the company.

Action
HTZ,
-9.09%

it fell 9.1% to $ 2.90, the lowest closing price since its IPO in November 2006.

10-Q was presented in conjunction with a first quarter report in which Hertz reported a higher than expected loss as the results were significantly affected by the COVID-19 pandemic. Revenues also fell more than expected.

"While my senior team and I have suffered economic shocks throughout our careers, the disastrous cost that COVID-19 has charged in the lives of our customers and in the travel industry is nothing to do with what we have experienced and the incredible speed with which it has happened, "said CEO Kathryn Marinello during the post-profit conference call with analysts, according to a transcript from FactSet.

And that did not improve after the end of the quarter. Marinello said the income trend went into a "free fall" in April, as almost all travel stopped, and the number of its used vehicles auctioned in the United States fell to " low records ".

The company had responded to the COVID-19 crisis by suspending some 16,000 employees as of March 30. "But with no way to predict the end of the crisis, we are forced to move 12,000 of these employees to permanent separation," said Marinello. This represents 32% of the 38,000 Hertz employees as of December 31.

Hertz's going concern warning and earnings report were released immediately after Hertz revealed in late April that some lease payments had been missed. Last week, Hertz said it had signed deals with most of its lenders to deliver it until May 22, before the company has to liquidate vehicles that serve as collateral.

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The company said on Monday evening that it could not guarantee that it could negotiate any relief on May 22. And in light of these "active discussions," Marinello said that "we will not answer questions" from analysts after preparing the comments.

Morgan Stanley analyst Adam Jonas said Hertz's "lack of transparency" contrasts with rival Avis Budget Group Inc.
CAR,
-6.69%,
It faces the same challenges, but responded with "high levels of financial transparency and stakeholder engagement", such as making its financial executives available for a series of calls. analysts.

"While we recognize the extremely difficult situation facing the car rental industry, the 1T Hertz conference call did not convey a sense of strategy … or a different route," wrote Jonas in a note to customers.

Jonas reiterated his underweight and stock price target of $ 2, implying a drop of 31% from current levels.

Hertz shares have fallen 84.5% in the past three months, while Avis shares have fallen 70.0% and the S&P 500 index
SPX
-2.05%

it decreased by 15.1%.