Hertz clears one hurdle, faces new ones amid coronavirus pandemic

Hertz has cleared one hurdle.

Lenders have given the troubled car rental company more time to make up its missed lease payments to avoid a default, which could trigger the sale of much of its fleet.

The Estero-based company reported the good news in a regulatory filing Tuesday.

The company, however, still faces many hurdles — financially and legally — due to the severe impacts of the coronavirus pandemic.

One of its newest hurdles?

A federal lawsuit over its recent layoffs.

Arlean Green, a former employee from Tampa, has sued The Hertz Corp. in U.S. District Court in Fort Myers over its failure to provide advance notice of its massive layoffs a few weeks ago. She seeks class-action status to include thousands of laid-off workers affected by the sweeping job cuts.

In a regulatory filing April 20, Hertz announced workforce reductions in all departments affecting about 10,000 employees across the United States due to the coronavirus.

The layoffs took effect April 21 for union employees. Green and other non-union employees were let go April 14.

In case you missed it:Hertz cuts 10,000 employees amid coronavirus pandemic

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Green, who worked for Hertz at Tampa International Airport, accuses the company of violating the federal Worker Adjustment and Retraining Notification Act, which generally requires a 60 days' advance notice to employees — and the state — of mass layoffs.

In her lawsuit, Green claims Hertz didn't provide "as much written notice as was practicable," and didn't provide a reason for "reducing the notification to zero days" when the company knew it was suffering — after already furloughing many of its employees in mid-March nationwide.

A Hertz spokeswoman couldn't immediately be reached for comment about the suit, filed April 30.

The rules for notice have been muddied by the pandemic.

Paige Landrum, press secretary for the state's Department of Economic Opportunity, said in an email: "If a business is closing due to a natural disaster or unforeseeable business circumstance, the 60-day notice requirement is waived. Notice should be provided as soon as practicable in these circumstances."

If found in violation of the WARN Act, Hertz could be forced to provide back pay and benefits to the laid-off workers for each day of the violation — for up to 60 days.

Meanwhile, Hertz continues to fight for its survival. 

Default delayed

In a regulatory filing Tuesday, Hertz Global — parent of The Hertz Corp. — reported that it had signed forbearance and waiver agreements with a group of lenders that will delay a default on hefty debt tied to its rental fleet. 

Hertz said the lenders have given it more time to "develop a financing strategy and structure that better reflects the economic impact of the COVID-19 global pandemic."

The deadline for Hertz to develop the new strategy and structure is May 22 — and the company stated "there can be no assurances" of getting any more relief from its lenders after that date.

When Hertz missed the lease payments due on April 27, which are required by an operating lease, it stirred up fears of bankruptcy.

More:Hertz faces more financial troubles amid coronavirus pandemic

Hertz leases the vehicles used in its day-to-day rental car operations in the United States from its special-purpose vehicle finance subsidiary.

The company had until May 4 to make the missed payments, until lenders agreed to continue negotiations.

Hertz has looked to adjust its monthly payments on the vehicles as yet another way to conserve cash and cut costs in the short run.

In a recent email, Hertz spokeswoman Lauren Luster said: "As a result of the pandemic and the uncertainty about the timing and strength of a recovery, Hertz is taking aggressive actions to preserve liquidity to support its ongoing operations."

Those steps, she said, have included reducing expenses, deferring capital expenditures, and adjusting fleet levels and staffing based on the significant drop in travel demand.

The Wall Street Journal has reported that Hertz — with $17 billion in debt on its books — has hired multiple financial advisers to help it streamline its operations and prepare for a potential Chapter 11 bankruptcy filing, citing unnamed sources. 

Such a filing would allow the company to restructure its debts and to continue operating with some breathing room and relief until the situation with the coronavirus improves. 

In a recent interview with Bloomberg, Kathryn Marinello, Hertz's CEO, said the company is doing everything it can to save money and avoid filing for bankruptcy during the travel industry collapse.

“We are looking for the support of our lenders and banks,” she said. "We are also looking for government support. Yes, we can avoid bankruptcy."

Salaries restored

While the company continues to look for new ways to deal with its critical financial condition, in Tuesday's regulatory filing it revealed that it plans to restore the base salaries for senior leaders who voluntarily took pay cuts "as a protective measure" to reduce costs in late March.

Marinello, who gave up 100% of her base salary, has voluntarily agreed to take a 10% pay cut going forward. 

According to regulatory filings, Marinello earned more than $8 million in total compensation in 2018. That included a base salary of $1.45 million, which remains the same under a new employment agreement she signed in November.

In its filing, Hertz said that restoring most of the leadership's wages is recognition of the "magnitude of the effort that has already been undertaken and will continue to be necessary from critical employees to operate with reduced resources."

Like its competitors, the company has been reeling from the pandemic, which has curbed tourism and travel across the country — and the globe. Hertz's business has dropped off by about 80%. 

The coronavirus hit just as it appeared Hertz had turned the corner on its ambitious turnaround plan, stopping the company in its tracks.

The Hertz Corp. operates the Hertz, Dollar and Thrifty brands.

At the end of 2019, the company had about 38,000 employees worldwide, with about 1,100 of them based in Southwest Florida.