A car-rental company previously owned by Hertz just filed for bankruptcy for the third time since 2008
by Rachel Premack, Business Insider US
- The car-rental industry has seen yet another bankruptcy.
- Advantage Rent A Car, previously owned by Hertz, filed for bankruptcy on Wednesday.
- The intertwined stories of Hertz and Advantage, featuring Canadian distressed-debt investors and pro-competition American regulators, reveal how dozens of blunders sank both firms into bankruptcy.
- Visit Business Insider’s homepage for more stories.
A former subsidiary of Hertz just went bankrupt, claiming more than $500 million in debt.
Advantage Rent A Car, which was founded in 1963 in San Antonio, Texas, filed for Chapter 11 protection on Wednesday. The news comes less than a week after its former parent company Hertz declared bankruptcy, carrying some $19 billion of liabilities.
Along with Hertz, the economic slowdown stemming from the coronavirus pandemic has brought down big names like J.C. Penney and J. Crew.
But none of these companies were flourishing before the pandemic – including Advantage, which has a few dozen locations across the US. Wednesday marks the third time since 2008 that Advantage has filed for bankruptcy.
For these companies, their problems stem far before 2020. The entangled stories of Hertz and Advantage, the former of which was once America’s No. 2 largest car rental company, shows how years of blunders and missteps placed both firms in a tenuous space by the time that the pandemic hit.
Bankruptcy, take one
Advantage went bankrupt amid the global economic recession in 2008. The following year, Hertz bought Advantage for $33 million.
But, by 2013, Hertz was eyeing a purchase of Dollar Thrifty Automotive Group, which was then the fourth-largest rental car business in the US. Hertz, in one of the many strategic blunders it made in the 2010s, decided to get rid of its stake in Advantage, who might otherwise turn down the Dollar Thrifty acquisition.
The acquisition went through, but perhaps not to Hertz’s advantage. Dollar Thrifty, also pursued by Avis, ultimately cost Hertz $2.3 billion. After Hertz bought Dollar Thrifty, leadership quickly raised cash by selling its own debt in the form of asset-backed securities – cars, in this case.
Bankruptcy, part two
A panoply of shoddy financial decision making brought Hertz to its knees. Meanwhile, Advantage filed for bankruptcy again in December 2013 because it was leasing its own vehicles from Hertz.
Catalyst, a private equity firm that specializes in distressed debt deals, ultimately took over Advantage in 2014. Hertz paid Canada-based Catalyst $2.75 million to take Advantage off its hands, and Catalyst agreed to forgive some $46 million of Advantage’s debt.
And yet another bankruptcy
Six years later, Advantage’s debt has more than ten-folded to $500 million. “The rental car industry is a disaster right now because of the whole travel industry,” Michelle Krebs, executive analyst for Autotrader, told The Detroit Free Press.
It’s unclear if, after yet another bankruptcy and global recession, if Advantage will soldier on – but history is bizarrely on their side.
Do you work in the rental car industry? Share your experience with rpremack@businessinsider.com.
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