Hertz Global Holdings has considered selling it’s Donlen leasing business if it can get at least $1 billion and has several buyers interested in the fleet management company, chiefly private equity funds, according to a report from Bloomberg.
Hertz Global Holdings announced on May 22, 2020 that the company and certain U.S. and Canadian subsidiaries filed for Chapter 11 bankruptcy. Bloomberg said that Hertz views Donlen as nonessential to its core rental business and is considering selling it to satisfy some debt obligations and enable the company to more easily raise debtor-in-possession financing, said people familiar with the matter.
“The impact of COVID-19 on travel demand was sudden and dramatic, causing an abrupt decline in the company's revenue and future bookings,” the company said when it first filed for Chapter 11 bankruptcy.
However, a final decision on pursuing a sale has not been made and these plans could change, according to Bloomberg. Following its filing for Chapter 11 bankruptcy on May 22, 2020, Hertz reached an interim settlement with debtors to suspend litigation related to the car rental company’s plan to reduce its leased fleet of rental cars, according to an SEC filing.
In 2011, Hertz purchased privately-held Donlen for $250 million, and has also assumed approximately $680 million of Donlen's outstanding fleet debt. Automotive Fleet spoke with Donlen’s former CEO Gary Rappeport in 2011 about why his family chose to sell the company, which, at the time, had been family-owned for 46 years.
“Much of this was driven around personal family reasons regarding health, estate, and taxes. We thought it was important to enter into this process while we had the time to select a great parent for the company. This was about addressing family estate issues; we knew if we waited, and if there were changes in law, we would have to address them as a reaction, rather than something planned. It was important to my dad and me that the company was not sold to a competitor. Both of us have spent our lives building this company and it was important that the company have a legacy that continues. This is what drove our decision,” Rappeport said in an interview with Automotive Fleeton Aug. 1 2011.
Hertz said that the transaction was part of the company's overall growth strategy to provide flexible transportation programs for corporate and general consumers.
“The acquisition of Donlen expands our portfolio of transportation solutions by giving Hertz an immediate leadership position in long-term car, truck and equipment leasing and fleet management for corporate customers who need scale and sophisticated fleet management services. This range of solutions from a single provider will make Hertz unique among its peers,” Mark P. Frissora, former chairman and chief executive officer of Hertz said at the time of the acquisition in an article from Automotive Fleet magazine.
