NEW YORK: Months before the irrational trading in GameStop Corp, there was Hertz Global Holdings Inc.
Operating under bankruptcy protection last spring once the COVID-19 pandemic wiped out its business, the car-rental giant confronted an extraordinary situation: Its stock price was skyrocketing for no apparent reason.
Conversations at the time among Hertz management and directors on its board, reported here for the first time, turned from shock to a vigorous debate about whether the company should capitalize on its unexpected good fortune and sell shares to fund itself during bankruptcy proceedings, according to three people familiar with the deliberations.
Raising money through a share sale would be less expensive for Hertz, which was bleeding cash as travel and car rentals plunged, than tapping a costly bankruptcy loan that most companies in its situation use to navigate court restructurings. Directors keen on selling shares fended off concerns from some in Hertz’s C-suite and boardroom that such a move risked misleading investors who failed to appreciate that creditors are always paid first in bankruptcy, two of the sources said. – Agencies
