A dragged-out post-lockdown recovery, a huge debt pile, and the potential for zero recoveries for unsecured creditors make the Hertz bankruptcy a likely liquidation, says Girish Bhise, founder and CEO at ValueAdd Research & Analytics Solutions, in a Seeking Alpha article.

In Bhise’s analysis almost 93% of Hertz's secured debt can be repaid, though the prolonged recovery of the travel industry will drag out the recovery of unsecured creditors’ debt.

Bhise lays out two potentially ugly scenarios: Hertz is likely a liquidation case as creditors opt to cut their losses, or it is a litigation case. “Given the painful and prolonged recovery ahead, we expect creditors to vote for liquidation and not incur further losses,” he writes in the article.

Given the sustained economic uncertainty, Bhise believes the car rental industry could face buyouts and consolidation. Yet he believes Hertz’s massive debt — which stood at $21.1 billion as of March 31 — inhibits a large player from buying Hertz.

While the pandemic accelerated the decline, Hertz’s issues started long before, Ghise writes.

Along with the oft-cited impact of ride hailing, Ghise also brings up Hertz’s struggles with its large reinvestment requirements to hold onto its market position, and problems to automate processes, including outsourcing digitalization to Accenture that “did not prove to be favorable for Hertz.”

Ghise cites Avis Budget Group’s ability to generate monthly revenue per unit of $1,157 per vehicle compared to Hertz’s $1,049 RPU, though Hertz’s utilization rate was 79% compared to Avis’s 71%.

While Hertz’s financial reorganization will provide an immediate lifeline through the initial stage of bankruptcy proceedings, “as the case progresses, (Hertz) may need additional funds to stay afloat,” Ghise writes.