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Advantage Rent A Car to File for Bankruptcy After Hertz Cancels Lease Agreement

Advantage Rent A Car LogoIt looks like yet another car rental company will be filing for bankruptcy. Advantage Rent A Car is filing for bankruptcy after Hertz announced that it terminated the company’s lease agreement to provide cars to Advantage Rent A Car. Without this lease agreement, Advantage Rent A Car simply does not have enough cars to run its business.

After this announcement was made, shares for Hertz fell more than 17 percent. Of course, this decline in shares came after Advantage Rent A Car said that the booking value of the cars that were being supplied to them by Hertz last year was too high.

Either way, Hertz has cancelled its agreement to supply Advantage Rent A Car with more than 24,000 vehicles. This announcement was made on Thursday. Thus, within just a few days from Hertz cancelling this agreement, Advantage Rent A Car has decided to throw in the towel.

Of course, Hertz should not be able to cancel the agreement without just cause. According to Hertz, Advantage Rent A Car failed to make some payments for the leased cars. This was grounds for termination of the lease deal. As a result, the contract can be cancelled without Advantage Rent A Car being able to press charges.

Hertz used to own Advantage Rent A Car, but last year it sold the subsidiary to Franchise Services of North America. This was required by law to satisfy antitrust concerns about Hertz’s takeover of Dollar Thrifty. Simply Wheelz, which is a part of Franchise Services of North America that does business as Advantage Rent A Car, said its lease of the cars from Hertz was part of this agreement. It recorded a huge $8.6 million loss on the cars that it sold from its fleet since last June. This was a huge difference from the booking value that was given by Hertz.

Franchise Services of North America released a public statement saying that despite many inquiries, Hertz has yet to give the company the information that it has requested. Hertz, by law, is required to give this information when requested. Due to this, Franchise Services of North America has not been able to precisely determine its potential loss because of the nature of the fleet of cars that was on lease from the car rental giant. Hertz, however, says that these allegations are without any kind of merit. At this point, it is hard to tell which side is being truthful and which side is just trying to cover themselves.

Franchise Services of North America did say, however, that it is in talks with three other groups for the sale of Advantage Rent A Car. It is interesting to note that Hertz did make a proposal to complete a sale under a “proposed insolvency of Simply Wheelz.” This proposal was completely rejected by Franchise Services of North America, though, because it believes that it can get a higher price.



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