Hertz Hits Another Pothole
If the corporate history of Hertz over the last five years were a movie, it would be a high-stakes thriller where the protagonist keeps narrowly escaping a burning building only to realize they left their car keys inside. After a triumphant return from bankruptcy and a very loud, very expensive bet on electric vehicles, the rental giant is once again finding itself in the crosshairs of financial analysts. S&P Global recently took a long, hard look at the books and decided that a B minus rating was the most appropriate way to describe the current state of affairs.
The downgrade from a B to a B minus might seem like a small alphabetical shuffle, but in the world of corporate credit, it is a signal that things are getting uncomfortably tight. S&P cited a few major reasons for the move, none of which involve a happy ending. First on the list is a 340 million dollar litigation settlement expected to hit in the first quarter of 2026. When you are already dealing with a less than adequate liquidity position, writing a check for a third of a billion dollars is like trying to fix a leak in a boat by drilling another hole to let the water out.
The root of the struggle continues to be the hangover from the company's aggressive pivot toward EVs under previous leadership. While the dream of a silent, high-tech rental fleet sounded great in a PowerPoint presentation, the reality of plummeting used EV values and high repair costs turned that dream into a financial nightmare. Hertz has been aggressively offloading its Tesla and Polestar inventory for months, but the damage to the balance sheet is persistent. Every time they sell one of those cars for less than they expected, it eats into the capital they need to refresh the rest of the fleet with the internal combustion cars people actually want to rent.
Adding to the complexity is a general oversupply in the rental industry and an uncertain pricing environment. When every rental company has too many cars on the lot, they start slashing prices to keep the wheels turning, which is great for the person landing at LAX but terrible for the company trying to pay down billions in debt. S&P noted that while air travel demand remains resilient, the profitability Hertz expected to see in 2025 simply did not materialize fast enough. They are now looking at 2026 and 2027 as transition years, which is corporate speak for we are going to be in the weeds for a while.
The liquidity situation is the most pressing concern. S&P pointed out that Hertz’s available cash and credit lines are expected to dip below the 1 billion dollar mark later this year. To counter this, the company is looking at every possible way to raise cash, including issuing more debt or selling and leasing back its real estate. It is a bit like pawning your watch to pay for the gas to get to work. It works in the short term, but eventually, you run out of things to pawn.
For the average consumer, this mostly means you will continue to see a fire sale of former rental units hitting the used market. If you are brave enough to pick up a high-mileage EV that has been through the literal ringer of the rental circuit, there are deals to be found. However, before you sign your life away on a car that spent three years being driven like it was stolen by vacationers, you might want to run a report through Price360. Their AI-powered visual inspection can spot the fender benders and parking lot battle scars that a standard history report might miss. It will not tell you if the previous renter treated the motor like a suggestion, but it will certainly tell you how much those dented panels are going to cost to fix.
Hertz is a resilient beast, having survived a full bankruptcy once already. They are currently focusing on diversifying into off-airport rentals and rideshare partnerships to stabilize the ship. But as this downgrade shows, the path back to a healthy balance sheet is paved with expensive lessons. For now, the rental giant is just trying to keep the engine from stalling while it navigates one of the most difficult financial stretches in its long history.
