Buying stock in bankrupt companies is risky because the rules require that all bondholders, suppliers and other creditors must be fully repaid before shareholders can get anything back, which rarely happens. Hertz has pledged to alert buyers about their potential wipe-out.
“They’ve all been given the warnings. If people want to buy it, fine,” said
Hertz asked for the sale after a nearly tenfold increase in its stock from 56 cents on May 26 to $5.53 on Monday. The stock has slid since then, falling to $2.60 in late New York trading after the ruling. Hertz attorney
“We are trying to move very swiftly,” he said.
Lauria and other lawyers acknowledged during the hearing that the move to sell stock led by Jefferies LLC is probably unprecedented. Hertz told the Wilmington, Delaware court it would warn buyers that “the common stock could ultimately be worthless.”
No one knows yet whether that will come true, Walrath said during a Zoom hearing watched by more than 200 people.
“It is not clear where the fulcrum security is and what enterprise value” of Hertz will be, Walrath said. Selling stock is an inexpensive way to help finance the bankruptcy case, Walrath said.
A committee of unsecured creditors -- those who stand near the back of the line to get repaid -- support the share sale because it still could bring in about $500 million, attorney
Several sets of unsecured Hertz bonds soared after the ruling, with the
Meanwhile, the New York Stock Exchange staff is starting proceedings to delist Hertz’s stock, the company
Hertz and its law firm, White & Case, have been running an aggressive bankruptcy strategy so far, said
“They are trying to have their cake and eat it, too,” Brendel said. “They want the master lease for the cars they want to keep and not think any more about the cars they want to reject.”
The case is The Hertz Corp., 20-11218, U.S. Bankruptcy Court for the District of Delaware.
(Upodates with lawyer comment in the fourth paragraph.)
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