Liquidity Concerns for Hertz and Avis

The current pandemic has severely impacted the transport sector, leading to liquidity concerns for companies like Hertz and Avis. Both companies have unique corporate structures with term loans, revolving credit facilities, and senior unsecured notes. However, their securitization structure, where fleet vehicles are held, poses a risk due to the plummeting prices in the second-hand car market. This threatens the minimal collateral value needed to maintain the structure. To mitigate this risk, both companies have been providing credit enhancement in the form of letters of credit.