Advantage Rent A Car to File for Bankruptcy Amid Lagging Revenues
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Advantage Rent A Car to File for Bankruptcy Amid Lagging Revenues

November 7, 2013

By: John Clark

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Advantage Rent A Car, which has been subject to a complex series of corporate transactions in recent years, is planning to file for bankruptcy help, according to a report this week from the Chicago Tribune.

Sources say the company, which was spun off from Hertz Global Holdings Inc. in an attempt by Hertz to purchase Dollar Thrifty, recently lost its contract with Hertz that provide cars for Advantage’s fleet. This move proved too much for the rental car company to handle.

This week, Hertz reportedly terminated its lease agreements on a fleet of 24,000 Advantage rental cars, after claiming that the owners of Advantage had repeatedly failed to make rental payments on the cars.

The situation was made more tense by the company’s history, as Advantage used to be owned by Hertz until the latter company sold Advantage to Franchise Services of North America (FNSA) after being hounded by antitrust authorities who claimed Hertz’s market share had grown too large.

The move allowed Hertz to purchase a rival discount rental company, Dollar Thrifty, after appearing antitrust authorities, according to sources. As part of the deal, Advantage Rent A Car agreed to lease its vehicles from Hertz, but the newly spun off company was unable to make its rental payments.

And Advantage’s recent bankruptcy filing has already had a ripple effect on the industry. Sources say Hertz’s stock fell by nearly 20 percent this week after bankruptcy documents revealed that the company had inflated the book value of the cars it leased to Advantage.

In addition, the bankruptcy could have an effect on travelers across the country, as Advantage has lots in 33 states, and rents cars at airport locations in 60 of the 70 largest markets in the United States.

The filing has also trigged a battle between Hertz and FNSA, as FNSA believes Hertz has failed to provide the owner of Advantage accurate information about the value of its rental fleet.

In a tersely worded statement, an FSNA official said, despite repeated requests, “Hertz has not yet provided the company with such information notwithstanding the view of the company that Hertz is contractually obligated to do so.”

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