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Hertz files for U.S. bankruptcy protection as car rentals evaporate in pandemic

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A sign in front of a Hertz rental car office on August 8, 2017 in San Francisco, California.

Justin Sullivan | Getty Images

The more than a century old car rental firm Hertz Global Holdings filed for bankruptcy protection on Friday after its business all but vanished during the coronavirus pandemic and talks with creditors failed to result in needed relief.

Hertz said in a U.S. court filing on Friday that it voluntarily filed for Chapter 11 reorganization. Its international operating regions including Europe, Australia and New Zealand were not included in the U.S. proceedings.

The firm, whose largest shareholder is billionaire investor Carl Icahn, is reeling from government orders restricting travel and requiring citizens to remain home. A large portion of Hertz’s revenue comes from car rentals at airports, which have all but evaporated as potential customers eschew plane travel.

With nearly $19 billion of debt and roughly 38,000 employees worldwide as of the end of 2019, Hertz is among the largest companies to be undone by the pandemic. The public health crisis has also caused a cascade of bankruptcies or Chapter 11 preparations among companies dependent on consumer demand, including retailers, restaurants and oil and gas firms.

U.S. airlines have so far avoided similar fates after receiving billions of dollars in government aid, an avenue Hertz has explored without success.

The Estero, Florida-based company, which operates Hertz, Dollar and Thrifty car-rentals, had been in talks with creditors after skipping significant car-lease payments due in April.

Forbearance and waiver agreements on the missed payments were set to expire on May 22. Hertz has about $1 billion of cash.

The size of Hertz’s lease obligations have increased as the value of vehicles declined because of the pandemic. In an attempt to appease creditors holding asset-backed securities that finance its fleet of more than 500,000 vehicles, Hertz has proposed selling more than 30,000 cars a month through the end of the year in an effort to raise around $5 billion, a person familiar with the matter said.

On May 16, the board appointed executive Paul Stone to replace Kathryn Marinello as CEO. Hertz earlier laid off about 10,000 employees and said there was substantial doubt about its ability to continue as a going concern. 

Hertz’s woes are compounded by the complexity of its balance sheet, which includes more than $14 billion of securitized debt. The proceeds from those securities finance purchases of vehicles that are then leased to Hertz in exchange for monthly payments that have risen as the value of cars fall.

Hertz also has traditional credit lines, loans and bonds with conditions that can trigger defaults based on missing those lease payments or failing to meet other conditions, such as delivering a timely operating budget and reimbursing funds it has borrowed.

Hertz earlier signaled it could avoid bankruptcy if it received relief from creditors or financial aid the company and its competitors have sought from the U.S. government. The U.S. Treasury has started assisting companies as part of an unprecedented $2.3 trillion relief package passed by Congress and signed into law.

A trade group representing Hertz, the American Car Rental Association, has asked Congress to do more for the industry by expanding coronavirus relief efforts and advancing new legislation targeting tourism-related businesses.

Even before the pandemic, Hertz and its peers were under financial pressure as travelers shifted to ride-hailing services such as Uber.

To combat Uber, Hertz had adopted a turnaround plan, aiming to modernize its smartphone apps and improve management of its fleet of rental cars.

Hertz traces its roots to 1918, when Walter Jacobs, then a pioneer of renting cars, founded a company allowing customers to temporarily drive one of a dozen Ford Motor Model Ts, according to the company’s website.

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Hong Kong police fire pepper pellets to disperse protests over security bill

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Police use pepper spray projectile during a Lunch With You rally in Central district on May 27, 2020 in Hong Kong, China.

Anthony Kwan | Getty Images

Hong Kong riot police fired pepper pellets to disperse protesters in the heart of the global financial center on Wednesday, as new national security laws proposed by Beijing revived anti-government demonstrations.

Police also surrounded the Legislative Council where a bill was due to be debated that would criminalize disrespect of the Chinese anthem, amid soaring tensions over perceived threats to the semi-autonomous city’s freedoms.

People of all ages took to the streets, some dressed in black, some wearing office clothes, and some hiding their identities with open umbrellas in scenes reminiscent of the unrest that shook the city last year.

“Although you’re afraid inside your heart, you need to speak out,” said Chang, 29, a clerk and protester dressed in black with a helmet respirator and goggles in her backpack.

A call to gather around the Legislative Council was scrapped due to a heavy presence of riot police.

Many shops, bank branches and office buildings closed early. Dozens of people were seen rounded up by riot police and made to sit on a sidewalk.

Protests have returned to the streets of Chinese-ruled Hong Kong after Beijing proposed national security laws aimed at tackling secession, subversion and terrorist activities. The planned laws could see Chinese intelligence agencies set up bases in the semi-autonomous city.

The move triggered the first big street unrest in Hong Kong in months on Sunday, with police firing tear gas and water cannon to disperse protesters.

The United States, Australia, Britain, Canada and others have expressed concerns about the legislation, widely seen as a potential turning point for China’s freest city and one of the world’s leading financial hubs.

Police said they had arrested at least 16 people on Wednesday, aged 14-40, for alleged crimes including possession of offensive weapons, possession of tools for illegal use and dangerous driving.

Protesters in a downtown shopping mall chanted “Liberate Hong Kong! Revolution of our times” and “Hong Kong independence, the only way out”, but dispersed as lookouts shouted a warning to “go shopping!” at the sight of police vans outside.

One protester was seen with a placard reading “one country, two systems is a lie”, referring to the political system put in place at Britain’s 1997 handover of the city to China that is meant to guarantee Hong Kong’s freedoms until at least 2047.

“I’m scared … if you don’t come out today, you’ll never be able to come out. This is legislation that directly affects us,” said Ryan Tsang, a hotel manager.

Chinese authorities and the Beijing-backed government in Hong Kong say there is no threat to the city’s high degree of autonomy and the new security laws will be tightly focused.

“It’s for the long-term stability of Hong Kong and China, it won’t affect the freedom of assembly and speech and it won’t affect the city’s status as a financial center,” Hong Kong Chief Secretary Matthew Cheung told reporters. “It would provide a stable environment for businesses.”

Hong Kong’s most prominent tycoon, Li Ka-shing, said in a statement security laws were within every nation’s right, but Hong Kong had the “mission-critical task” to maintain trust in “one country, two systems”.

Hong Kong media reported Beijing had expanded the scope of the draft security legislation to include organisations as well as individuals.

The law was being revised to cover not just behavior or acts that endanger national security, but also activities, broadcaster RTHK and the South China Morning Post reported.

U.S. President Donald Trump on Tuesday said the United States this week would announce a strong response to the planned security legislation for Hong Kong.

Hong Kong shares slide

The U.S.-China Business Council (USCBC) urged “all leaders to take those steps necessary to de-escalate tensions, promote economic recovery and the rule of law, and preserve the ‘one country, two systems’ principle.”

Asian shares slipped over rising tensions between the United States and China. Hong Kong shares led declines with the Hang Seng falling 0.46%, though it kept a bit of distance from a two-month low touched on Monday. 

Protesters and pro-democracy politicians say Hong Kong’s National Anthem Bill, which aims to govern the use and playing of the Chinese national anthem, represents another sign of what they see as accelerating interference from Beijing.

The bill carries penalties of up to three years jail and/or fines of up to HK$50,000 ($6,450) for those who insult the anthem. It also orders that primary and secondary school students in Hong Kong be taught to sing the “March of the Volunteers”, along with its history and etiquette.

“As long as citizens don’t disrespect the anthem law, there’s no need to worry, I hope people can discuss the bill rationally,” Chief Secretary Cheung said.

The anthem bill is set for a second reading on Wednesday and is expected to become law next month.

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Sweden’s no-lockdown could mean it’s excluded from Nordics reopening

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People sit on terrace tables at cafe in Stockholm, Sweden, on Thursday, March 26, 2020. Sweden is starting to look like a global outlier in its response to the coronavirus.

Bloomberg

As Sweden’s Nordic neighbors look to reopen borders and lift travel restrictions, worries over Stockholm’s controversial approach to the coronavirus has increased concerns that it could be excluded from those plans.

Sweden’s Foreign Minister Ann Linde said Tuesday that the EU had cautioned against discriminating when opening borders, and that any decision to exclude the country from an agreement between the Nordic states would be a political decision.

“It is a very complicated issue, and I think that all politicians in every country should also look at the long-term effect before they take very politically-motivated decisions,” she told reporters at a briefing in Stockholm Tuesday, according to Reuters.

Linde’s comments come after Cyprus said it would not permit direct flights from Sweden when it opens up on June 9, but would allow inbound flights from Norway, Denmark and Finland.

There is a nervousness over Sweden because, unlike its neighbors and most of Europe, it kept much of its public and social life open as the coronavirus spread throughout Europe in late February and March.

The government allowed Sweden’s bars, restaurants and schools for under-16s to remain open, although it banned mass gatherings and visits to elderly care homes (which have seen acute outbreaks of the virus), while advocating social distancing, working from home and good personal hygiene. 

The strategy has been controversial and attracted global attention, and some criticism. Data shows that the country of around 10 million has recorded 34,440 cases and 4,125 deaths. This is far higher than its Nordic neighbors, which each have populations of around 5 million; Norway has recorded 235 deaths, Denmark has recorded 563 deaths and Finland has reported 312 deaths.

Allowing for different testing regimes and attributions of the cause of death, according to ourworldindata.org, Sweden’s daily confirmed Covid-19 deaths per million inhabitants, on a rolling 7-day average, stood at 4.68 on Tuesday, higher than the total for the U.K. (at 4.46) and the U.S. (at 3.40) as well as Russia and Brazil, which have the largest numbers of coronavirus cases in the world.

Nervous neighbors

Given the data, it’s perhaps not surprising that Sweden’s neighbors are cautious about the reopening of borders and lifting of travel restrictions, although essential travel, such as travel for work, has continued between the countries throughout lockdown, albeit at a lower level. 

Norway and Finland are set to decide on the lifting of travel restrictions on or by June 14.  Finland is not commenting on other countries’ strategies, the Foreign Ministry told CNBC when asked for comment, but pointed to Finland’s explicit strategy to prevent the spread of the virus in the country and told CNBC “it is monitoring the corona situation very carefully and is ready to react quickly if the situation suddenly gets worse.”

Norway directed CNBC’s request for comment to its Ministry of Justice, where no one was immediately available for comment. Meanwhile, Denmark’s Foreign Ministry told CNBC that, as of Monday, the country was “expanding the possibility for travelers from the Nordic countries and Germany to enter into Denmark.”

“It will be possible for residents from these countries to travel into Denmark if they have a worthy purpose for entering, which can now also include (visiting) grandparents, grandchildren, partners, ownership of a vacation residence in Denmark or if they are undertaking business travel to Denmark,” the ministry said in a statement to CNBC. On May 29, the Danish government will present a plan for a controlled and gradual revision of the temporary border controls and travel advice for the summer period, the ministry added.

Like its neighbors, Denmark was tight-lipped on its neighbor Sweden, saying: “Unfortunately, we can’t comment further on the situation in Sweden.” Sweden itself has told its citizens not to travel abroad until July 15 unless absolutely essential.

Defense of the strategy

With global attention on Stockholm’s approach, Sweden’s Linde defended the country’s more laissez-faire approach, which has been led by its Public Health Agency and chief epidemiologist Anders Tegnell.

“Transmission is slowing down, the treatment of COVID-19 patients in intensive care is decreasing significantly, and the rising death toll curve has been flattened,” Linde told reporters, insisting that while “there is no full lockdown of Sweden … many parts of the Swedish society have shut down.”

Tegnell has defended his strategy too, telling CNBC on April 22 that Stockholm was heading toward herd immunity “within weeks,” although an official study released last week showed that only 7.3% of Stockholm’s inhabitants had developed Covid-19 antibodies by the end of April.

The country’s former chief epidemiologist, Annika Linde, who oversaw Sweden’s response to swine flu and the Sars epidemic, said earlier this week that the country’s approach to the epidemic, one aiming at herd immunity, had been mistaken.

“I think that we needed more time for preparedness. If we had shut down very early … we would have been able, during that time, to make sure that we had what was necessary to protect the vulnerable,” Linde told Britain’s The Observer newspaper on Sunday.

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UK Conservative Party slides in polls amid Dominic Cummings crisis

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Number 10 special advisor Dominic Cummings arrives home in London on May 25, 2020.

TOLGA AKMEN

The U.K.’s ruling Conservative Party, led by Prime Minister Boris Johnson, has seen its lead in polls narrow further, as a battle over a top political adviser continues to dominate headlines and public debate in Britain.

A YouGov survey for The Times newspaper, published Wednesday, showed that the Conservative’s lead over opposition party Labour had slipped nine percentage points in a week. Support for the Tories fell four points to 44%, while support for Labour rose five points to 38%, compared with a week ago.

“Following a tough week dominated by the actions of the Prime Minister’s chief adviser, the Conservatives have seen their 15 point lead over Labour slip to just 6 points,” YouGov noted of the poll, which surveyed 1,629 adults between May 25-26.

Pressure is mounting on Boris Johnson as the political battle intensifies over his closest aide Dominic Cummings, who is accused of breaking U.K. lockdown rules.

Cummings, an influential and controversial figure at the heart of government, has refused to apologize for making a 260-mile trip from London to the north of England, at the height of coronavirus crisis after lockdown restrictions had been imposed.

Cummings has defended his decision to travel, saying the trip to stay with family in Durham was within the rules because he wanted to ensure childcare for his young son in case he and his wife fell ill with coronanvirus. His wife had displayed symptoms of the virus.

The visit was admissible under the “exceptional circumstances” allowed under the government’s lockdown measures, he said at an unusual press briefing dedicated to the matter on Monday.

Despite attempts to explain the circumstances around the trip, Cummings’ actions have angered the British public at a time when most people feel they have made great, and sometimes heartbreaking, personal sacrifices during the lockdown.

So far, Prime Minister Boris Johnson has defended his aide, yet the political storm surrounding Cummings and his refusal to resign has led to a revolt within the Conservative Party. On Tuesday, one junior minister resigned and now 38 Conservative members of parliament (MPs) are calling for Cummings to go.

The furor over the aide is not only damaging the government’s public standing — it is also seen to have undermined its messaging when it comes to the coronavirus lockdown, still largely in place. According to YouGov, 70% of the public believe that the Cummings crisis will make it harder for the government to get future lockdown messaging across to the public.

A separate survey on Tuesday, by polling firm Savanta, showed Johnson’s approval rating stood at -1%, down from 19% on Friday. It’s poll also showed approval in the government in negative territory, falling 16 percentage points in a day to -2%.

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