Florida business people might be interested in knowing about the bankruptcy of a nationwide auto rental company. Advantage Rent A Car filed for bankruptcy on Nov. 5.
Advantage has stores in 33 states and operates in 86 percent of the largest airports nationally. Hertz Corp sold Advantage last year when it bought Dollar Thrifty. The latter two companies are competitors in the inexpensive rental-car market. The new owners of the company, Franchise Services of North America and Macquarie Capital, put Advantage into Chapter 11 bankruptcy after it ran up losses and reportedly wonder what the true value of the company is.
As part of the sale agreement, a unit of Franchise Services of North America called Simply Wheelz LLC purchased 24,000 cars from Hertz and agreed that it would carry any residual risk for the fleet of leased vehicles. The value of equipment when it’s sold is called its residual value. However, Simply Wheelz has posted an average loss of $1,633 per car on the 5,295 vehicles it sold to Hertz at the end of the leases, for a total of about $8.6 million in losses, FSNA said.
FSNA officials said the losses were alarming, and they wanted to figure out what their potential losses from disposing of the leased Hertz fleet might be. They said that, although they were entitled to know the net book value of the leased fleet, Hertz had not provided it.
A Chapter 11 bankruptcy can save a business, but it is complex and a business should consider discussing the details with a qualified attorney early in the process. A bankruptcy attorney could handle filing all the paperwork to ensure everything was done properly. An attorney could also investigate to determine if there are more lucrative ways to liquidate assets to satisfy the debts.
Source: Reuters, “Car rental company Advantage to be placed under Chapter 11“, November 05, 2013