Car rental company Advantage to be placed under Chapter 11

Reuters

Nov 5 (Reuters) - Advantage Rent A Car, which Hertz Corp hived off last year as part of its deal to buy DollarThrifty, would be placed under Chapter 11 bankruptcy on Tuesday,as its new owners question the book value of the fleet that wascausing losses.

Hertz sold its Advantage brand, which competes with DollarThrifty in the low-cost segment of the market, to FranchiseServices of North America and Macquarie Capital.

Simply Wheelz LLC, a unit of Franchise Services of NorthAmerica (FSNA) that does business as Advantage Rent A Car,bought 24,000 vehicles from Hertz as part of the deal.

The master lease agreement required Simply Wheelz to bearthe residual value risk of the leased fleet. Residual valueshows how much an equipment is worth at the end of its lease, orat the end of its useful life.

Simply Wheelz, as part of its fleet management operations,began to sell Hertz vehicles in June and booked losses on thesesales, FSNA said.

As of Oct. 25, Simply Wheelz had sold 5,295 vehicles throughauctions for an average loss of about $1,633 per vehicle, and atotal loss of about $8.6 million, according to FSNA.

Given the "significant difference" between the book value ofthe Hertz vehicles and the fair market value realized at theauction, FSNA said it requested Hertz to provide information todetermine the calculation of the net book value of the leasedfleet.

"Despite repeated requests, Hertz has not yet provided thecompany with such information notwithstanding the view of thecompany that Hertz is contractually obligated to do so," FSNAsaid in a statement.

Without access to this information, FSNA said it was unableto accurately quantify the potential loss it would experience asa result of its disposition of the Hertz leased fleet.

FSNA said that it has been in talks with three otherparties, besides Hertz, for the sale of the Advantage car rentalbusiness and to obtain additional financing.

Hertz offered to provide interim financing to Advantage, amove rejected by FSNA as the company said the terms offered byHertz would not lead to a broader auction that could fetch ahigher sale price.

FSNA also ruled out a potential sale of the Advantage brandback to Hertz, saying the Federal Trade Commission may notapprove it.

Advantage operates in 33 states including airport locationsserving 60 of the top 70 airports across the United States.

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