Advantage Rent A Car will file for bankruptcy after the lease agreements that supplied its cars were terminated by Hertz Global Holdings Inc, the Chicago Tribune reported.
The brand, which operates in 33 states, was sold last year so Hertz could purchase Dollar Thrifty. Franchise Services of North America bought Advantage, which Hertz spun off to stay out of trouble with antitrust authorities since the two would be competitors.
After Advantage's owners allegedly neglected to make some payments, Hertz terminated lease agreements on 24,000 Advantage vehicles on Saturday, according to the Chicago Tribune.
Hertz shares fell by around 17 percent after Advantage's new owners reported the book value of the cars given to them at the time of the sale was overestimated.
As part of the deal, FSNA's unit Simply Wheelz LLC, which does business as Advantage Rent A Car, leased its vehicles from Hertz. Simply Wheelz reported a loss of around $8.6 million on the vehicles it sold from the Hertz fleet since June.
FSNA said the master lease agreement on the fleet required Simply Wheelz to carry the residual value risk, which is the equipment's worth at the end of its lease or useful life, the Chicago Tribune reported.
With this "significant difference," FSNA wants Hertz to calculate the net book value of the leased vehicles.
"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," FSNA said in a statement.
Hertz has reported a "better-than-expected" third-quarter profit and said that FSNA's allegations are "without merit."
FSNA is discussing the sale of Advantage with three other parties besides Hertz, whose offer to provide interim financing with the proposed bankruptcy of Simply Wheelz was rejected. The company plans to file for Chapter 11 bankruptcy protection for Advantage by early next week.
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