Hertz to restore executive pay amid heavy workload as it looks to dodge a default

CEO’s base salary in 2019 of $1.45 million represented 15.9% of her total compensation of $9.14 million

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Hertz Global Holdings Inc. disclosed Tuesday that it was restoring the salaries of senior executives to pre-COVID-19 levels, given the heavy workload required as the car rental company looks to fend off a default.

The stock

plunged 16.2% in very active trading to a record closing low of $3.01. Volume ballooned to 49.4 million shares, compared with the full-day average of about 20.9 million shares. The Wall Street Journal reported late Monday that Hertz had hired an additional adviser as it prepares for a possible bankruptcy filing.

The shares have plummeted 80.9% year to date, while rival Avis Budget Group Inc.’s shares

have shed 57.0% and the S&P 500 index

has lost 11.2%.

In an 8-K filing with the Securities and Exchange Commission on Tuesday, Hertz said: “In light of the magnitude of the effort that has already been undertaken and will continue to be necessary from critical employees to operate with reduced resources, the company restored the base salaries of those employees who had voluntarily reduced their salaries as a proactive measure to reduce costs in response to COVID-19’s impact on travel demand, as initially reported in the company’s Current Report on Form 8-K furnished on March 26, 2020.”

On March 26, Hertz said senior leadership were taking a “significant reduction” in their pay, as the company suffered a significant drop in demand as a result of the coronavirus pandemic. Chief Executive Kathryn Marinello went as far as giving up 100% of her base salary, as the company moved “aggressively” to cut costs, including furloughing employees. And then last week, Hertz disclosed that it missed certain lease payments, but it had a grace period until May 4.

On Tuesday, Hertz said it had reached agreement with most of its lenders to give it more time, through May 22, before the company is required to liquidate vehicles serving as collateral. The company said it can’t make any assurances that it will be able to negotiate any further forbearance or waivers extending relief past May 22.

Regarding the executive salaries, Hertz said they will be restored effective of May 11. CEO Marinello voluntarily agreed to a 10% salary reduction going forward.

To put the 10% reduction in context, Hertz’s 2020 Proxy Statement filed with the SEC on March 27 disclosed that Marinello’s base salary in 2019 of $1.45 million represented 15.9% of her total compensation of $9.14 million. That compared with a base salary of the same $1.45 million in 2018, but a total compensation of $8.01 million.

The 14% increase in total compensation in 2019 came as Hertz’s stock rallied 31.9% last year, while Avis shares ran up 43.4% and the S&P 500 advanced 28.9%. Read more about Avis’s upsized debt offering and its first-quarter earnings report.

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