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Law360 (May 29, 2020, 5:28 PM EDT ) The parent of Florida-based Advantage Rent A Car told a bankruptcy judge Friday that it hopes for a "last-ditch sale effort" on a tight timeline that would see a Chapter 11 transaction approved by June 26 after its business crumbled due to the COVID-19 pandemic.
During a first-day hearing conducted via telephone and videoconference, debtor attorney Justin Alberto of Cole Schotz PC said Advantage Holdco's pre-pandemic efforts to sell its assets to a strategic buyer fizzled earlier this year, and the coronavirus then eliminated virtually all of its business overnight.
Through its Chapter 11 case, Advantage hopes to revive that sale process and reengage with buyers who expressed interest in acquiring the company before its bankruptcy filing, he said. Advantage is contending with more than $350 million of secured debt, according to court filings.
"We hope to embark on a very expedited and last-ditch sale effort in these cases," Alberto told the court. "The company believes in its business and believes the strategic buyers with the requisite experience in this industry will come to the table."
The process envisions a June 24 auction, if necessary, and a June 26 sale hearing, Alberto said. Such a short time frame, while unusual, is needed in this case because of the unique challenges facing the debtor in light of the COVID-19 pandemic, he said.
Those challenges include travel restrictions imposed early on that reduced Advantage's business by 95%. Alberto said that in early March, before the pandemic reached America, its location at Los Angeles International Airport rented out a couple of hundred cars every day. Almost overnight, he said, that figure was reduced to five cars.
In response to the decline in business, Advantage laid off about 600 of its more than 800 employees and mothballed the operations of the company.
To fund its Chapter 11 case and its operational needs, Advantage received permission from U.S. Bankruptcy Judge John T. Dorsey to borrow about $2.5 million on an interim basis from prepetition lender and equity holder Catalyst Capital Group Inc. as part of a debtor-in-possession financing package. The entire package consists of $4.5 million in new money advances and a roll-up of about $9 million of Catalyst's prepetition debt.
Judge Dorsey also approved a typical slate of first-day relief Friday, including requests to pay employee wage and benefit obligations and maintain its bank accounts and cash management systems.
In addition to Advantage Holdco, a number of other affiliated companies — Advantage Opco LLC, E-Z Rent A Car LLC, Central Florida Paint & Body LLC, Advantage Vehicle Financing LLC and RAC Vehicle Financing LLC — filed for bankruptcy protection May 26.
The car rental company, owned by Canadian private equity firm Catalyst Capital Group Inc., operates a fleet of about 23,000 vehicles in 40 locations around the U.S. Advantage operates primarily in vacation destinations, which have taken a hit during the COVID-19 pandemic.
Founded in San Antonio in 1963, the privately owned Advantage declared bankruptcy in 2008 and was acquired by car rental giant Hertz Global Holdings, which itself filed for Chapter 11 protection May 22 citing the same pressures arising from the pandemic.
The company was sold to Macquarie Group Ltd. in 2012 after the U.S. Federal Trade Commission required Hertz to divest Advantage to win the agency's approval of its $2.3 billion purchase of the Dollar Thrifty Automotive Group.
Advantage hit Chapter 11 again in November 2013, blaming what it said was Hertz's refusal to negotiate new lease terms for Advantage's vehicle fleet. Catalyst provided Advantage with bankruptcy financing and ultimately bought the company in 2014 for a $46 million credit bid.
The debtor is represented by Normal L. Pernick, Justin R. Alberto, J. Kate Stickles, Patrick J. Reilley, Stuart Komrower and Taylre C. Janak of Cole Schotz PC.
The case is In re: Advantage Holdco Inc., case number 1:20-bk-11259, in the U.S. Bankruptcy Court for the District of Delaware.
--Additional reporting by Rick Archer and Carolina Bolado. Editing by Alanna Weissman.
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