Value problems lead to Chapter 11

November 15, 2013 9:14 pm Published by

Readers in Rockland County may be interested in the announcement that the parent company of Advantage Rent A Car, Franchise Services of North America, is planning to take the company intoChapter 11 bankruptcy. Advantage Rent A Car, which offers value priced car rentals in more than 30 states, was sold to FSNA by Hertz Corp in 2012.

Once Simply Wheelz LLC, the division of FSNA that operates as Advantage Rent A Car, began to sell some of the 24,000 vehicles that were purchased from Hertz, it became clear that the fair market value of the vehicles was considerably lower than the book value for each vehicle they had been provided by Hertz Corp. After selling almost 5300 vehicles, Simply Wheelz lost more $8.5 million, an average loss of more than $1500 per vehicle.

Although Simply Wheelz is attempting to secure more financing, the decision to file Chapter 11 bankruptcy was influenced by the realization that they were unsure how much additional money they may lose as a result of the valuation discrepancies. Officials with Simply Wheelz asked Hertz to provide additional information to justify the high book values they calculated for the fleet, but Hertz has not provided a response. Simply Wheelz rejected an offer by Hertz to provide temporary financing while they attempt to identify new investors.

Businesses that are facing similar financial difficulties may benefit from a consultation with a lawyer. Attorneys working in the area of bankruptcy may be able to help their clients use the relevant areas of bankruptcy law to restructure their operations and begin to reestablish financial security.

Source: Reuters, “Car rental company advantage to be placed under chapter 11“, November 05, 2013

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