After Hertz layoffs, $16.2 million in retention bonuses

On Monday Hertz, the beleaguered vehicle rental service, said it would lay off 10,000 employees in North America as a result of the novel coronavirus pandemic.

On Tuesday, it disclosed in an SEC filing that it had entered into retention agreements with 340 of its employees at the director level and above to disburse about $16.2 million in retention bonuses.

About $1.5 million—$700,000 to chief executive Paul Stone; $600,000 to chief financial officer Jamere Jackson; and $189,633 to chief marketing officer Jodi Allen—was explicitly allocated to members of its executive leadership team.

Hertz said the retention bonuses were made “in recognition of, among other things, the financial and operational uncertainty the company and its employees face as the company navigates unprecedented circumstances arising from COVID-19’s adverse impact on the global travel sector; the substantial additional efforts undertaken by the company’s key employees with a reduced workforce in response to an extremely challenging business environment; the forfeiture of the recipient’s right to participate in the company’s 2020 annual bonus plan; and the risk that the company’s current challenges result in the departure of key employees and the significant benefits to the company of providing incentives for such employees to remain with the company.”

The bonuses are subject to 100% repayment if the recipient voluntarily leaves before March 31, 2021.

The company, based in Bonita Springs, Fla., filed for Chapter 11 bankruptcy protection on Friday after the effects of the COVID-19 pandemic decimated its business. With little domestic and international travel to be had, airport rental services haven’t generated the revenue they usually do. Hertz—as well as competitors Enterprise and Avis—have watched their typically humming businesses fall silent.

But Hertz—No. 326 in this year’s Fortune 500—is in a far more precarious position than its rivals. It has taken on substantial debt in pursuit of pricey acquisitions such as Dollar Thrifty Automotive ($2.6 billion; 2012), which was intended to add leisure travel to Hertz’s core business traveler market. Early in the millennium, Hertz also issued bonds backed by vehicles—which are declining assets, as any car owner knows—as collateral.

As of last week, the company tallied $24 billion in debt, nearly as much as it claims in assets. As of this morning, the company’s shares were trading at less than a dollar—down from more than $20 in February.