As the Hertz rental car company at the Martha’s Vineyard Airport starts down its path of bankruptcy proceedings, airport officials are considering monitoring the process as it unfolds.
There are three car rental companies currently operating out of the airport: Avis, Budget, and Hertz. Hertz recently filed for bankruptcy, and commissioners discussed at a meeting Thursday whether to engage a lawyer to monitor the Hertz bankruptcy docket and make sure the airport is secure.
Owner of the airport’s Hertz service John Cahill declined to comment because of company policy.
According to airport commission chair Bob Rosenbaum, there are two ways a rental car company operates out of an airport. One way is to have a franchised business, where an owner acquires a license to use the Hertz trademarks and proprietary knowledge. The other is where a party simply manages that business, and the lease for that location is dealt with directly by the airport.
Rosenbaum said that because the airport deals directly with Hertz and not through another franchisee, there is minimal exposure for the airport, and it might not be worth it to monitor the bankruptcy proceedings. “The bankruptcy issues are primarily for those airports that have a franchised operation, so therefore the need to have somebody monitoring the bankruptcy proceedings is more important to those airports that have the franchise style, as opposed to what we have here,” Rosenbaum said.
Effectively, Rosenbaum said, there is nothing the airport can do to be involved in the court proceedings, particularly because Hertz has already prepaid the airport for use of the property up to this point.
Rosenbaum said he hopes that at some point, Hertz will reach an agreement under Chapter 11 of the U.S. bankruptcy code, which constitutes a restructuring of a company’s debt structure in order to satisfy the amount to be paid to a creditor.
The other, less positive direction for Hertz to take would be to file under Chapter 7, which means the company’s assets would be liquidated, and all nonexempt property would be sold and the proceeds would go to creditors.
“We are just going along with the river; I would expect that at some point Hertz will come out of this as a Chapter 11, once they get their debt structure figured out,” Rosenbaum said.
According to airport director Cindi Martin, Dave Mackey of the law firm Anderson & Kreiger reached out to her about the Hertz bankruptcy monitoring engagement. Mackey told her the attorneys have four other airports that are interested in possibly engaging in bankruptcy monitoring for rental car companies.
“He thought might be a good idea to reach out to other airport clients and see if they are interested in putting this together as a class, and all share the cost,” Martin said.
Anderson & Kreiger would partner with Tom Bean, a Boston lawyer who specializes in bankruptcy law.
Mackey said that the primary clients who have reached out to Anderson & Kreiger about monitoring the rental car company dockets are engaged in ongoing customer facility charges (CFCs). These CFCs have to do with airports signing an agreement with rental car companies in order to charge customers a pre-transaction fee, in addition to the normal charge. This fee is mutually agreed upon by both parties, and serves airports as a funding stream to pay for capital improvements. Those funds are held in trust by the rental company, then remitted to the airports periodically to be used for a designated purpose.
Mackey said that if the airport did have a CFC with Hertz, there would be more of a reason to be closely monitoring the bankruptcy proceedings, but with a simple lease structure, this engagement might be less useful to the Vineyard.
Commissioners decided to table the discussion until after they hear more from a bankruptcy specialist.