Nov. 5 (Bloomberg) -- Advantage Rent A Car, spun off by Hertz Global Holdings Inc. to win U.S. approval for its purchase of Dollar Thrifty Automotive Group Inc., filed for bankruptcy after talks with Hertz over vehicle lease payments broke down.
Franchise Services of North America Inc., which operates Advantage, said in a statement yesterday that it failed to reach a deal to restructure vehicle lease agreements after Advantage missed a payment to Hertz. Advantage had acquired 24,000 vehicles from Hertz under the agreements.
The bankruptcy filing puts in jeopardy the Federal Trade Commission’s plan to create a viable competitor to Hertz as part of its agreement to clear the $2.3 billion Dollar Thrifty acquisition. The FTC gave final approval to the purchase in July, ending an eight-month compliance review of the deal.
Advantage filed for bankruptcy after Hertz notified Franchise Services on Nov. 2 that it was terminating the lease agreements and seeking the return of vehicles that Advantage had acquired in the Dollar Thrifty transaction, according to the statement.
Advantage, based in Ridgeland, Mississippi, listed assets of $100 million to $500 million in its bankruptcy petition filed in Jackson, Mississippi.
The FTC’s approval of the purchase followed an investigation into how Macquarie Group Ltd. was running Advantage, which it bought in a joint venture with Franchise Services, people familiar with the matter have said. The agency had let Macquarie operate the business on a provisional basis.
The commission is monitoring Franchise Services’s bankruptcy “to ensure compliance with the terms” of the order approving the Dollar Thrifty acquisition, FTC spokesman Peter Kaplan said in an e-mailed statement.
A spokesman for Hertz didn’t respond to phone messages seeking comment. Hertz is listed as Advantage’s largest unsecured creditor with a claim of $10 million, according to court papers.
Analysts and rental-car executives had said consolidation in the industry was giving unprecedented pricing power to its market leaders. Closely held Enterprise Holdings Inc. is ranked first followed by Hertz and Avis Budget Group Inc.
The FTC ordered Hertz to divest locations beyond the Advantage business to protect consumers, citing the $11 billion spent to rent 50 million vehicles at U.S. airports each year. Without the divestitures, the merger would have hurt competition at 72 airports around the U.S., the agency said when it initially approved the transaction on Nov. 15, 2012.
Under terms of the consent decree, the commissioners could have rescinded the sale of Advantage to Macquarie and ordered the assets resold to another approved buyer.
Richard Branson’s Virgin Group Ltd., the travel and entertainment conglomerate, sent a letter June 7 to the FTC expressing its interest in the Advantage assets, which could have represented a way to gain quick access to the largest airports in the U.S., according to Fred Lowrance, senior research analyst with Avondale Partners LLC in Nashville, Tennessee. Ordinarily, a company would have to bid for each airport counter as it became available.
The FTC’s investigation had focused on whether Macquarie was following through on its commitments to expand and strengthen Advantage after the Dec. 7 ouster of Sanford Miller, an industry veteran who was hired to run it, two people familiar with the matter said in April. Macquarie had said in an e-mail to Miller that it didn’t have car-rental experience.
The case is In re Simply Wheelz LLC, U.S. Bankruptcy Court, Southern District of Mississippi (Jackson).
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