Friday, August 29, 2025

US Federal Reserve Now Owns Defaulted Hertz Bonds

Given the drastic economic downturn in the travel and hospitality industry, car rental company Hertz Global Holdings Inc (NYSE: HTZ) was unable to come to a forbearance agreement with its senior lenders over missed lease payments in April, and as a result has filed for bankruptcy. However, prior to the the May 22 deadline by which Hertz had to come to an agreement with its lenders, which was of course not achieved, the Federal Reserve went on a shopping spree and purchased $1.8 billion worth of ETF’s which also happen to own Hertz bonds.

As a means of stimulating the function of bond markets, the Federal Reserve began buying junk bonds, or so-called fallen angels, which were downgraded to junk bond status as an implication of the coronavirus pandemic. As if that didn’t have taxpayers gasping enough, the Fed then announced it will begun buying corporate bond ETFs, allocating a total of $1.8 billion to the “cause.” However, the Fed did not discuss how much of the $1.8 billion will be used to purchase what portions of investment-grade ETFs and junk ETFs.

Although the Fed is downplaying the junk bond purchases, stating that the goal is to rather bridge the gap between the investment-grade and non-investment-grade markets, it turns out there is a little bit more to the story than that. Of the ETF’s the Federal Reserve is buying, a sizable portion of them hold junk bond components – so in other words, the Fed’s attempted sugar-coating has failed.

But here’s the real kicker that will have taxpayers fainting: two of the junk bond ETFs that the Federal Reserve purchased, HYG and JNK, each own $50 million and $30 million respectively, worth of now-defaulted Hertz bonds. So what does this all mean? Well for starters, the Federal Reserve is now technically a stakeholder in Hertz’s bankruptcy process. And unless the Federal Reserve can deprive itself of the Hertz bonds via JNK or HYG in the meantime, it will own a devalued stake in the company’s post-petition liability.


Information for this briefing was found via Market Watch and Zero Hedge. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

3 Responses

Video Articles

Goliath Resources Hits 10.60 g/t Gold Over 22.82 Metres, Highest Grade Results In Third Distinct Rock Package At Surebet Discovery

Four Countries Control the Fertilizer That Feeds the World | Sage Potash

$10,000 Gold Is Just A Question of Time | Florian Grummes

Recommended

Antimony Resources Drills 5.27% Sb Over 4.95 Metres In Latest Results

Nord Precious Metals Identifies 29 Veins At Castle East Following 3D Modeling

Related News

Jerome Powell Keeps Rates Unchanged at 5.5%

As was widely expected, the Federal Reserve decided to maintain the overnight rate at 5.5%....

Wednesday, September 20, 2023, 02:02:41 PM

Hertz Forced to Cancel New Vehicle Orders Amid Travel Industry Collapse

As the coronavirus continues to drastically curtail global and domestic travel, there are several industries...

Sunday, May 17, 2020, 06:41:00 PM

US Federal Reserve Extends Emergency Lending Programs to Dec. 31 Despite Lower Than Anticipated Uptake

As the US economy continues to struggle amid the coronavirus pandemic, the Federal Reserve has...

Wednesday, July 29, 2020, 04:04:00 PM

Fed Warns Banks Planning To Venture Into Cryptocurrency

The US Federal Reserve released on Tuesday an additional set of guidelines for banks that...

Thursday, August 18, 2022, 12:35:00 PM

July FOMC Minutes Suggest Fed is Afraid of Over-tightening Policy in Wake of Economic Data Lag

Last month’s FOMC minutes revealed that the Fed continues to perceive inflation as “unacceptably high,”...

Thursday, August 18, 2022, 10:17:00 AM