Avis prepping financing for Dollar Thrifty bid: sources

NEW YORK (Reuters) - Avis Budget Car Rental LLC is arranging financing to back its bid for Dollar Thrifty, banking sources involved in the process told Thomson Reuters LPC.

The car rental company, amending its JP Morgan-led credit facility, is seeking to increase the maximum amount of first-lien senior secured debt to $2 billion from $1.5 billion.

Avis Budget Group Inc CAR.N is on a bidding war with rival Hertz Global Holdings (HTZ.N) to buy Dollar Thrifty Automotive Group Inc (DTG.N) to gain a bigger share in the leisure and value car rental markets.

Avis has said it was interested in making a "substantially higher bid" for Dollar Thrifty after Hertz made $41-a-share offer in April -- a mere 5.5 percent premium to Dollar Thrifty shareholders then.

Shares of Dollar Thrifty have since risen 18 percent and now trade at about $45.76.

Hertz and Avis have begun the process for getting antitrust approval and have both received "second requests" from the regulator, but Avis is yet to make any specific offer.

"The company (Avis) must have bid at a good price, seeing that they are amending their debt facility and getting ready to raise additional debt," said a source, who is part of Avis' banking syndicate.

The amendment also proposes to enable Avis to issue second-lien high yield notes. The definition used in calculating the debt-to-EBITDA covenant is also proposed to be changed.

"The company said the issuance of subordinated notes is to support its potential acquisition, but did not specify the amount of second-lien debt they will incur," another source said.

Consenting lenders will get a 12.5-basis points amendment fee upon closing of the amendment, and another 12.5 basis points if the acquisition succeeds. Consents on the amendment are due Wednesday.

In April, the company gathered $983 million of commitments on its extended revolving credit facility due April 2013. The remaining $191 million of the revolver matures in April 2011.

The company also extended $350 million of its $787 million TLB due April 2012 to April 2014. In return for the extension, lenders got a 100-basis points extension fee.

The extended revolver has a margin of LIB+450 with no Libor floor. The extended TLB has a margin of LIB+425 with a 1.5% Libor floor.

Financial covenants include a leverage ratio of 6.25 times until June, which will then be reduced through the deal period until it reaches 4.25 times in 2013. The interest coverage ratio is 1.3 times.

(Reporting by Jacqueline Poh in New York, additional reporting by A.Ananthalakshmi in Bangalore; Editing by Don Sebastian)