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Fitch Assigns Issuer and Debt Ratings to Various Avis Entities
March 11, 2013 / 3:31 PM / 5 years ago

Fitch Assigns Issuer and Debt Ratings to Various Avis Entities

(The following statement was released by the rating agency) CHICAGO, March 11 (Fitch) Fitch Ratings has assigned a long-term Issuer Default Rating (IDR) of 'B+' to Avis Budget Finance PLC (Avis Budget Finance) and 'B+/RR4' ratings to Avis Budget Finance's EUR250 million, 6% senior unsecured notes due March 2021. In addition, Fitch has assigned 'BB+/RR1' ratings to Avis Budget Car Rental, LLC's (ABCR) $900 million senior secured term loan maturing March 2019. Of the proceeds, $200 million represents incremental issuance, while the remaining $700 million will be used to refinance ABCR's existing senior secured term loan maturing March 2019 at lower interest rates. The Rating Outlook for Avis Budget Finance is positive. KEY RATING DRIVERS Avis Budget Finance is a wholly-owned, indirect subsidiary of Avis Budget Group, Inc. (ABG, rated 'B+', Outlook Positive by Fitch). The 'B+' ratings of Avis Budget Finance and its senior unsecured notes reflect the unconditional guarantee provided by ABG (indirect parent), Avis Budget Holdings, LLC (indirect parent) and ABCR (direct parent), and all current and future direct and indirect domestic subsidiaries. The note ranks pari passu with all other unsecured and senior indebtedness of the company. The Recovery Rating of 'RR4' reflects average recovery prospects in a distressed scenario based upon collateral coverage of unencumbered balance sheet assets on a pro forma basis as of Dec. 31, 2012. The 'BB+/RR1' ratings assigned to the term loan reflect outstanding recovery prospects for this class of debt upon liquidation in a distressed scenario. The term loan is secured by pledges of all of the capital stock of ABG's domestic subsidiaries and up to 66% of ABG's foreign subsidiaries. The proceeds of the note and incremental term loan issuance will be used to finance ABG's acquisition of Zipcar, Inc. (ZIP), which was announced on Feb. 2, 2013. Fitch expects the incremental issuance will modestly increase ABG's corporate leverage, and will have a marginal impact on ABG's overall credit profile in the medium term. On a pro forma basis net of unrestricted cash, corporate debt-to-full-year adjusted EBITDA is expected to increase from 2.9x to 3.4x in 2012, excluding the effects of $60 million of potential midpoint synergies associated with the acquisition. Including synergies, net corporate leverage would have declined to 3.0x on a combined basis in 2012. Given ABG's prior track record of managing operating leverage, Fitch believes the proposed synergies are achievable. SUBSIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIES Avis Budget Finance and ABCR are wholly-owned subsidiaries of ABG. Avis Budget Finance's IDR is aligned with that of ABG because of the unconditional guarantee provided by ABG and its various subsidiaries. Therefore, the ratings are sensitive to the same factors that might drive a change in ABG's IDR. RATING SENSITIVITIES - IDRS AND SENIOR DEBT Positive rating actions would be driven by ABG's ability to sustain improvements in operating leverage and liquidity, maintain appropriate capitalization and economic access to funding in the capital markets, and its ability to achieve proposed synergies and manage expected integration costs. Fitch would also view positively ABG's ability to manage net leverage to pre-acquisition levels, as measured by net corporate debt-to-adjusted EBITDA below its articulated range of 3x-4x in the longer term. Conversely, negative rating actions could result from a material deterioration in revenue and cash flow generation resulting from declines in passenger volumes, rental rates, and used car values which impair ABG's access to funding, liquidity, and/or capitalization. A meaningful and sustained increase in net leverage over and above ABG's articulated range could also yield negative rating actions. The Recovery Ratings are also sensitive to changes in the level of balance sheet assets and collateral values, which ultimately impact the level of available asset coverage in a distressed scenario. Fitch assigns the following ratings: Avis Budget Car Rental, LLC --Senior secured term loan 'BB+/RR1'. Avis Budget Finance PLC --Long-term IDR 'B+'; --Senior unsecured 'B+/RR4'. The Rating Outlook is Positive. Contact: Primary Analyst Johann Juan Director +1-312-368-3339 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 Secondary Analyst Mohak Rao, CFA Director +1-212-908-0559 Committee Chairperson Nathan Flanders Managing Director +1-212-908-0827 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: --'Global Financial Institutions Rating Criteria' (Aug. 15, 2012); --'Finance and Leasing Companies Criteria' (Dec. 11, 2012); --'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012); --'Recovery Ratings for Financial Institutions' (Aug. 15, 2012). Applicable Criteria and Related Research Rating FI Subsidiaries and Holding Companies here Recovery Ratings for Financial Institutions here Finance and Leasing Companies Criteria here Global Financial Institutions Rating Criteria here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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