DBRS Comments on AvisBudget Group, Inc. 4Q09 Results, at B (high), Trend Stable

DBRS has today commented that the ratings of AvisBudget Group, Inc. (AvisBudget or the Company), including its Issuer Rating of B (high) are unaffected following the Company’s announcement of 4Q09 earnings results. The trend on all ratings is Stable.

Today’s comment follows AvisBudget’s earnings release indicating a pre-tax loss of $88 million for 4Q09 and a pre-tax loss of $77 million for the full year. The full year loss included $20 million of restructuring charges and $33 million of non-cash impairment charges. For the year, total revenue was $5.1 billion, while corporate EBITDA increased 44% to $243 million, excluding one-time items. The results benefited from improved pricing, a reduction in fleet costs, and the Company’s cost savings and restructuring initiatives. Given the traditional seasonal impact on travel volumes in the fourth quarter and the tepid economic recovery, DBRS considers the quarter and full year results as acceptable. Further, DBRS views the results as evidencing the financial flexibility the Company enjoys derived from its substantial variable costs in the overall cost structure and its solid fleet management, both key considerations in the rating.

Total car rental revenue declined 9% year-on-year during the quarter, to $1.1 billion. The decrease was driven by a 19% decrease in rental days as demand remained subdued, and, to a lesser extent, the result of the Company’s conscious effort to reduce unprofitable business. Importantly, pricing improved, as, industry wide, fleet remained tight. To that end, revenue per day increased 13% partially offsetting the decline in revenue from lower volume. Further, Avis reported a decrease in fleet costs, driven by the reduced fleet size and a decline in per-unit fleet costs reflecting the continuing healthy used-vehicle market.

DBRS acknowledges AvisBudget’s much improved access to the capital markets as markets have begun to normalize. During the quarter, AvisBudget completed a $345 million five year convertible note offering, providing additional liquidity. The Company also completed a $200 million two year vehicle-backed financing facility and has renewed its $1.95 billion vehicle-backed conduit facilities.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Finance Companies Operating in the United States, which can be found on our website under methodologies.

This is a Corporate (Financial Institutions) rating.