DBRS Comments on Dollar Thrifty’s 2Q10 Results, at B (high), UR- Positive

DBRS has today commented that the ratings of Dollar Thrifty Automotive Group, Inc. (DTAG or the Company), including its Issuer Rating of B (high) are unaffected following the Company’s announcement of 2Q10 earnings results. All ratings remain Under Review Positive, where they were placed on April 28, 2010.

Today’s comment follows DTAG’s earnings release indicating a net income of $42.3 million for 2Q10, a significant increase from $12.4 million a year ago. For the six months ending June 30, 2010, DTAG has reported net income of $69.6 million putting 2010 on track to be the most profitable year in Company history. Results continue to benefit from the company revenue management actions, its solid cost control and its sound fleet management. Evidencing these benefits, DTAG reported its sixth consecutive quarter of year-on-year double digit growth in corporate EBITDA, which increased over 250% to $74.3 million. Given the less than robust economic recovery and modest increase in airline capacity, which is a key driver of rental volume, DBRS considers the quarter’s results as very respectable.

Total vehicle rental revenue increased slightly year-on-year at $380.1 million; however, on a same-store basis rental revenues increased 2.9%. The Company’s pricing strategies and tight fleet levels continue to drive solid pricing gains. Revenue per day (RPD) grew for the sixth consecutive quarter to $47.65, or 0.8% year-on-year. The increase in RPD offset a 0.5% decrease in rental days. Further, DTAG reported a decrease in fleet costs, driven by the continued healthy used-vehicle market and efforts by management to improve efficiency in fleet disposition. Vehicle depreciation per unit for 2Q10 totaled $193 per month, excluding gains on sale of fleet vehicles depreciation per unit was $275 per month.

DBRS acknowledges DTAG’s continued progress in refinancing maturing debt and improved access to the capital markets. During the quarter, DTAG established two new funding facilities totaling $500 million and repaid $200 million of maturing notes. DTAG’s next medium term note maturity is $600 million, which will begin to amortize in December 2010. Given the Company’s solid liquidity and improved access to the capital markets, DBRS sees these maturities as manageable.

The Under Review with Positive Implications reflects DTAG’s announced definitive agreement to be acquired by the higher-rated Hertz Corporation (rated BB by DBRS). Given the recently proposed acquisition offer from Avis Budget Group, Inc. (rated B (high) by DBRS), DBRS continues to monitor developments regarding the potential sale of DTAG and may provide further commentary or take rating actions as developments warrant.

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.