DBRS Morningstar Upgrades Avis Budget Group, Inc. and then Discontinues and Withdraws All Ratings

DBRS Inc. (DBRS Morningstar) has discontinued and withdrawn the ratings of Avis Budget Group, Inc. (Avis Budget or the Company) and its related entity, Avis Budget Car Rental LLC. The decision to discontinue and withdraw the ratings was made at the request of the Company. Prior to the discontinuation, DBRS Morningstar upgraded the ratings of both entities, including the Company’s Long-Term Issuer Rating to B (high), and its Long-Term Senior Debt rating to B. At the same time, DBRS Morningstar revised all trends to Stable from Positive. Avis Budget’s Intrinsic Assessment (IA) was placed at B (high), while its Support Assessment was SA3, which resulted in Avis Budget’s ratings being equal with its IA before the discontinuation of the ratings.

The upgrade of the ratings considers the Company’s improved credit fundamentals, including solid earnings generation reflecting improved pricing, the rebound in airline passenger travel, as well as robust gains related to used vehicle sales. Overall, the Company maintains a top-tier global vehicle rental franchise underpinned by a sizable on-airport business accompanied by a solid off-airport business, and a broad international business. Importantly, Avis Budget’s capable management team successfully navigated the business through the coronavirus pandemic. Meanwhile, Avis Budget’s risk position is sound and well-managed, supported by a sophisticated fleet management platform and appropriate residual value setting policy. The upgrade in ratings also reflect the Company’s deficit equity position and dependence on secured wholesale funding channels. We note that the high level of balance sheet encumbrance due to its funding profile was factored in the one notch differential between the Long-Term Issuer Rating and the Long-Term Senior Debt rating before discontinuation. The Stable trend considered our expectation that Avis Budget’s credit fundamentals would remain sound over the near-term, despite the slowing economic environment.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/ Social/ Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

Notes:
The principal methodology is the Global Methodology for Rating Non-Bank Financial Institutions: https://www.dbrsmorningstar.com/research/402314/global-methodology-for-rating-non-bank-financial-institutions. (September 2, 2022). In addition, DBRS Morningstar uses the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings: https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022) in its consideration of ESG factors.

The following methodology has also been applied
• Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships, https://www.dbrsmorningstar.com/research/404334/dbrs-morningstar-global-criteria-rating-corporate-holding-companies-and-parentsubsidiary-rating-relationships (October 26, 2022).

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

The primary sources of information used for this rating include Morningstar, Inc. and Company Documents. DBRS Morningstar considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The rating was not initiated at the request of the rated entity.

The rated entity or its related entities did not participate in the rating process for this rating action.

DBRS Morningstar did not have access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is an unsolicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com.

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