S&P boosts Avis Budget

S&P said it raised Avis Budget Group Inc.’s issuer rating to BB from B+, its secured debt to BB+ from BB- and unsecured debt to BB- from B. The secured debt’s 2 recovery rating, indicating an expectation for substantial recovery (70%-90%, rounded estimate: 85%) in default and the unsecured debt’s 5 recovery rating, indicating an expectation for modest recovery (10%-30%, rounded estimate: 15%) in default are unchanged.

Avis Budget's credit metrics improved significantly, due primarily to better-than-expected operating performance, and results are forecasted to stay healthy even as rental market conditions slowly normalize over the next several years, the agency said.

“We expect revenue growth of around 70% in 2021, moderating to the mid-single-digit percent area thereafter. Based on continued strong operating performance, we expect EBIT interest coverage of around 3x in 2021, moderating to the mid-2x area thereafter (this compares with (0.5)x in 2020 and 1.5x in 2019 before the pandemic). We also expect funds from operations (FFO) to debt of about 20% in 2021 and to remain close to this level thereafter (compared with 8% in 2020 and 18% in 2019),” S&P said in a press release.

The outlook is stable.

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