S&P puts Avis on watch

Standard & Poor's said it placed its ratings on Avis Budget Group Inc., including the BB+ corporate credit rating, on CreditWatch with negative implications.

The agency said the CreditWatch listing reflects concerns regarding refinancing risk, the effect of a weaker economy, and potential asset impairments after the company announced it would be required to record a substantial one-time noncash charge for goodwill impairment in the fourth quarter. Avis said the charge is based on a reconciliation of its current equity market capitalization to shareholders' equity, rather than recent results or longer-term expectations, and the company does not expect this charge to affect any of its borrowing arrangements.

At Sept. 30, Avis had $2.5 billion of asset-backed vehicle debt due within the next year. The company has already repaid a portion from an increase in its principal asset-backed bank conduit facility in October, and it is in the process of increasing its seasonal vehicle-backed bank facility. However, under current capital market conditions, S&P believes Avis Budget may find it more difficult to achieve this goal.

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