Avis Budget plans to renew $1 billion asset-backed securitization facility, achieve 9% margins

By Jennifer Lanning Drey

Portland, Ore., Oct. 4 - Avis Budget Car Rental LLC plans to renew and upsize its $1 billion asset-backed conduit facility in the fourth quarter, David Wyshner, Avis' chief financial officer, said Thursday during a presentation at the Deutsche Bank Leveraged Finance Conference in Scottsdale, Ariz.

"The reaction from our banks and lenders has been very good. I think we're in a position where our asset class provides diversification to lenders and is, in fact, relatively more attractive right now."

The facility is used for fleet financings and to temper seasonality.

Avis views its liquidity as strong and reported $2.8 billion in available liquidity at June 30, Wyshner said. The total liquidity figure was made up of $1.7 billion in vehicle-backed debt and $1.1 billion available under the company's revolving credit facility.

The company is considering using some of its free cash for share repurchases in light of its declining stock price but will put more of an emphasis on maintaining proper liquidity, Wyshner said in response to a question following his formal presentation.

"The issue for us is what's the right capital structure for us, what's the right liquidity, and how should we be using our cash over time," he said.

9% margin improvement

A pricing environment that has not kept up with fleet costs is Avis' key challenge in the current market, Wyshner said. Consequently, the company's margins have been declining since mid-2005 from their normalized levels of 9% or higher.

In response to the decline, Avis has set a goal of returning to 9% margins, which the company believes it can achieve through modest improvements in pricing. However, Avis also plans to make improvements in pricing-yield management, fleet management and internal processes.

The company has identified hundreds of opportunities to reduce costs that, when combined with better fleet management, are expected to generate savings of more than $100 million a year within the next few years.

"We're determined not to sit on our hands and wait for pricing to happen but rather to give ourselves multiple ways of improving margins, and we're very focused as a team and as an organization on the three optimization opportunities," Wyshner said.

Avis is a Parsippany, N.J.-based provider of vehicle rental services.

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