Moody's downgrades Avis

Moody's Investors Service said it lowered Avis Budget Car Rental LLC's corporate family and probability-of-default ratings to B2 from Ba2 and its speculative-grade liquidity rating to SGL-3 from SGL-2.

The outlook is negative.

The agency said the downgrade reflects the significant erosion in Avis' credit metrics that will result from the continuing weakness in leisure and commercial travel and the resulting fall-off in rental car demand. During 2009, Moody's expects that Avis' performance will be burdened with lower rental demand and revenues, under-absorbed overhead costs, significantly higher interest expense on its fleet financing debt and the need to refinance a significant portion of this fleet debt during late 2009.

The SGL-3 liquidity rating recognizes the reduction in the size of Avis' committed credit facility to $1.15 billion from $1.5 billion and Moody's view that the minimum EBITDA covenant level may afford the company only modest head room.

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