S&P: Avis Budget unchanged

Standard & Poor's said the B+ ratings and stable outlook on Avis Budget Group Inc. are unaffected by news that the company agreed to acquire Zipcar Inc. for about $500 million, primarily using debt.

Zipcar's hourly car sharing, which would be a new business for Avis Budget, generates lower margins than Avis Budget's daily car rental business, S&P said.

However, the company expects to realize $50 million to $70 million in annual synergies, including $20 million in the first year after the acquisition, the agency said.

This should be possible given Avis Budget's larger vehicle purchasing presence, S&P said.

Based on the incremental debt and some synergies, the agency said it expects the company's credit metrics to weaken only modestly after the acquisition and to remain within assumptions for the rating.

The ratings reflect the company's aggressive financial profile, the price competitive and cyclical nature of on-airport car rentals and a significant amount of secured assets, S&P said.

The ratings also consider the company's position as one of the largest global car rental companies, the relatively stable cash flow the business generates and an expectation that Avis Budget's operating performance will continue to improve, the agency said.

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