Avis Budget Group Inc.
), the leading global car rental company, has increased its term
loan facility to $1 billion, from the existing $900 million, for
a lower rate of interest. However, the new term loan borrowing
retains the same maturity as the existing facility of 2019.
The $1 billion term loan, issued by the company's wholly-owned
subsidiary Avis Budget Car Rental LLC, has been refinanced at the
LIBOR plus interest rate of 2.25% subject to a LIBOR floor of
0.75%. This represents savings of 75 basis points from the
previous interest rate of LIBOR plus 2.75%, subject to a LIBOR
floor of 1%.
Simultaneously, the company announced the redemption of its $124
million worth of senior notes due 2018, bearing an interest rate
of 9.625%, eliminating the outstanding balance of its high-cost
We believe this act of curtailing interest rate on existing loan
facility as well as redeeming its high-cost debt will enable the
company to save on its corporate interest expenses.
In another such move, earlier this year, the company concluded a
senior notes offering of $500 million due 2023, bearing an
interest rate of 5.5%. The proceeds from the offering were used
to eliminate a portion of the company's previously issued
high-cost debt instruments, including principal amounts of its
$325 million senior notes with a 9.625% interest rate and
maturity due in 2018 and $25 million notes due 2020 with an
interest rate of 9.75%.
In conjunction with its first-quarter 2013 results, the company
raised its corporate debt related interest expense forecast for
fiscal 2013 to $240 million, from an earlier projected range of
$230 - $235 million. The increase in net interest expense
primarily reflects the cost of financing the Zipcar acquisition,
partially offset by benefits from the company's already completed
refinancings. However, this represents a $30 million decline from
the 2012 level.
Avis Budget Group is the leading vehicle rental company providing
vehicle rental services through its Avis and Budget brands in
more than 10,000 rental locations in about 175 nations across the
globe. Additionally, the company's newly acquired Zipcar brand
enables it to provide car sharing services to more than 790,000
members. The company operates most of its car rental offices in
North America, Europe and Australia directly, and operates
primarily through licensees in other parts of the world.
Currently, Avis Budget carries a Zacks Rank #3 (Hold). Other
stocks that are performing well in the business services industry
Essex Rental Corp.
SouFun Holdings Ltd.
). Of these, PDI carries a Zacks Rank #1 (Strong Buy) while Essex
and SouFun Holdings have a Zacks Rank #2 (Buy).
AVIS BUDGET GRP (CAR): Free Stock Analysis
ESSEX RENTAL (ESSX): Free Stock Analysis
PDI INC (PDII): Free Stock Analysis Report
SOUFUN HLDG-ADR (SFUN): Free Stock Analysis
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