Avis' Unit issues $125M Senior Notes - Analyst Blog


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Recently, Avis Budget Car Rental LLC, a unit of the leading general-use vehicle rental company Avis Budget Group Inc. ( CAR ), closed an offering worth $125 million, issuing senior notes with an interest rate of 8.25%. These notes are expected to mature in 2019.

These notes, which are an unsecured debt of Avis Budget Car Rental LLC, will be guaranteed by Avis Budget Group and some of its domestic subsidiaries.

The offer price of these notes was 103.5% of par, with an effective yield of 7.3%. The company plans to utilize the net proceeds from the notes issue to buyback its 7.625% senior notes, which are slated to mature in 2014.

Additionally, Avis Budget indicated that it has bought back its 3.50% convertible notes, valued at $100 million, for about $115 million, excluding accrued interest.

Last week, another unit of Avis Budget Group, Avis Budget Car Rental Funding, closed its offering of $750 million asset-backed bonds carrying an annual interest rate of 2.6%. The proceeds of the offering will be used to refinance the outstanding asset-backed securities (ABS) debt maturing in 2012 with an interest rate of over 6%. The new offering will result in savings of about $20-$25 million in interest expense in 2012.

Avis Budget Group is the leading vehicle rental company in North America, Australia and New Zealand. Moreover, a formidable network of more than 10,000 rental locations and 350,000 vehicles enable the company to strengthen its well-established position in a highly competitive vehicle rental industry.

The company faces intense competition from other established players, such as Hertz Global Holdings Inc. ( HTZ ), Enterprise Rent-A-Car, Dollar Thrifty Automotive Group Inc. ( DTG ) and Ryder System Inc. ( R ).

We have downgraded our long-term recommendation on Avis Budget to Neutral following the company's fourth-quarter 2011 net loss, which widened more than two folds to 14 cents per share from the prior period. However, Avis Budget currently has a Zacks #4 Rank, implying a short-term 'Sell' rating on the stock.

AVIS BUDGET GRP ( CAR ): Free Stock Analysis Report
DOLLAR THRIFTY ( DTG ): Free Stock Analysis Report
HERTZ GLBL HLDG ( HTZ ): Free Stock Analysis Report
RYDER SYS ( R ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: CAR , DTG , HTZ , R

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