Avis Budget Car Rental is piecing together the market’s second rental-car fleet transaction of the year in a $500 million transaction.
Avis Budget Rental Car Funding (AESOP) Series 2017-1 has three classes of notes, including a $401 million Class A series that received preliminary triple-A ratings from DBRS, Moody’s Investors Service and Fitch Ratings in presale reports issued Friday.
The master AESOP trust will also issue $58.7 million in Class B notes that are rated ‘A(high)’ by DBRS, ‘A1’ by Moody’s and ‘A’ by Fitch. The subordinate Class C notes sized at $40.2 million are rated ‘BBB’/’Baa3’/‘BBB’.
Like other rental car fleet asset-backs, the notes in AESOP are paid through lease payments by Avis into a pair of special-purpose vehicles (SPVs) that finance and own the title to the fleet vehicles. Avis’ 2017-1 deal involves 364,005 vehicles with an average age of 9.1 months. The bulk of the vehicles are Ford, GM and Chrysler branded autos that are rented through Avis, Budget, Payless and Zipcar operations.
Nearly 75% of the vehicles in the pool are “non-program” cars, which are vehicles that do not benefit from repurchase or guaranteed depreciation agreements with manufacturers. The percentage of non-program vehicles is seasonal and has ranged as low as 30%, according to Moody’s.
No previous AESOP deal has reached a 75% non-program care concentration, but that level is below that of last June’s deal through the Hertz Vehicle Financing II platform series involving Hertz and Dollar Thrifty rental fleets, according to Fitch.
While the non-program vehicles will be subject to market-rate residuals when they are ultimately sold into the wholesale/retail vehicle markets, AESOP noteholders would only be subject to losses in the event of default by the sponsor.
Avis’ deal is the second rental car securitization following Enterprise Fleet Management’s $1 billion notes offering in January backing fleet financing.
